Got a lot priced in
September 6, 2024
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–Big data today: NFP expected 165k vs last of 114k. Unemp rate expected 4.2 from 4.3.
–October FF settled 9502, a slight bias for 25 bps at the Sept 18 meeting. SFRU4 settled 9512.25. High settle Aug 5 in FFV was 9517, exactly pricing a 50 bp cut. High settle in SFRU4 on Aug 6 was 9528.5. I think today’s range will be capped by 9525 to 9529 on weak data and will have a floor of 9503 to 05. My guess for ultimate settle on 13-Sept is 9525 to 30. I think today’s data will be weak and given that the FOMC is 2 days after what is likely to be a contested election marked by sporadic violence, I think the market will lean heavily for another 50 in Nov.
–Ten year breakeven made a new low just above 2%; I marked at 2.045.
–Seller of 50k SFRH5 9675/9750/9775/9850 at 9.25 (exit of 9675/9775cs and now long 9750/9850 which settled 6.5 ref 9643). Market obviously expecting (or fearing) large eases. Consider SFRM5 which settled 9675 or just 3.25%. The M5 9875c settled 12.5, 125 otm, a strike price of 1.25%. The equidistant put, the 9550 strike, which is STILL lower than the current FF rate by 75 bps, settled 4.5. New low in SFRU4/U5 1-yr calendar at -180.25 (9512.25/9692.5).
–One interesting trade, buyer of Wednesday Week-2 (Sept 11) 113.75p for 10 in size 12k. The 113.5p also traded 19k. Settles were 11 and 7 vs TYZ4 114-24. Apart from being a solemn anniversary, CPI and 10y auction are on that date. (Hard to find these settles on CME website, symbol is WYW near the end of the Treasury Daily Bulletin page).
–Best of luck today.
