Sept 2. Employment day… does ISM matter for the Fed?

–The session started with weakness in treasuries, with data on Jobless Claims and Productivity about as expected, but Unit Labor Costs were +4.3%, not exactly great for corporate profits.  However, the market reversed on much weaker than expected ISM of 49.4 vs 52 expected.  Rates were mostly unchanged across the curve.

–While ISM caused shorts to cover, it won’t necessarily stay the Fed’s hand in terms of a hike, especially if Payroll data today is robust.  I would note that there was a late seller of 14k FFV6 at 9954.0, risking 6-6.5 to make 18-19 on a Fed hike in Sept.  Open interest in FFV was +18k.

–Payrolls expected 175k.  The market is not looking for much with all Sept midcurve atm straddles 14.5 or lower with two weeks to go.

–Oil has had a fierce sell off in the last two weeks, falling over 10% from the high around $49 in CLV6.  It’s seeing a small bounce this morning, currently over 43.50.

ISM and the Fed

Posted on September 2, 2016 at 4:58 am by alexmanzara · Permalink
In: Eurodollar Options

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