New large put buying on contract lows
March 1, 2023
–Exit seller of about 50k SFRZ3 9450/9400ps 14.5 to 14.0 yesterday, settled 14.25 vs 9475.0. This was originally bought Feb 13 for 9-9.25 when Z3 was trading 9512.5. However, of greater interest was a late buyer of >60k 0QJ3 9500p for 7.0 to 7.5. Most buying occurred after settle of 6.5 v 9548.5; 7.5 was being paid as contract was trading 9545.5 late. Yesterday, underlying contract SFRM4 printed an early low of 9543.0, which is the contract low (also printed there on Monday). This morning there’s a new contract low print of 9542.5. Large new put buying on contract lows! China’s PMI was 52.6 vs 50.5 expected, highest since April 2012 (re-open). In the US, Mfg ISM is expected 48.0 from 47.4 last.
–Pressure on SFRM4, and reds in general, helped SFRM3/M4 spread settle at a new high of -86.0. 2/10 also made a new closing low of -88, though -92 printed a few days ago. Ten year yield was nearly unch’d at 3.914%. Somewhat interesting that Goolsbee, the new Chicago Fed President had this remark in his inaugural speech:
The temptation can be to look at what’s easy to find and lean more on that—stock market, bond market, and other financial data that give instant reactions to news about the economy and our policy announcements and tell us which way the markets want the Fed to move. But it is a danger and a mistake for policymakers to rely too heavily on market reactions.
–What’s easy to find is the most inverted yield curve since the 1980s. Let’s just pretend it isn’t there.
–I saw a small clip yesterday of CNBCs Sorkin interviewing David Solomon, Goldman’s CEO. He cited opportunities for growth in ‘wealth management’. It’s all about gathering assets in an environment where relatively high rates make fees seem a bit less egregious. It’s not that there’s anything wrong with that, but is the wealth management industry really doing a great job? Once again, it harkens back to the early 1980s with this line in Trading Places from Jamie Lee Curtis as Ophelia. “I’ve saved 42 grand, in t-bills, earning interest.” The one-year bill was north of 10% in 1983. No fees on that! (You know the scene. Go ahead, youtube it. You’re welcome).
–In a sliver of hope for Chicago, Lori Lightfoot was defeated in her quest for a second term. Crime was the main issue. In a long-forgotten political note, the first woman to be mayor in Chicago was Jane Byrne. She beat Bilandic. The main issue then was lack of snow removal related to the blizzard of 1979.
