Short summary

August 29, 2019

–Once again new lows in all near euro$ calendars at Wednesday’s settle.  EDU9/U0 fell 2 to -77.25 and EDZ9/Z0 fell 3.5 to -59.5.  Long treasury yields made new lows early with tens closing down 2.4 bps to 1.466% and 30’s down 3.5 to 1.937%.  Late in the day Mnuchin said treasury was again seriously considering issuing long term debt.  TBAC (Treasury Borrowing Advisory Committee) didn’t like the idea before, so if 100 year bonds ARE approved for auction, it will probably start with modest size.  

–There continues to be call buying on EDH0 underlying.  Yesterday +75k EDF0 9875/9925c spd bought for 8.0 covered futures from 9849.5 to 9848.0.  Settled 7.75 vs 9848.0.  These are January expiration on EDH0 underlying.  New position. Current target FF is 2.00 to 2.25%.  This trade needs the perceived target to drop 100 bps to 1.00 -1.25% by March to break even.   There are only three FOMC meetings prior to expiry as the Jan 2020 meeting is Jan 29.  Of course, if the market is certain each and every FOMC through March will result in a cut of 25, then happy days.

–Stocks jumped late yesterday and this morning as US/China trade rhetoric softened.  US and Ultra Bond contracts have eased a bit in response to both the prospect of long dated auctions and trade resolution, but are still well above last Friday’s settles.  SP500 dividend yield is now above the bond yield. 

–Tomorrow is first notice day in treasuries.  Rolls are substantially done, with for example, only 450k TYU remaining vs total OI of 3.87m.  

Posted on August 29, 2019 at 5:39 am by alexmanzara · Permalink
In: Eurodollar Options

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