Sept 20. New high

–Interest rate futures continue to trade heavy.  Two and five years posted new high yields at 280.3 and 295.5.  The ten year tacked on 3.3 bps to close at 307.7.  The 30yr bond rose 3.9 to 323.2, just under the high yield of the year which was 324.7.  The MacroTourist cited a BBG article which noted that the pension fund tax break expired Friday.  Companies were allowed, until then, to take a bigger tax deduction for shoring up underfunded pensions, which had contributed to buying of long dated assets.  So the end of that tax break is one factor that has now diminished the bid for longer dated treasuries, but clearly there are several others, including concerns that the Fed may hike more aggressively, and that foreign buyers might not be quite as magnanimous with respect to funding exploding US budget deficits.
–Slight new high in 2/10 at 27.4 bps, +2.5 on the day.  There were a few synthetic steepening euro$ plays in front June to red midcurve June puts, nothing of significant size, but EDM19/EDM20 futures spread rose 0.5 to a new high of 18.  Buyer of 40k EDU9 9650 put for 3.5 as downside protection becomes more popular.
–Crude oil breaking out to the upside with CLX8 71.11 as of this writing, +34 cents. In a world where many other commodities have sold off, I’m not sure if oil will be taken as an inflationary impulse or as a input price headwind.  Perhaps both.
–News today includes Philly Fed expected 18.0 from 11.9.  Jobless Claims 210k.  Leading Index +0.5 and Existing Home Sales.  Also, the Fed’s quarterly Z.1 report is released, which is usually trumpeted by the press with respect to household net worth.  I’ll go out on a limb and pre-write the headline: HOUSEHOLD NET WORTH HITS A NEW RECORD HIGH!  Also worth noting in this report are the tables on debt levels and growth rates.  Here’s another headline that could be written: Fed’l Gov’t Debt and its growth trajectory.  IT’S AT A NEW RECORD HIGH!
–Though bitcoin has lost its parabolic allure, currently bouncing around 6000/6500 having fallen from near 20000 in the beginning of the year, the adrenaline rush is now being satisfied by cannabis companies.  Price action in Tilray (TLRY) was spectacular yesterday with a range of $150.  The stock was $30 in mid-August and hit 300 yesterday at the high, before crashing to 150 and closing a bit over 200.  Ironically enough, both TLRY and TSLA daily tops were exactly 300.  Dude.  That’s a new high.
Posted on September 20, 2018 at 5:01 am by alexmanzara · Permalink
In: Eurodollar Options

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