Sept 6. Domestic data isn’t much of a catalyst

-Little change in US rates yesterday in spite of equity market sector rebalancing. Curve edged very slightly steeper. NY Fang index was down 2.7% yesterday and Nasdaq -1.19%, but outside of tech, damage was minimal with DJIA closing higher on the day. Employment report tomorrow, but that data, which used to be the big report of the month, is now little more than a footnote. We know the labor market is strong. Policy is caught between a solid domestic economy and increasing fissures internationally, which may or may not splinter into the US, and I mean that both in terms of Fed policy and the administration’s in general. Markets don’t seem to care: Eurodollar premium was hammered yesterday. Heavy selling in Oct 9737^ at 6.5 (settled there with new open int of 25k). 0EZ 9725c were sold at 5.0 to 5.5 in size of 50k which were new sales (settled 5.25 vs 9702.5). One week ago Monday (Aug 27), EDZ 9737 straddle was 14.5 vs 12.0 settle yesterday. 0EZ 9700 straddle went from 26.5 to 24.5. At the end of May market turmoil was associated with Italy and the euro. Yesterday, Fitch downgraded several Italian banks without any impact on stocks or debt. Perhaps the gold/silver ratio at a new high of 84.3 (matching the 2008 high of 84.4) is a sign of international stress, but bitcoin has been crushed the last two sessions. In any case, India rupee made a new low for the year, as did Hang Seng.
–News today includes ADP expected 200k, ISM Services expected 56.8, Factory Orders -0.6 and Durables -1.7. There will likely be more political drama with the NY Times op-ed from an anonymous WH staffer bashing Trump. I’d wager that the source will be revealed before midterm elections and will probably solidify Trump’s support.

Posted on September 6, 2018 at 5:23 am by alexmanzara · Permalink
In: Eurodollar Options

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