Powell again; Taiwan earthquake

April 3, 2024

–7.4 earthquake in Taiwan.  (sell USD assets to pay for re-building?)

–Eurozone inflation falls to 2.4% vs expected 2.6%.  Core 2.9% vs 3.1% last.

–From MNI yesterday:  Cleveland Fed Mester (’24 voter but retiring in June) won’t rule out a rate cut in June, while SF Fed Daly said three rate cuts in 2024 is still a “reasonable baseline”.

–Powell speaks today at 12:10 EST on the Economic Outlook.  Preceded by Bowman on the Fed’s Role as Lender of Last Resort and followed by Kugler, again on the economic outlook. Mester mentioned the discount window yesterday and making sure banks have proper collateral to pledge (almost as if they expect it to become much more important).

–Other news includes ADP expected a bit higher than last reading of 140k.  ISM Services expected 52.7 from 52.6.

–Curve bear steepened yesterday.  2y note down 1.5 bps to 4.699%, while 10y rose 3.2 to 4.361% and 30y rose 4 bps 4.507%.  Both the 10y and 30y are right around the halfway back levels from the high yields of last year (set in October) to the December lows.  The 50% levels are 4.39% and 4.54%. 

–Large open interest change in FV, +86k even as the futures were only -1.25/32 to 106-135s.  Early new buys of way-out calls: +25k FVK4 108.75c for 2 (1.5s) and 50k FVK4 109c for 1.5 (1.0s).  Large open interest numbers are sometimes thought of as tinder for the next big move as one side or the other is forced out.  In SOFR large buyer of about 35k SFRU4 9500/9525/9550 c fly for 4.5 to 5.0, settled 4.75 ref 9509.  We’ve flirted around with longs at the 9500 strike with March’24 and June’24; as of now that strike is in the money in Sept, but I think there’s about as good a chance that we blow through the top strike as fall below 9500.  Of course the long fly targets the middle at 9525.

–Crude oil CLK4 is holding above 85.  Silver breaking out to the upside, following gold’s strong lead. Gold/silver ratio easing lower.

–Here’s the earthquake map from USGS.gov

Posted on April 3, 2024 at 5:39 am by alexmanzara · Permalink
In: Eurodollar Options

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