OPTIONS: Larger FX Option Pipeline

Apr-18 11:27
  • EUR/USD: Apr19 $1.0635-45(E1.3bln)
  • USD/JPY: Apr19 Y155.00($1.7bln); Apr22 Y155.00($1.4bln)
  • AUD/USD: Apr23 $0.6415-20(A$1.9bln)
  • USD/CAD: Apr19 C$1.3700($1.7bln)

Historical bullets

US TSY FUTURES: UXY Blocked

Mar-19 11:23

Latest block trade lodged at 11:00:18 London/07:00:18 NY:

  • UXYM4 2,798 lots blocked at 113-18, looks like a buyer.
  • DV01 ~$247K.

US TSYS/TIPS: Natixis Like 2y/5y Breakeven Steepener

Mar-19 11:19

Natixis write “if, as far as inflation is concerned, “the last mile is the hardest,” the inverted sign of the 2-5y breakeven UST curve presents an attractive opportunity.”

  • “As central banks and investors might be wrong about the mean-reverting feature of the inflation dynamics, given recent surprises on the two last data points, either the 2-year breakeven is too high or the 5-year is too low.”
  • They recommend a long 2y/5y UST breakeven curve trade at -0.4bp, targeting +25bp in the next 3 months. Stop set at -14bp.

CANADA: CPI Ahead – 0830ET

Mar-19 11:19
  • Bloomberg consensus sees headline CPI rising two tenths to 3.1% Y/Y in February. The broad range is 2.9-3.1% but with S&P an outlier at 2.5.
  • The median and trim average meanwhile is seen holding at 3.35% Y/Y at what was the lowest print since late 2021.
  • TD agree on headline but see the core measures firm a tenth to 3.45% on average, despite 3-mth rates holding unchanged at 3.2% annualized.
  • Both 3-mth and Y/Y rates are important here: Gov. Macklem was keen to point out earlier this month that the Bank needs to see a further easing in median and trim figures which as he noted were running at 3.3/3.4% Y/Y and a similar rate in three-month terms in Jan.
  • The Bank has recently explicitly put more weight on a range of underlying inflation measures but still formally refers the median and trim measures.
  • When asked about this by MNI in the Q&A, Macklem said “We are comfortable with our preferred measures of core inflation. We’ve been using this term underlying inflation because it reflects what we’re seeing in a whole range of indicators rather than people getting fixated on one number. Yes, our preferred measures are important, but we also look at alternate measures (CPIxFE, CPIX) and the whole distribution of price changes where still ~45% of the basket is rising above 3%, roughly double what is normal”.
  • On these other measures, CIBC look for CPIxFE to rise 0.3% M/M SA. We calculate that rounded figure as seeing the 3-mth rate cool further to just 2.3% annualized after moderating sharply in Jan.
  • This is the sole CPI report in the narrow window between the Mar 6 and Apr 10 decisions, although we are still to see monthly GDP, the BoC's BOS/CSCE surveys and another labour report before then.