Euro$ option pit re-opens today
August 10, 2020
–Friday featured a slight rebound in yields with tens up 2.4 bps to 55.9 as the employment report was somewhat better than expected. A couple of near one-year eurodollar calendars edged to new recent highs, for example EDU0/EDU1 rose 1.5 to -3.5 and EDZ0/Z1 rose 1 to -6.5. This latter one-year spread is now the lowest point on the curve at -6.5; most calendars are now positive. The interpretation of the front end of the curve is that the market has more or less dismissed the idea of further easing in the form of future FF rate cuts to negative levels, but foresees rates locked at low levels indefinitely. The first twelve quarterly ED contracts, or 3 years, are between 99.82 (EDH’22) and 99.73 (EDM’23), 18 to 27 bps.
–Refunding kicks off tomorrow with $48 billion three year notes. Nearing $50 billion for a single issue! The new CBOT 3-year note is $200k face, and has built up to open interest of just over 5000 contracts. That is, it has just over $100 million in open interest. Not quite an appropriate hedging vehicle yet.
–The euro$ option pit re-opens on the trading floor today. Let’s generate a little activity!
–The Magnificent Mile shopping district in Chicago is the scene of enthusiastic window smashing and looting overnight into this morning. See @AmyJacobson on twitter. Clothes and goods are being stuffed into cars with license plates clearly on camera. I’m sure community interventionists will be able to resolve the situation. Just another reminder that Chicago and other big cities dependent on conventions and trade shows are likely to lose significant business whether there’s a vaccine or not. Last week Governor Cuomo was trying to cajole wealthy New Yorkers into coming back to Manhattan. The challenge is arguably larger in Chicago. Tax base is running away.
