Aug 12. Stocks have “no-confidence” vote for Fed

The stock market took the Fed’s tepid assessment of the economy to heart and sold off by 2.5 to 3.0%.  Likewise, the measures announced to support the economy were deemed ineffectual. 
–The curve made new lows, with 2/10 spread down to 217 bps, down 20 bps in just a week.  EUR/JPY plunged by nearly 3 big figures as the yen rose to its highest level against the dollar in 15 years.  Risk OFF.
–There was a buyer of at least 10k EDU0 9887p for 1/4 tick, probably a cover, but also a reminder of the possibility of a cash crunch as asset values are again called into question.  Additionally, a story yesterday noted that the ECB’s dollar swap facility had been tapped for a small amount.
–Huge roll out of Green Sept call flies (9825/9850/9875) into EOU 9912/9937 c 1×2 which makes some sense as EDU11/EDU12 spread declined to a new low of only 70 bps.
–Larger than expected trade deficit yesterday spurred downward revisions in GDP estimates. For a more graphic depiction of pain associated with the economy, a federal housing assistance program in Atlanta (for Section 8 housing) was mobbed by 30k people, three times more than expected.
–Today’s news includes Job Claims and 30 year bond auction.

Posted on August 12, 2010 at 7:53 pm by alexmanzara · Permalink
In: Eurodollar Options

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