Rates unch’d; new high beans

Sept 18, 2020

 –Just be a few snippets to end the week.   Not much of a theme in rates; little movement or net change.  Tens unch’d at 68.2 bps.  In dollars there was some noticeable buying of 100 calls at 0.75.  Settled 1.0 on volume 75k vs  9980, but open interest was only up 5600.  Yesterday’s 3m libor setting was 0.22738, just above the all-time low on May 1, 2014 of 0.22285.  No agreement on fiscal package, near record low libor, BOE: buy zero strike calls.

–Today is quad witching.  Yesterday ESZ0 held the 9/9 and 9/11 lows, while NQZ0 broke the 10924 double bottom and squeezed out a low of 10904.25 before squeezing out shorts and ending with a loss of only 179.75 at 11075.25.
–BOE meeting resulted in a settlement of 100.09 in red Dec (L Z1), the highest ever settle in short sterling.  Dec’20/Dec’21 settled at a new low of -14.5  The bank is considering a policy move to negative rates, which is beginning to be priced in futures.

–Soybeans (S X0) closed at a new high for the year 1028 31/4… up 16% in a month, said due to Chinese demand.  The chart looks like the stock of a vaccine wonder drug.  Straight up.

–Attached is a chart of 3 month FV vol…new low at 1.4%.  So yes, the market believes the Fed.  NOTHING is going to HAPPEN.  But it’s sort of instructive to look back at a long term chart like this.  See the previous low in 2013 around this level?  That was right before the May 2013 taper tantrum.  Not that there’s anything on the horizon like that…but when the market is beaten down into complacency the awakening gets ugly.

Posted on September 18, 2020 at 5:03 am by alexmanzara · Permalink
In: Eurodollar Options

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