We noted yesterday that the recent trend of increased volumes into Eurodollar future out-months was 'odd'...
But the sudden surge in interest in Eurodollar calls (vs puts) suggests more than just a few prop bets are being placed on the fact that The Fed does not hike rates in June.
For the 3rd month in a row, US Producer Prices have risen at a faster rate than The Fed's mandate. April healdine PPI rose 2.5% YoY - the most since Feb 2012, and well above the highest anayst estimate, despite disinflationary credit impulse pressures from China being seen in industrial metals. The biggest driver is surging costs for investment advice!
Core PPI (ex food and energy) rose 1.9% YoY - also above highest estimates - to the highest since Dec 2014.
After tonight's significant downgrade and warning from Moody's about Canadian Banks, the following seems extremely prescient now.
Authored by George Stockus via BeatlesOnBanking.com,
Stability breeds instability – this was economist Hyman Minsky‘s lasting contribution to the craft. The Minsky Moment , popularized during the 07-09 US housing crisis, basically suggests breeding animal spirits too long creates systemic problems.
Just hours after the Fed's March "dovish" rate hike, when stocks paradoxically surged to all time highs and yields tumbled, Goldman found something strange: "surprisingly, financial markets took the meeting as a large dovish surprise—the third-largest at an FOMC meeting since 2000 outside the financial crisis, based on the co-movement of different asset prices." Even more surprising is that according to Goldman, its financial conditions index, "eased sharply, by the equivalent of almost one full cut in the federal funds rate." In other words, the Fed's 0.25% rate hike had the same e
"You know what made yesterday so much fun? For a brief window of opportunity we were able to envision a lot of green shoots globally and talk in the context of a whole set of crystal champagne flutes half-full. Which central bank might be the next one to surprise with a hawkish spin was actually a topic. Speculation, idle or not, on widespread retractions of liquidity was good news, not of that soul-crushing bad news is good news variety."