Aug 13. Short term interest rates futures fall on profit taking

Aug 13.  Interest rate futures came under some profit taking pressure Thursday, with red pack settling down over 6 bps.  There was a large seller of EDU0 9962c vs 9950/9937 p spread: Fimat sold calls over, 30k at 2.0 and 1.5 credit (sold calls at 3.0 and bought put sp at 1.0 and 1.5). The put spread was also bought outright about 20k.  Someone reportedly sold about 50k EDZ0 futures. 
–In any event, short end implied vol jumped.  On Wednesday someone paid 1/4 tick for EDU0 9887p; yesterday EDU 9850p were bought for 1/4 tick.  Suddenly there are some option trades which suggest the possibility of big moves in the front end.
–Talk of an administration plan for principal forgiveness for underwater homeowners is undermining confidence in agency/MBS paper and driving money into treasuries.  A broader theme was touched upon by the NY Times, noting that large debts are often simply left unpaid because lenders often simply write them off as uncollectible.  “Even when a lender forces a borrower to settle through legal action, it can rarely extract more than 10 cents on the dollar. “People got 90 cents for free,” Mr. Combs said. “It rewards immorality, to some extent.”  
–Gold was up $17. 
–J&J was able to sell $1.1 billion tens and 30’s at record low yields of 2.95 and 4.5%.
–Today’s news includes Retails Sales, expected +0.5%, and CPI expected +0.2 with Core +0.1.  Hoenig also speaks.

Posted on August 12, 2010 at 7:55 pm by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply