If the Gov’t Efficiency Team is cutting, does Powell ease?
November 13, 2024
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–CPI today expected 0.2 with Core 0.3 (same as last month) and yoy 2.6 from 2.4 with Core 3.3 from 3.3.
–Trump places Musk and Ramaswamy to tighten up gov’t efficiency. When an individual company announces layoffs, the stock often rallies. But culling government bureaucracy may not have the same effect on equities as a whole. There are a lot of companies depending on government largesse. Great in the long run though.
–Yields up across the board yesterday. New lows for many contracts. A few large trades I’ll cite. For a more thorough list see Art Main’s (TJM) summary below.
0QM 9537.5/9512.5ps 4 paid 25k (settled 4.0 vs SFRM6 9613.5). New
0QM4 9550/9500ps 8.25 paid for 34k (settled 8.25). New
SFRM6 made a new low for the move at 9610.5, but on Oct 1 it was 9713.5…100 higher. Seems a bit late to be selling into it here. On the other hand SFRZ5 fell from 9680 to 9557 in the four month period from start of January to end of April.
–SFRZ4 buyer of 35k 9556.25/9562.5cs for 3.25 covered 9556.5, 13d. Looks to be roll with 9556c OI +40k and 9562c down 40k. There was an outright seller of 50k SFRZ4 9556.5 which sparked a move to the day’s low of 53.5. Last time I saw a block that big was on 9/25 when 82k SFRZ4 were sold on block at 9606 (the top). Also buyer of 20k SFRX4 9556.25/9550ps for 1.75, 20k. New EFFR is indeed 4.58 or 9542 (officially posted for Friday).
–Activity favored put sellers in TY… vol just a bit easier on the move to higher yields. Suggests that there’s little panic left in terms of grabbing long maturity puts. TYZ4 108.5p 30k sold 6 to 5 (109-23+) settled 8 vs 109-135 (exit). TYF5 107p 20k sold at 12, settled 14 vs 109-18 (appears new).
–In combination with weakness in SOFR contracts (& straddles bid)…it argues for flatter curve and indeed 5/30 made new low at 26 bps. 5y yield +12.4 to 4.314 and 30y +9.9 bps to 4.575.
–EUR touched low of the year just under 106…last time there was April, and interceding high in Aug/Sept was just over 112. $/yen modest new high just under 155. DXY 105.90, with a high 106.18. High of year in April 106.51.
–Given the change in forward rates in Euribor (none) and SOFR (Z5 rate up >110 bps) it’s no wonder EURUSD has sold off.
Player summary from Art Main.
+32k SFRZ4 95.5625/95.625 call spread covered 95.565/.59 delta .16/.05 at 3.25
+26.75k SFRF5 96.50 call at 1
+13.9k SFRF5 96.875 call at 0.5
+10k SFRM5 98.00 call covered 95.88/.955 delta .05 from 1.5 to 2
+7k SFRM5 96.375/96.625/96.75/97.00 call condor at 2
+7.2k SFRU5 98.25 call covered 95.965 delta .03 at 2.5
+12k 0QF5 96.25/96.50/96.25 call fly from 5 to 5.25
+10k SFRX4 95.50 put at 0.75
+7k SFRZ4 95.625/95.5625/95.50 put fly at 0.5
+10k SFRZ4 95.625/95.50/95.4375/95.375 put condor at 4.5
+10k SFRH5 95.75/95.265 put 1 x 2 at 1 (bot one leg)
+15k SFRZ5 96.25 put (5k covered 96.065 delta .56) from 55 to 55.5
+34k 0QM5 95.50/95.00 put spread at 8.25
+25k 0QM5 95.375/95.125 put spread at 4
somewhat interesting note from a BBG chat (anon) / China stimmy less than expected accelerated the sell off according to friend WS at MNI.
Luxury company meltdown in europe continues:
MC FP is LVMH
873 in March, now new low 582
KER FR is Kerig
426 in March now new low 212
RMS FR is Hermes
2414 in March, now 2016 (not new low)
CFR SW is Richemont
150 in June, now 118 (not new low)
