Oct 2. Let’s all skip work
–ECB meeting today and ADP data in US (expected +170-180k). Draghi expected to continue to hint at another Long Term Repo Op without actually doing it. An FT piece the other day by Weidmann alludes to a central problem associated with LTRO, namely banks loading up on too much sovereign debt which gets preferential credit treatment in spite of riskiness of *certain* countries.
–Interest rate futures pulled back yesterday in spite of the gov’t shutdown. Early theme of the day was put buying, for example a large new buyer of TYZ 117.5/119.5/121.5p fly for 4. Also buying in green eurodollar put condors, flies etc. However, later in the day there was a buyer of 50k EDH4 9975/9987c spd for 1.25 and a good size seller (new position) of TYZ 124/128 strangles down to 56.
–While ISM was stronger than expected, a prolonged gov’t impasse will almost certainly have a negative influence on GDP and confidence going forward, with business leaders already pushing for a solution and warning of reduced employment given uncertainty. So any thoughts of a taper in October are out the window…the Fed might not even be open by then!
–Spectacular weather in Chicago, high 70’s under crystal blue skies, so I might want to skip out early as well…in solidarity with my brothers in the government.
