Paring back shorts in interest rate futures

April 21, 2021

–SPX was down 0.7% yesterday, continuing a modest pullback from last week’s all-time-high.  SPAK, the Defiance SPAC etf, was down 2.5% yesterday, and is off more than 30% from the high set in February.  The Defiance website says it is “Democratizing and Disrupting the IPO market” but it is now near the low of its short existence.  How’s that for democracy?  You can all lose together.  

–In the rate market, yields continued to ease, with the general theme appearing to be capping risk on shorts.  Tens fell 3.5 bps to 1.56%.  Once again, the near eurodollar one-year calendars slipped to new recent lows with the first four quarterlies unchanged while every contract thereafter sloped higher in price.  EDU21/EDU22 settled at 11.5.  It’s worth noting the steepness further out:  EDU22/EDU23 is 52.5 and EDU23/EDU24 is 60.5.  One interesting aspect of the day, according to preliminary figures, was the large decline in open interest.  The eurodollar strip lost 380k contracts.  While 187k of that was due to the expiration of the April serial, a drop of 200k combined with a decline of 28k ten year futures suggests short covering.  One year after the historic plunge to negative $40/barrel oil, there was a notable buyer of negative rate calls:  EDH22 100.0625 call 0.5 paid for 15k.  A modest trade in the big picture, but still symbolic.  

–Inflation continues to be a dominant theme, with a Powell letter to Senator Rick Scott being made public yesterday indicating the Fed would limit any overshoot.  
A google trends search shows that “inflation” made a new high in the beginning of March, with data going back to 2004.

  @carlquintanilla: Some other companies making recent price-hike announcements: (thanks AOK)

Kimberly Clark
Shake Shack
Waste Mgmt
Owens Corning
Boston Beer

Posted on April 21, 2021 at 5:35 am by alexmanzara · Permalink
In: Eurodollar Options

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