Piling on uncertainty

August 2, 2022

–Yields continue to decline with tens down nearly 4 bps at futures settle to 2.605%.  With 20 minutes left in the day session the yield had eased to 2.59%.  Volume was fairly light.  Early large buyer of 10k TYX2 125.5c for 29/64’s.  Expires 21-Oct and settled 29 vs 121-125 in TYZ2.  Perhaps it was Nancy’s husband, as it’s reported she WILL visit Taiwan; TYU2 currently 121-25. (“Honey, I’m very worried about you making this trip.” *Dials cell phone.  “Morty, buy me up to $5 million in treasury calls.  Try not to be obvious.” DOD spokesman John Kirby tried to make a visit sound like a routine affair at yesterday’s press conference, while China has left no doubt there will be a response.

–New historic low in red/green euro$ spread which settled -41.25.  2/5 treasury spread is also at a new low (as mentioned over the weekend).  It fell 1.2 bps today to -24. If snarled supply chains are partially due to chip shortages, and if uncertain supplies lead to inflation, and if Taiwan is a major supplier of chips, and if the Fed is determined to stop inflation at all costs, then this spread might have more to go. 

Posted on August 2, 2022 at 5:53 am by alexmanzara · Permalink
In: Eurodollar Options

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