Sept 30. Black Moon

–The catalyst yesterday was news that several large accounts were pulling excess money from DB, which sent the stock (and stocks in general) hurtling to new lows.  It doesn’t really matter now if Dijsselbloem or other government officials solemnly declare their faith in DB.  Who are you going to believe, a gov’t spokesman or money walking out the door?  It’s another poignant reminder that confidence is the name of the game.  Once it starts to crumble, things can collapse in a hurry. “How did you go bankrupt?”  Bill asked. “Two ways,” Mike said. “Gradually and then suddenly.” * Compounding the issue is the fact that Central Banks are no longer considered omnipotent as was the case in previous crises.

–Crude oil was up another 60 cents yesterday, though this gain has evaporated as of this morning.  Higher oil should conceivably help risk assets, but when every Fed official volunteered that lower oil prices were a net positive early in the year, how does the flip side look?

–Bank of Mexico yesterday raised rates by 50 bps from 4.25 to 4.75 to stem weakness in the peso. The currency is lower this morning.  As Dr Peter Venkman said in the beginning of Ghostbusters, “The usual stuff isn’t working.”

–In terms of market action in rates, there was little of it besides a modest bid to the back end of the curve.  In Euro$’s, Dec/March made a new low settle of just 2.5.  TYZ this morning edged to its highest level since mid-August at 131-19.  Though the buyer of 20 delta TYZ calls has ceased his program, there are are still 95k of each strike open with the majority held by the one buyer; deltas are now 28 and 17.  Implied vol in treasuries remains mired at the lows.

–News today includes Personal Income and Spending expected +0.2 and +0.1 with Core PCE +1.7 yoy.  Chicago PMI expected 52.0

–Black moon tonight (two new moons in a calendar month).

*Hemingway, The Sun Also Rises

Posted on September 30, 2016 at 5:24 am by alexmanzara · Permalink
In: Eurodollar Options

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