Powell today. Rinse. Repeat.
June 22, 2021
–Yields moved higher at the long end, indicating stabilization after curve flattening in the wake of the FOMC. Tens ended at 1.484%. On the eurodollar curve, reds +1.125, greens +1.75, blues +0.375 and golds -2.25. It appears as if short cover buying in golds has run its course. There were also new positions added in blue Dec puts, for example 20k 3EZ 9800/9762p 2×3 paid 6 to 6.5, settled 9.5 and 4.25 so 6.25 in the 2×3, and a buyer of 25k 3EZ 9750p/9887.5c risk reversal covered 9846 for -3.5 (bought put, put settled 3.25 and call at 7.0). In all, open interest in blue Dec midcurve puts rose 147k. Implied vol fell in treasuries.
–Powell speaks this afternoon in Congressional testimony. Prior to that is the 2 yr note auction. The market appears to have absorbed the Fed’s message from last week; there probably won’t be a large reaction to Powell this afternoon. I would expect questioning on Bullard’s suggestion that MBS be tapered first.
