Dec 28

Dec 28.  Short end was clobbered late in the day with EDZ10 down 8 bps to 9856.0.  Total open interest in eurodollars was down 34k, so it feels mostly like forced exits rather than new positions.

–The administration lifted a $400 billion cap on aid to Fannie and Freddie, essentially providing a blank check of support. So far $111b has been used. Given that modified mortgages are defaulting at high rates, it seems like the plan might be to use the agencies to ease mortgage requirements, even though losses are likely to follow in spades.  A related story on NPR highlighted “strategic default” and profiled a homeowner who was walking away from a mortgage she could afford because the price had dropped significantly.  Erosion in the concept of contracts continues.

–Terrorist attempt to take down an airplane was thwarted, but may give rise to fears once again with a slight flight to safety premium. 

–China looking to curb property price appreciation by tightening policy (BBG). 

–Sagging tourism causing ‘fiscal crisis’ in Hawaii.  Cailifornia may ask Obama admin for help in easing federal mandates related to social programs.

–Auctions this week begin with 2 year today, followed by 5’s and 7’s Tuesday and Wed.

Posted on December 29, 2009 at 5:09 am by alexmanzara · Permalink
In: Eurodollar Options

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