What turn?

Sept 29. 2020

–Eurodollar and treasury prices were barely changed yesterday, although front contracts which cover the turn are still showing notable strength.  October ED contract settled 9978.25 or a rate of 21.75 bps (which essentially equates to last week’s lowest ever libor setting), and EDZ0 settled up 1 at 9974.5.  Today’s libor setting will reflect the turn.  

–EDZ0/EDZ1 spread settled at a new recent high of -2.5, up 1.5 on the day.  This is now the only one-year calendar spread that is inverted.  While the spread between the white pack (average price of the first 4 quarterly contracts) and the red pack (avg price of contracts 5 thru 8) is just 1.75 bps, the spread between blues (4th year) and golds (5th year) is 20.75 bps.  This gives an indication of when the market thinks rate hikes will be possible… years from now.  However, that perception may begin to both move forward and be magnified.  While trades are quite small so far, more activity is occurring in blue and gold midcurve puts.  For example, a buyer yesterday of 7k 4EZ 9937/9925/9912p fly for 1.75, settled 1.5 vs 9942.  Also a buyer of 1k 4EM 9925/9900 ps vs 2EZ 9975 straddle.  The 4EM put spread settled 7.5 vs 9932.0.     

–Bank stocks gapped open higher and maintained strength in keeping with the general rebound in stocks.  Copper a bit lower this morning with HGZ0 at 2.97; looks like it should re-test early Aug low around 2.80.  Rough proxy for China economic strength.

–Presidential debate this evening.

Posted on September 29, 2020 at 5:00 am by alexmanzara · Permalink
In: Eurodollar Options

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