Who, what, where, why, when, how?

Who is the agent responsible for buying several hundred thousand eurodollar contracts a few minutes after the daily settlement yesterday, when the futures pits were vacant?



What were they thinking, other than to rattle the market's chains, show that there was a noisy buyer, and hope to squeeze the futures up during illiquid conditions?

Where might they stop out, given that the market has, at the time of writing, printed a number of contracts in the mystery buyer's face?




Why did Mark Carney decide, nearly a year after he took office, to suddenly utter something decidedly hawkish, that rate hikes could come "sooner than markets expect"?  Moreover, why has he spent most of this year pushing back on those very expectations?

When might the first hike come?  Markets are pricing a LIBOR at 0.75% by December,  though a base rate hike should increase the current paltry basis between bank rate and LIBOR.   August seems like it's probably too soon, so November would appear the subject of Carney's hints.

How much of Brazil's budget deficit was spent bribing the referee in last night's match?   A diabolical penalty decision gave them the lead, and it looked like he missed a foul when they scored the third on the counter-attack.


Previous
Next Post »

11 comments

Click here for comments
Anonymous
admin
June 13, 2014 at 9:53 AM ×

CB 101 is surely about clarity/credibility, comments yday look bipolar vs last month IR. CB uncertainty on policy = buy long dated vol, UKX variance has been at long term lows for a while.


http://www.bankofengland.co.uk/publications/Documents/inflationreport/2014/irspnote140514.pdf

4 wks ago;

"the economy has edged closer to the point at which Bank Rate will need gradually to rise. The exact timing will inevitably be the subject of considerable speculation and interest. The ultimate answer will depend on the
evolution of the economy, particularly the degree of slack, the prospects for its absorption, and the broader inflation outlook."

re slack
"but despite recent progress, significant slack remains in the labour market."
re inflation
"the outlook for inflation in the medium term remains benign"

Reply
avatar
JB
admin
June 13, 2014 at 10:05 AM ×

Unfortunately due to the implied nature on the STIR curves they are open to heavy manipulation. Im away at present so havent seen where along the curve the majority of the trades were entered but I assume near the front due to the Z4 chart you've put up. The strategy thats been used has caused the belly of the curve to extend even higher due to low liquidity and all the while whoever executed the buy order has sat on the offers further out. They are now long the curve, at very favourable prices (even more so this morn) and haven't broken any exchange rules on manipulation....... Doesnt look like they'll need stopping out any time soon.

Reply
avatar
JB
admin
June 13, 2014 at 10:11 AM ×

V much agree re BoE and its bout of bipolar disorder...... A very poor way to communicate a change in views, esp after such a strong attempt to express a dovish stance as recently as the QIR. Mr Carney now looks less credible than he did last August!!

Reply
avatar
Macro Man
admin
June 13, 2014 at 12:41 PM ×

JB...not sure if I understand your point in the first post....using EDZ%, for example, the VWAP between 15.10 and 15.20 NY time yesterday was 99.04....currently 9.5 ticks below that price. Similar story throughout whites and reds, with the greater the loss the further out the curve....

Reply
avatar
Anonymous
admin
June 13, 2014 at 12:44 PM ×

C says
The problem with transparency as the 'market' would like to think of it is that's it's doom lays within it's success. Surely we don't have to think too hard about that issue. In essence the market is always ready to make a good thing a great thing otherwise we would not be able to discuss the existence of mean reversion.
For the moment crediting Carney with the intelligence to understand this issue in order for him to deter the market from running off the policy cliff he must at various points make statements which appear contradictory and indeed may leave the 'market' wondering about his credibility.

Reply
avatar
Anonymous
admin
June 13, 2014 at 12:59 PM ×

C says
In any case talk of a rise is premature because after this summer growth due to property/housebuilding will lose momentum and the GDP data will adjust accordingly.
As usual just when the UK was believed to be a basket over a year ago we now have the same people getting fooled again on the otherside of that argument.

Reply
avatar
Anonymous
admin
June 13, 2014 at 11:52 PM ×

The buyer in front end e$ effectively eliminated nearly 6m worth of carry because of the prices that were paid. Volumes in Reds where anemic for the next two hours and yet price cascaded to it's daily lows. Asian hours opened lower and only then, were the seller present. either way you slice it, someone brought a knife to a gun fight in size.

Reply
avatar
JB
admin
June 14, 2014 at 12:42 PM ×

MM..... Ive not seen exactly whats traded where on the curve and what size. I'll look into it when im back in the office. Question is, if you wanted to be an aggressive buyer/seller of the curve do you sit patiently in the exchange traded calendar spreads or do you aggressively attack the market with one leg (in this case a buy) causing the rest if the curve to follow suit due to short term traders following flow, stops and the like. If you just so happen to be offering the other parts of the curve you have now significantly beat the exchange spread price. Esp now a vacum has been created and there are a significant amount of short term trapped longs. I think the executor of the initial trade turned up to a gun fight with a degree in nuclear weaponary and will not be getting stopped out.

Reply
avatar
Be_A_Debaser
admin
June 15, 2014 at 11:42 PM ×

So JB is essentially saying the Agent Provocateur is sellng the Z4/Z5 spread in your two charts but got much better fill on his Z5 leg by spiking the Z4 higher initially. He has probably decided that the payoff on Z5 is where the action is too.

Reply
avatar
Macro Man
admin
June 16, 2014 at 1:15 AM ×

The problem with that theory is that the interest paid offers throughout the strip. Moreover, its a bit risky to buy a zillion red and white packs qfter the close and hope that some nice soul fills u on an equivalent number of greens and blues. In this case, it didn't happen, as our mystery guyer got Carney'ed

Reply
avatar
Anonymous
admin
June 16, 2014 at 8:32 PM ×

The #1 rule of legging spreads is to get 'off' the illiquid side of the trade prior to the liquid side. i'm not thoroughly convinced this is what transpired despite what some are theorizing.

Reply
avatar