Q2 GDP (lower than expected?)

July 26, 2019

–Rate futures closed lower yesterday after an initial surge higher on the ECB (no rate cut, exploring additional stimulus).  EDU9 closed at 9784.0 (-2.5), the lowest settle since late May.  Front end continues to trade weak as t-bill supply is expected to weigh.  EDZ9 also settled -2.5 at 9793.5.  Once again, in terms of end of year funding pressure, it’s illustrative to compare EDU9/Z9 at -9.5 vs FFV9/FFF0 at -21.5.  EDZ9 trades heavy due to turn-of-year considerations, and it could get sloppy.

–All treasuries made outside ranges and closed lower, suggesting that longs are paring back.  Ten year yield rose 2.6 bps to 2.076%.  Today is August option expiration, and yesterday saw the onset of wing replacement: a buyer of 100k TYU 123p for 2/64’s (3 delta).  

–Today Q2 US GDP released, expected +1.8%.  Atlanta Fed is now at 1.3% and NY Fed’s Nowcast is 1.4%.  

–I was chatting on Bloomberg with a friend during ECB press conference, and I said that all Draghi cares about now is getting through the end of his term in October without the whole thing blowing up.  The response was, Not unlike a prop trading firm.  “She did it” *points at Lagarde*.  My working thesis (and I am not letting facts stand in the way), is that markets test new Fed chiefs, and I am going to expand that to: markets test new Central bank heads.  Greenspan had the crash of 87.  Bernanke had the crisis.  Of course, Yellen just sort of sailed through, and Powell didn’t have any initial problems.  Good luck Christine. 

Posted on July 26, 2019 at 5:08 am by alexmanzara · Permalink
In: Eurodollar Options

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