Blinken tasked with saving…stocks
Feb 18, 2022
–Russia/Ukraine situation was the main driver yesterday, with SPX -2.1% and Nasdaq -2.9% going into today’s option expiration. Options on March treasury futures also expire today. Yields declined with tens slipping back below 2%, ending at 1.97%, down 7 bps on the day. New talks between Lavrov and Blinken in the coming week have calmed things down this morning.
–The Fed Effective rate has been 8 bps since the start of the year, or 9992 in futures terms. The April FF contract is an appropriate expression for odds of tightening at the March FOMC. In September it was 9991.5. By the January FOMC a bit more than one 25 bp hike had been priced as it was trading 9965. On Feb 10 it traded 9943.5, essentially projecting certainty of 50 bps by the March meeting (9992-50 is 9942). Yesterday it settled 9958.5 up 2.5 on the day…not that geopolitical tensions will stop any hike, but clearly leaning towards 25 and not 50.
–Treasury vol remains firm and rose yesterday with TYJ 126.5^ 1’60 or 6.1. However, eurodollar options seem to have peaked on Valentine’s day. On Monday EDZ2 9800 straddle was 85.5. Yesterday EDZ2 9812.5 straddle settled 72 and EDH3 9800 straddle settled 82 vs 9796.5.
–May beans just above $16/bushel this morning.
