Sept 18. Who cares about tariffs?

–Little net change in US rates yesterday with tens up 1 bp to 3.00% at the time of futures settlement.  A couple of the near euro$ calendars closed at new highs, for example EDH9/EDH0 rose 1 to a new high 32.5.  EDZ8/EDZ9 popped above 50 bps at the start of the day, but came back to close unchanged at 49.0.
–The Fed fund contracts immediately surrounding the quarterly FOMC meetings give an indication of rate hike odds, and these spreads all notched new highs yesterday.  For example, Nov/Jan spread isolates the December 19th FOMC, and that closed at 20.0 (80% chance of a hike).  Feb/Apr settled 16.0 (~62% for March).  May/July settled 12.0 (nearing 50%).
–Trump slapped more tariffs on China, which vowed retaliation.  Stocks were down in the wake of the announcement but have now floated back higher.  Shanghai Comp and Hang Seng both higher as well, and copper is seeing a nice rebound this morning having tested new lows overnight.  This spat is probably closer to spilling out of the arena of trading diplomacy and into the South China Sea.
–With 39 days until expiry on October 26, the November TY 119 straddle settled at exactly one point, which is around 13.3 bps.  For the sake of comparison, Green Oct 9687.5 straddle settled 12.5 with 25 days to go.  I’d have to go with the Nov TY straddle if I had to be long premium, but that’s like one of those hypothetical questions where you’re given the choice between two unpleasant outcomes.  I have a specific example in mind, but don’t think I can print it here…
–TIC data from July today.
Posted on September 18, 2018 at 5:18 am by alexmanzara · Permalink
In: Eurodollar Options

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