Archive for the ‘Eurodollar Options’ Category
Does USD steamroll higher?
December 23, 2024********************* –Back in September, the difference between the lowest contract on the SOFR strip (SFRU4 at 9505) and the peak (SFRM6 at 9721) was -216. Currently, the lowest contract is SFRH5 at 9581 and the peak is SFRU6 at 9603. (I use old euro$ convention and consider H5 as front contract). That spread […]
Projecting
Weekly comment – December 22, 2024***************************************** As mentioned in Friday’s note, I think Q4 2024 has marked a huge turning point. My focus is on liquidity and a tightening in financial conditions, punctuated by the dramatic rise in yields since the Fed’s initial 50 bp FF cut in September. The 30-yr yield has gone from […]
In: Eurodollar Options
Trend in financial conditions has reversed
December 20, 2024********************* –Usually I jot down a few notes about changes in SOFR spreads, or maybe an interesting macro tidbit. But current market moves appear to me to be a complete change in market dynamics, with signals of a harsh reversal in liquidity and financial conditions. Instead of BTFD it’s now STFR (sell rallies). […]
Hawk tuah
December 19, 2024*********************–That was what the professionals might call, “a hawkish cut”. A couple of weeks ago I had thought the Fed might hold and BOJ hike. Wrong. Only Beth Hammack, Cleveland Fed President saw it my way, she dissented in favor of holding rates steady. Barely mattered as yields jumped, with weakest SOFR contracts […]
Elevator down
December 11, 2024*********************–Yields up a few bps yesterday going into today’s CPI. Expectations are 0.3 m/m for both headline and Core. On y/y headline expected 2.7 from 2.6 and Core 3.3 from 3.3. Steady numbers…unless you drink coffee. Front end contracts remain convinced of a Fed ease one week from today. FFZ4 settled 9550.75. A […]
NFIB optimism. Will it bear out?
December 10, 2024******************** –Yields a touch higher in front of this week’s auctions; 3y today. Ten year re-open tomorrow, ended at 4.197% up 4.8 bps on the day. On the SOFR strip reds through golds down 3 to 4 bps. Notable new buyer of 50k SFRJ5 9625/9700cs for 11.0. Settled 11 ref 9608 in SFRM5. […]
Shifting Sands
December 9, 2024******************* –NFP about as expected at 227k (220k exp). However, Private payrolls were 194k vs 205k expected. So government payrolls rose, but they will be under the cutting knife next year. The Unemp rate upticked to 4.2%, enough to solidify expectations of an ease at the Dec 18 FOMC. –Current EFFR is 4.58%. […]
Low MOVE underpricing uncertainty
December 8, 2024 – Weekly comment****************************************Image below is MOVE (treasury vol index) and the yield of the US 10 year. The ten-year yield bottom corresponded with the September 18 FOMC 50 bp rate cut. That yield was 3.62% on September 16, the low for this calendar year. Rates soared from there going into the election, […]
Earth is Shaking
Dec 6, 2024************ –Going into today’s payroll report (NFP expected 210 to 220k, rate 4.1) longer end contracts closed near the highs of the past week. TYH5 settled 111-065, down 1.5/32s, but well off the week’s low of 110-18. It feels like the market is set up a bit short, looking for a solid rebound […]
Front end pricing favors Dec cut
December 5, 2024******************* –News articles attribute bitcoin’s surge above 100k to a pro-crypto choice for the SEC. Paul Atkins. I guess it has nothing to do with political gymnastics in S Korea and France. Or with Blinken urging Ukraine to conscript younger kids into the meat grinder. Well, maybe it doesn’t because gold is still […]
