May 25. Funding pressure evident in EDM10 contract

Interest rate contracts fell Monday, with red pack down nearly 10 bps. Ten year treasury yield rose about 3 bps to 3.23%.  EDM0 has only three weeks until expiration and though the LIBOR setting continues to edge up (now around 50 bps), EDM0 contract is fully 21 bps cheap to the setting at 99.29 (or 71 bps).  Panic and uncertainty are in abundant supply in front end of euro$ curve. 

–On the other hand, treasury vol went lower during the day.  TYN 120.5 straddle had settled 2-29 on Friday but traded as low as 2-17 Monday before buyers emerged (2-19 settlement Monday). 

–The US press spent a lot of time covering the last episode of the TV series Lost.  Might as well have been talking about US politicians’ grip on the electorate.  From Rasmussen poll: “Just 27% [of Americans] are even somewhat confident that Congress knows what it’s doing when addressing that nation’s economic challenges.”

–Today’s news includes the 2 year auction and Consumer confidence, expected 59.0 from 57.9. 

–In the last month BP’s market cap has shrunk to about $131 billion, from around $187 b a loss of about 30%.  The stock is now around 42, but the low in 2009 was just under 35.

Posted on May 30, 2010 at 3:39 pm by alexmanzara · Permalink
In: Eurodollar Options

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