Smith Wesson and me

July 17, 2020

–Once again, yields little changed on light volume with tens down 1,5 to 61.2.  The thirty year mortgage rate fell below 3% for the first time (2.98%) aiding the flow of urban dwellers to the suburbs.  In eurodollars, back calendar spreads are grinding to new recent lows.  Red/gold pack spread fell 1.75 bps to 40.25.  Vol remains lethargic; new seller of 7k TYU 138/141 strangle at 18 (settled there).  However, there was a notable new bottom fishing buyer of 7500 USU 180p at 1’49 covered 180-08 causing the straddle to settle at that same level, 3’50, up 6/64 on the day.  

–The Fed’s balance sheet is back over $7 trillion, having started the year at an already substantial level of $4.17t.  Stocks only go up because the Fed’s balance sheet only goes up.  The message isn’t lost on the home builders.  All above 200 day moving averages with some at or near all-time highs, Lennar (LEN) DR Horton (DHI) and LGI Homes (LGIH), the latter having tripled off the March low like a rocket.  Get outta Dodge with a cheap mortgage and a new Ford Bronco.  And you thought only the gun stocks were doing well… SWBI (Smith and Wesson) up over 4x from March low).  

–One other small note, the short sterling curve looking suspiciously like the US Fed fund curve, with red sterling contracts trading 100 or slightly above and the front Sept’20/Sept’21 closing at a new low -12.5 yesterday.

Posted on July 17, 2020 at 5:45 am by alexmanzara · Permalink
In: Eurodollar Options

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