FRANCE: Macron Calls Meeting Of Party Leaders @14:30CET Ahead Of PM Announcement

Oct-10 10:55

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President Emmanuel Macron is convening a meeting of leaders of numerous political parties, excluding...

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ECB: EUR STIR Options Flow More Balanced As Terminal Approaches (1/2)

Sep-10 10:55

With the ECB now at or close to its assumed terminal rate, recent EUR STIR options flow has been much more balanced than earlier this year (where it was dominated by demand for dovish call structures).

  • A divergence in participants’ views likely reflect differing opinions on (i) the underlying strength of Eurozone domestic demand and the impact of past rate cuts, (ii) the eventual economic impact of a higher US effective tariff rate and (iii) the eventual impulse from higher German fiscal spending.
  • Thursday’s communication and updated projections will provide an update on how the ECB currently assesses these drivers, and will be key in shaping any market reaction on the day.
  • Popular dovish plays in recent weeks have included significant purchases of the ERM6 98.3125/98.4375 call spread, alongside other upside call structures in Z5 and H6. On a shorter-term basis, today’s flow has included a buyer of the ERU5 98.00/98.06 call spread. These options expire on Sep 15th, so essentially capture tomorrow’s ECB decision in isolation.
  • However, there has also been demand for more hawkish put spreads and flies expiring through the course of next year during the past few weeks.
  • Looking at options in ERU5, ERZ5, ERH6, ERM6, ERU6 and ERZ6, the 98.25 strike currently has the highest open interest, followed by the 97.9375 strike. While 98.25 strike OI is fairly evenly split between calls (60%) and puts (40%), 97.9375 is dominated by puts (90%). We note that put sales have been used to fund dovish call structures through this year, but recent increases in OI have also reflected increased demand for the hawkish put structures noted above.
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PIPELINE: Corporate Bond Roundup: $3B KFW 3Y SOFR Launched Earlier

Sep-10 10:51
  • Date $MM Issuer (Priced *, Launch #)
  • 09/10 $3B #KFW 3Y SOFR+30
  • 09/10 $1B Federal Home Loan 2Y +4
  • 09/09 $Benchmark Komatsu Finance AM 5Y +95a
  • 09/09 $Benchmark Saudi Aramco 5Y Sukuk +105a, 10Y +115a
  • 09/09 $Benchmark IDA (International Development Association) 7Y SOFR+55
  • $14.75B Priced Tuesday, $44.95B/wk

US 10YR FUTURE TECHS: (Z5) Bullish Theme

Sep-10 10:41
  • RES 4: 114-10   High Apr 7 (cont.)
  • RES 3: 114-00   Round number resistance 
  • RES 2: 113-26+ 2.764 proj of the Jul 15 - 22 - 28 price swing 
  • RES 1: 113-21+ High Sep 5
  • PRICE:‌‌ 113-07+ @ 11:30 BST Sep 10
  • SUP 1: 112-28+/112-14+ Low Sep 5 /  20-day EMA
  • SUP 2: 111-28+ 50-day EMA
  • SUP 3: 111-13+ Low Aug 18 and a key support  
  • SUP 4: 110-25   Low Aug 1 

Treasury futures rallied sharply higher last week and the contract is holding on to the bulk of its latest gains. The move higher highlights an acceleration of the uptrend. Note too that moving average studies remain in a bull-mode position, highlighting a dominant uptrend. This paves the way for an extension through 113-21 next (pierced), the 2.618 projection of the Jul 15 - 22 - 28 price swing. Initial firm support to watch is 112-14+, the 20-day EMA.