FOMC in one week
January 24, 2024
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–Big buyer +23754 TUH vs -9817 UXYH about $895k DV01. Steepener likely works best on rate cut signal at the Jan 31 FOMC, but may also be impacted by the Quarterly Refunding Agreement. Open interest in TU was up 39.6k and UXYH4 OI was up 11.7k, so substantially due to this trade. Prelim open interest also shows a whopping increase of nearly 58k in the FV contract in front of today’s 5y auction. If those were pre-auction hedges I would expect the 5y auction to be solidly bid. Treasury curve did steepen, with (old) 2y up about 0.5 bps to 4.38 and tens +4.6 to 4.14%. 30s + 6 to 4.375%.
–After countless thousands of call fly and condor purchases on March and June SOFR contracts, finally a significant put buyer: on block SFRK4 9475p bought for 3.0 in size 108k. SFRM4 is underlying contract, settled 9527.5. Option expires 10-May, so captures May 1 FOMC. Open interest up just shy of 110k in that put. The pit graciously settled the option at 2.25, though in fairness it did trade 2.5 in the pit after the block. This trade is likely just a protective play for no ease.
–News today includes S&P PMIs expected 47.6 from 47.9 in Mfg, 51.5 from 51.4 Services and Comp 51.0 from 50.9
–Netflix beat and China cut RRR to arrest the freefall in stocks.
–This is sort of a fun chart comparing the size of country’s shares on Global GDP to equity market shares: (Japan’s equity share in the 1980’s is a real stunner)
