Waiting for the SPR purchase announcement
March 30, 2020
*strategic petroleum reserve
The May WTI crude contract traded below 20 this morning with a low of 19.92 and now prints 20.45. On the Market Huddle podcast with Kevin Muir and Patrick Ceresna, one of them mentioned that a barrel of Western Canadian Select was about the same price as a Starbucks latte. This morning, according to oilprice.com, W Canada price is $6.11/bbl. Another client quipped, “How much is the barrel worth?” Zerohedge has an article citing Bloomberg that the CFTC exempted Capital One from rules which would make it register as a “Major Swap Participant” in energy. The article claims the CFTC “bailed out” COF by not making it meet margin calls. If true, it’s a bombshell. For all the Fed talk of ‘stress tests’, when actual stress hits the rules go out the window. Not a confidence builder. What’s in your wallet? Nothing, nada, zilch. https://www.zerohedge.com/markets/cftc-quietly-bails-out-capital-one
| CFTC Quietly Bails Out Capital One | Zero HedgeLast Friday, around the time of the quad-witching collapse which sent the S&P to levels not seen since Trump’s inauguration, amid the flurry of headlines bombarding shell-shocked traders, was one that was particularly ominous if bizarrely incomplete.www.zerohedge.com |
–Month and quarter end. ESM0 hit a low of 2445.0 last night, nearly 200 lower than Friday afternoon’s late high of 2634.50. It has now rebounded to 2527, +3.00 on the day. Re-balancing should provide support. Additionally, China cut its 7-day reverse repo 20 bps to 2.20%. Rates are lower in the US amidst a flatter curve. Reds +2.5, greens +4.0. blues +5.0. EDJ0 is holding slightly positive at 98.80 (+2.0), so it’s likely that libor will finally set lower. However, the ‘major bank in trouble’ rumors that have accompanied the persistent rise in libor may not be so far-fetched given COF. (3m libor has gone from 74 bps on 12 March to 145 bps on Friday).
–Given the libor pressure, it’s not too surprising that near ED calendars made new lows Friday. EDM0/EDM1 settled -31.0, down 5.5 on the day. However, EDH1/EDH2, the 4th quarterly one-year calendar, is positive at 4.5 and spreads rise from there forward to the mid-teens. Almost all of the inversion is right up front. EDM0/EDU0 settled -21.5. Implied vol is coming out of treasuries, with TYM now 5.8, still high in a pre-COVID world, but well off the peak of over 11.4.
