Resistance FOMC high, support NFP low

April 7, 2021

-Yields fell yesterday in a continuing rejection of Friday’s employment data.  Tens fell over 6 bps to 1.654%.  Friday’s top tick in TYM was 131-20, now trading 131-25.  Red/gold euro$ pack spread closed at a high of 182 last week, yesterday it fell over 8 bps to just under 171.  Bearish news, including the surge in both ISM Mfg and Services and in the employment data, has been absorbed by a market that had apparently already priced in the strong releases.  Today FOMC minutes are released.  At the last FOMC, EDU3 settled 9914.5, now 9902.5.  EDU4 settled 9850.5, now 9835.5 and TYM at 132-03, now 131-22 (at yesterday’s settle).  Rate futures pretty much sold off after the last FOMC; highs from that day should provide strong resistance.

–Fallout still being felt from the Archegos liquidation.  Various estimates have put the portfolio at $100 billion, capitalized with about a tenth of that.  Many of the stocks publicized in the Archegos portfolio dropped by about half, so call it a max of $50 billion lopped off the top value. CS has taken a hit of $4.7 billion, about 10% of the drawdown.  I guess it’s not that big of a deal when one considers that a move of less than 2.5% in just AAPL alone is over $50 billion. 

–Treasury vol held up pretty well in the rally, with the atm TYK 131.75 straddle settling 1’02 or 4.5 with two and a half weeks left. EDH24 is the last green.  The atm long-dated straddle on that contract is the 9862.5 strike as the underlying settled 9858.5, and it settled 98.5 with 1077 days to go.  On Friday the 9850 straddle which was at the money, settled 101, the first time I saw the last green straddle over 100 bps in a long time!   

Posted on April 7, 2021 at 5:27 am by alexmanzara · Permalink
In: Eurodollar Options

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