Sept 23. The market’s fine here, trust me…

–Ten year yield dropped 2 bps to 256.5.  Red/gold pack spread fell 2.5 to a new low just under 188.  Implied vol was under pressure as futures prices rose and long put positions were exited.  For example, there had been accumulation over the past month of at least 80k EDZ5 9900/9850/9800 put flies, yesterday about 20k were sold at 9.5.  Dollar index (DXY) made a new high.  New recent lows in Brazilian Real, Turkish Lira and SA Rand, underscoring vulnerability in EM.  Copper nearing support level of 3.00.  HYG (hi yield ETF) had an outside day and closed lower, with yield of 5.55.  Watch for continued signs of credit stress.
–This morning Eurozone PMI Composite came in at a disappointing 52.5 and German Mfg PMI was only 50.3, below forecasts.  US auctions 2 yr notes today; w/i at the close of the floor was 59.5/59.0.  There are a few Fed speakers on tap, Bullard at 9 EST, preceded by Powell and George.
–Small cap stocks are leading the market lower in the wake of last week’s Alibaba IPO, which incidentally made Jack Ma the richest guy in China.  From a Business Insider article ‘…what really stood out during the interview was his use of the word “trust.”  “Trust. Trust us, trust the market, and trust the young people. Trust the new technology…”
–You know what I’ve learned about people that are always saying “trust me”?  That’s right, you can’t trust them.  All the central banks are also begging for trust, and for gov’ts to institute structural improvements, but of course they don’t really trust the market to seek its own level.  But eventually it does.  Like water.

Posted on September 23, 2014 at 5:25 am by alexmanzara · Permalink
In: Eurodollar Options

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