Half empty
March 6, 2024
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–Yields fell, curve flattened. Tens down 8.2 bps to 4.135%. New low in red/green SOFR pack spread to -30.625 (9617.5/9648.125). Red pack+7.125 and green pack +8.25. Perhaps of note is that SFRU4/U5 posted a new recent low at -105, down 3 on the day (9525/9630). This is the spread the Bill Gross cited as a long. It hasn’t had a lot of volatility; last 20 trading day range is -93.5 to -102. Related to this spread was a new buyer of 60k 9600/9700cs for 6.5 (settled 11.0/4.5). The 4% strike (9600) seems a bit optimistic given a narrowing time window. Maybe optimistic isn’t the correct word, as some bad stuff would have to occur to spark >150 bps in cuts. See Egypt, below.
–News today includes ADP, expected 150k. Powell at 10:00am and JOLTs also at that time, expected to extend its decline a bit more to 8.9m. Beige Book in the afternoon.
–A couple of other significant trades: new buyer of 30k TYK4 110.5p for 54. Settled 50 ref TYM4 111-095, -0.38 delta. Seller of over 10k TYK4 109.5/113 strangle 63 to 62; settled 62.
–Massive volatility in bitcoin, with the March futures having a range of about $10k. Key reversal with outside day after a new historic high of over $70k, but I’m not sure the technicals mean much in this market.
–After a pullback in the past two sessions, CLJ4 is back near $79/bbl (up 73 cents). Does Egypt’s massive hike and currency devaluation have an impact? Hike of 600 bps to 27.25%, ccy down 30%, apparently closer to the black market level. The collapse of Egypt would add to the region’s instability and further complicate oil transport.
