Oct 31. Sell vol, sell curve. Wash, rinse, repeat

–Solid rally in fixed income going into month end as Core PCE prices yoy remain stuck at just 1.3%.  Tens sunk 5.8 bps to 236.8.  Curve flattened.  2/10 fell 3.5 bps to 79.2.  Red/gold pack spread -2.75 to 46.125.  Reports that the corporate tax cut may be phased in over time were also a factor.
–The day started with new sales of FV vol: Seller of 10k FVZ 117/117.25 strangle from 30 to 29.5, and an exit sale of 20k EDU9 9750p at 13.5 (13.25s ref 9792.5).  Later in the session 150k EDZ8 9812/9800 put spreads were sold at 6 covered 06.5; this trade was an exit of top legs of a condor entered in June.  Once again, with nearly 4 weeks until expiration, the ten year atm straddle traded at just 1 point (TYZ 125^ settled 1’01).  ED straddles crushed the last couple of days.  Sell vol, sell curve….wash, rinse, repeat.
–BoJ left policy on hold.  Reuters notes that Italy’s ten year has fallen about 33 bps on the month to 1.84%, partially boosted by a ratings upgrade.  Today’s US news includes:
ECI +0.7 for Q3.  Chicago Purchasing Mgr expected 60.0  (rarely gets above 65 and last was 65.2) and then Consumer Confidence 121.4.
–FOMC on Wednesday.  Bank of England expected to raise on Thursday.  Trump to announce Fed Chair of Thursday as well.
–One other quick note from Monday concerns the decline in the personal savings rate.  Interestingly, levels around 3% (now 3.1) were last seen in 2005-2007 when homes were seen as “savings accounts”.  Now we’re just living in a cash flow, pay-as-you-go world…
https://fred.stlouisfed.org/series/PSAVERT

fred.stlouisfed.org
Graph and download economic data from Jan 1959 to Aug 2017 about savings, personal, rate, and USA.

 

Posted on October 31, 2017 at 5:14 am by alexmanzara · Permalink
In: Eurodollar Options

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