Sometimes there’s a small lag
February 15, 2024
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–News today includes Empire State Mfg which plunged last time to -43.7, so likely to see a bounce. Retail Sales expected -0.2 m/m vs +0.6 last. Ex auto and gas +0.2 expected vs +0.6 last. Several analysts are warning of a large downside miss on Retail Sales. Philly Fed was -10.6 last.
–Just about every news site has ‘Japan Slips Into Recession’ as a lead story, along with ‘UK falls into recession’. $/yen is holding above 150 and Nikkei continues to make new highs; it was 30700 at the end of October and is 38150 now, just three and a half months later (+24%). It’s like BOJ’s Ueda said in Sintra last June, “We haven’t had any serious monetary tightening for three decades” and amusingly added, “So in terms of that, the lag in the effect of monetary policy could be at least 25 years.” *nervous laughter by the other central bankers.
https://www.youtube.com/watch?v=DLGomU8iKBg
–Equity melt-up at end of day. SPX +1%.
–A few big trades: New stuff in treasuries: +50k TYJ 108/112 risk reveral vs 110-00, paid 3 for put. Open interest up over 40k in both strikes. As a comparison, with TYM4 having settled 110-175, I checked a late mkt 108.5/112.5 rr vs 110-16, 42d 1/2 for put. Just before CPI premium favored the call in equidistant rr’s. Also looked like new buying in TYH4 109.5p, followed by new sales in 109.25 and 109 puts. March options expire a week from Friday. Settles vs TYH4 110-00+, 15, 10, 7.
–In SOFR a couple of large exits: SFRZ4 9400/9350ps 1.5 paid 100k vs 9463 to 9461 with 5d. This settled 2.75 / 1.75 (so 1.0) vs 9567.0. 0.5/1.5
–SFRZ4 9575/9500/9425p 1x3x2 fly 11.5 paid 25k settled 47.25/13.75/3.75 or 13.5 (has 4 to 5 call delta). Open interest -25k, -61k, -38k.
