Quick notes
November 18, 2019
–China trimmed its key 7-day repo from 2.55% to 2.50%, a small sign of easing. Today the Chicago Fed national Activity Index released, expected -0.50 from -0.45 last. The low was in April at -0.84, but weakness has persisted through the year. While stocks look to start the day higher, gold is currently down $10, below 1460, near the low of the month.
–Uneventful close of November midcurves. Dec treasury options expire Friday. Open interest favors puts, with 129p at 76k (12s), 128.5p 90k (4s) and 128p 125k (1s). On the call side the 129.5c have 67k and 130k 90k. I would surmise a slight bias for lower prices.
–After the announcement late Thursday of term repos over the turn of the year, EDZ9 to FFF0 spread eased to 36.0 on Friday, down 2 on the day, with EDZ9 up 1 and FFF0 down 1. EDZ9 9812.5 straddle settled 7.5. The market is fairly confident the Fed has taken appropriate measures to suppress year-end funding pressure, which encourages vol sellers across the curve.
–After Retail Sales and Industrial Production data, the Atlanta Fed cut its GDPNow Q4 forecast to 0.3%, a new low.
