Oct 15. Bowl a few frames this afternoon, beat the hike

–Wednesday started with weaker than expected economic data, with retail sales (ex-auto and gas) at 0.0 vs expected +0.3.  Core PPI was -0.3 vs expected +0.1.  And there was more bad news.  Walmart was hit over 10% (evaporation of $21 billion of market cap) as the company slashed its outlook.  The Beige Book was downbeat on manufacturing.  Electricity output was down 1.5% yoy in the US. The State of Illinois said it will delay pension payments because it has no cash. Oh, and it will stop paying out lottery prizes greater than $600.  A Cook County official (Chicago/ IL) announced plans to tax cable tv, golf and bowling.  BOWLING!  Really?

–Nearly all interest rate contracts tested the spike highs set on Oct 2 jobs data.  Indeed, 2016 euro$ contracts exceeded the employment highs. Green euro$ pack surged 13 bps and the Five Yr treasury yield sank 8 bps to just 128, with tens -7.3 bps to sub 2%.  All near euro$ calendar spreads made new lows.  The peak one-yr spread is now EDM16/EDM17 which fell 4.5 bps to just 52.  Hilsenrath piece late in the day suggested a hike may not occur in 2015.  Thanks Jon.  April 2016 Fed Funds closed +4.5 at 9972.5.  Four FOMC meetings in front of it, and it’s only 15 bps under the front month.  So you’re saying they might not hike this year?

–The dollar fell, and gold jumped $21 (late to $1186.5 GCZ5).  The gold settle was the highest in three months.  Both gold and silver closed above their 200 day moving averages.

–There were some large plays, for example new buyer of 35k 0EM, 0EU 9925/9962/9987c flies for 11.5.  0EM settled 6.25 and 0EU 5.25.   Settle in for a long slow grind higher…
–Today’s news includes Jobless Claims expected 270k.  Empire State  -8.  CPI -0.2 Core +0.1.  Philly Fed -2.0 vs -6.0 last.

Posted on October 15, 2015 at 5:18 am by alexmanzara · Permalink
In: Eurodollar Options

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