Wait and see

April 15, 2019

–Rate futures closed on the lows Friday and have seen no bounce this morning.  Both red and green ED packs settled -7.625.  Tens were up 5.6 bps to 2.558%.  There was sizable buying of TYK 123/124 call spreads on legs for 20 to 21, settled 19 ref 123-03.  Open interest in in the lower strike was up 59k (new buyer) and up 34k on the 124 strike (exits followed by new sales).  May treasury options settle one week from Friday.  

–Gold is testing new lows for the year and silver is at a new low, in an apparent unwind of safe-haven bets as the dollar remains strong.  Oil has pulled back about 50 cents this morning.  However, last print on April bitcoin is 5160, +95 on the day.  

–Trump is again pressuring the Fed and saying stocks would be much higher if not for tightening.  Nervousness about the central bank’s independence is rising in some quarters, though those concerns aren’t really showing up in the markets.  Several reports indicate that the US is softening some conditions in order to move US/China trade talks forward.  –Jan20 Fed Funds settled 9772, indicating 50/50 odds for an ease by year-end.  The first three euro$ one-year calendar spreads are -20, -22.5 and -25.0 with the latter being EDZ19/EDZ20, the lowest spread on the board; all consistent with the idea of one rate cut going forward.  The highest prices on the ED curve are the greens, specifically EDU21 at 9774, a rate of 2.26%, 34 bps under the current libor setting.  US rate markets continue to lean towards ease, but are in a ‘wait-and-see’ mode.  

Posted on April 15, 2019 at 5:14 am by alexmanzara · Permalink
In: Eurodollar Options

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