March 10, C, AIG, FNM, FRE surge

March 10.  Comments by China supported the treasury market.  Three year note auction went well.  Tens auctioned today.
–Treasury vol is at recent lows and pressing lower. 
–The crap owned by the gov’t all surged yesterday.  AIG +12.6%, FRE +7.5%, FNM +5.9% and Citi +7.3%.  There were rumors about the gov’t selling some or all of its stake in Citi.  Ironically(?), there were also reports that regulators told JPM and Goldman to refrain from increasing dividends or engaging in stock buybacks until the banking sector is less fragile.  Perhaps the message is: let us offload our crap first, and maybe you could help us out by talking things up.
–There were a couple of big trades yesterday in euro$ options.  Buyer of 40k EOM 9837/9800/9762p fly for 5.5.  (There have been low risk short positions taken in size in the front midcurve for the last several cycles, though the curve inevitably rolls up).  Also, buyer of 15k EOU 9825c vs E2U 9712c for 1.0.  Many of these synthetic red/green flatteners have been entered recently; the trades have a chance of working out nicely if the economy stumbles.  
–Greece seems to be receding to the back burner to simmer.  Individual US states are vying to carry the torch.  New report says NY state must cut its budget by $20 billion.

Posted on March 10, 2010 at 5:21 am by alexmanzara · Permalink
In: Eurodollar Options

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