Oct 20. The Cubs bats are silent
–The weaker opening in stocks reversed Thursday and SP closed almost unchanged. Curve wasn’t changed all that much at the futures close; reds were the strongest thing on the board +2.25, tapering down to golds at +1.0. However, late in the day it was reported that Trump was leaning toward Powell as Fed Chair and tens were immediately bought from 12506 up to 12. Late in the day reds were +5, greens +4.25, blues +3.25 and golds +2.0.
–One large exit trade was a sale of 20k 2EZ 9775p vs +4EZ 9725p at a price of 3.5. This trade was originally bought for around 1/4 bp, so nice trade, and exceptional timing on the exit given the late rally: 2EZ 9775p were mostly sold at 5.0 ref 9789 and later in the day were 4.5/5.0 ref 9790 trade, though currently EDZ9 trades 9784.5. Just looking at price ranges in the past 24 hours, and noting that tax policy is still lurching toward a compromise, that Trump will likely finalize a Fed chief next week, and then will go to Asia, it feels like price air pockets may become a bit more frequent; perhaps green midcurve vol is a bit too low.
–The curve now seems to be finding buyers in either price direction as steepeners are covered. One other small note is that red/green/blue pack butterfly closed +4 bps, highest I can recall recently. (Red/green close 16.5 and green/blue 12.375).
