|We had a noticeable shift about how the quarterly vs non-quarterly meetings are priced. I mentioned in an email last week that there was a large increase in open interest in FFX7. Since then, there has been a larger increase in OI. Open interest in FFX7 increased over 250% the past week, from 10.0K to 35.4K contacts. The other FF contracts had no notable OI change (other than FFF8 which has no meetings in it). I was speculating this was some kind of “September FOMC” deferral trade, since it is unusual for someone to want to take a large position in a less liquid contract otherwise. My best guess is that a large market participant is playing for the September meeting to get priced out and moved into November. The other possibilities are fading the Dec meeting (vs EDZ7) and/or combining a ED-FF spread narrowing view.
Idle speculation aside, the interesting repercussion is that most of the non-quarterly meetings have started getting noticeably priced in. Compare the Fed meeting pricings from this past Friday, with the last Fed meeting summary I published just 5 weeks ago. There are a number of interesting things that have happened: CLICK TO READ THE REST OF THIS ARTICLE FROM THE CA WEB SITE
Next Week: I discuss the January fixed income rally we have had the past few years.