Solid demand for treasuries
October 27, 2022
–Bank of Canada hiked only 50 bps vs expected 75 to 3.75%. ECB today. Nov Fed Funds (FFX2) settled 9621.0, fully priced for a 75 bp hike by the Fed next week.
–Ten year yield flirting with 4%; closed 4.013% down 9.3 bps on the day. Yesterday featured large new buying of TYZ2 112.5c; settled 0’37 vs 111-03 with open interest +10k. TYZ 112.75/114c spd also bought in good size; settled 0’17 with open interest +18k in both strikes. About 5k TYZ 110.5 straddles sold early 2’24 to 2’22, atm vol nearly unchanged on the day. Open interest in futures continues to grow with TU +66k, FV +36k and TY +23k. Seven-yr auction today, following a stellar 5y.
–Following Tuesday’s post-close earnings reports, GOOGL closed -9% and MSFT -7.7%. Yesterday META was -5.6% but the earnings call was met with another 20% slashed from the price. AAPL and AMZN today. Used to be called FAANGs, perhaps [negative] GAMMA is more appropriate now.
–DXY fell yesterday though the dollar has firmed slightly this morning. My feeling is that the dollar has put in a short-term top, with positive implications for commodities, especially WTI, which I think could test 98-99 sometime in November.
