Archive for the ‘Eurodollar Options’ Category
SOFR pricing
March 23, 2025 – Weekly Comment************************************ Peak contracts on the SOFR strip have been in the 6th and 7th slots, what I would refer to as the middle reds. Current peak is SFRU6, 2nd red, sixth slot, which settled 9654 or 3.46%. Despite increased measures of inflation expectations, both from surveys and from the Fed’s […]
Bonds tentatively embrace the QT reduction
March 21, 2025**************** –Yields slightly lower yesterday with 2s, 5s and 10s down around 2.5 bps to 3.853%, 4.005% and 4.231%. Same on the SOFR strip with all contracts in the first 4 years up 2 to 3.5. Peak contract remains SFRU6 at 9652 (3.48%). –Sev’l large treasury option trades. Pre-open exit seller of 50k […]
Balance sheet change equals ease?
March 20, 2025*****************–I was wrong about my SEP predictions yesterday. And wrong about how stocks would react if inflation estimates were raised. Powell said “a good part” of the increase in inflation estimates were due to tariffs. Here are the last three quarters of SEP: (End-of-2025 estimates) […]
Dots are rarely right, but they make markets move
March 19, 2025****************–Front SOFR contracts continue to trade heavy in front of today’s FOMC, with SFRM5 and U5 both settling -1.5 at 9587 and 9608, even as every contract one year out and further closed positive on the day. The red SOFR pack (2nd year) +2.75. Greens (3rd) +3.875. Two-yr treasury yield -1.2 bps at […]
Front end pressure
March 18, 2025*****************–Retail sales a bit soft yesterday and Empire State Mfg sank to -20.0 vs -1.9 expected, but front end yields pushed higher. Two-yr up 3.3 bps to 4.05%, while tens were nearly unch’d, with the yield down less than 1 bp to 4.302%. TYM5 settled down 1/32 at 110-19+, while USM5 was +7/32 […]
If you’re long gold, you’re in a deflating world
March 17, 2025*****************–Front end hit Friday as U of Mich inflation expectations showed an unexpected jump. At the end of 2024, year-ahead expectations were just 2.6%, low of the cycle. Just four months later 4.9% (vs 4.3 estimate), nearing the high of 2022 which was 5.4%. Market measures like breakevens (treasury vs inflation-indexed yields) are […]
Canary
March 16, 2025 -Weekly Comment************************************* The inset is a painting ‘The Goldfinch’ by Carel Fabritius in 1654. It features in the 2013 Donna Tartt Pulitzer Prize winning novel of the same name. In the book, the young protagonist Theo Decker is at New York’s Metropolitan Museum of Art with his mother when a bomb explodes. […]
When credit turns
March 14, 2025**************** –New all-time high in gold yesterday and this morning GCJ5 is up over $17/oz just above 3008. GCJ5 settled 2991.30, +44.50. This, despite Schumer’s reversal, which for now, averts the chances of a government shutdown. –Yields fell yesterday as equities continued to decline (SPX -1.4%). Tens down 3.4 bps to 4.276%. Ten-yr […]
Weaker than expected CPI provides no comfort for bonds
March 13, 2025**************** –CPI was a little better than expected with monthly readings of 0.2 both headline and Core. Headline yoy was 2.8 vs expected 3.0 and 3.1 on Core vs 3.2. PPI today. –However, bonds traded weaker on the day, partially due to continued supply. Ten year auction went well with a yield of […]
SFRH5 opts rolling off Friday. Where will SFRM5 be on 13-June opt expiration
March 12, 2025**************** –Despite equity market volatility yields rose yesterday with tens up 7.5 bps to 4.286%. Today brings CPI and 10-yr auction of $39b. CPI expected 0.3 headline and Core with yoy 2.9 (from 3.0) and Core 3.2 (3.3). In February, the ten-yr breakeven (10y yld minus inflation-indexed 10y) hit a high of 247 […]
