Sept 25. Long dated treasuries edging to new high yields

–US yields ended modestly higher Monday with the ten year up 1 bp to 307.6.  Green and blue euro$ packs also down 1 bp on the day.  This morning WTI crude (CLX) is above 72.50.  Ten year and 30-yr bond contracts at new lows.  Treasury auctions 5 year notes today.
–Draghi said that underlying inflation could see a relatively vigorous pick up, putting pressure on bunds and euribor contracts.  ERZ9/ERZ0 spread eclipsed the high of 37.5 in early August, trading 38.5.  In dollars, EDZ9/EDZ0 also made a new recent high… at just 3.5 bps.  While the bor curve increasingly reflects expected tightening by the ECB in late 2019 to 2020, the US curve has been signaling an end to growth (given flat to negative calendars over the same time frame).  However, that part of the euro$ curve is now steepening, albeit slowly.
–Heavy trade in EDZ8 contract with one block buyer of 80k early followed later in the session by chunky sales.  At the end of the day, EDZ8 only settled +0.5 and open interest increased by less than 20k.  There had also been large buying of the 2-yr contract, but that appeared to be auction related with a decline in open interest.  Heavy sales of EDZ9 9725/9750 call spread (40k) appears to have been a roll down of shorts to the lower strike.
Posted on September 25, 2018 at 5:17 am by alexmanzara · Permalink
In: Eurodollar Options

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