Sept 24. Curve continues to flatten

–The curve continues to flatten after last week’s Fed meeting.  Red/gold pack spread closed -2.25 bps to near 185.  This is the lowest red/gold has been since June of 2013, when it was in its incipient climb to over 300 as Bernanke first hinted at the taper in May 2013.  Once again, there was some fairly heavy put selling, for example 30k EDU5 9925/9900ps sold and 60k EDZ5 9875/9850ps sold (9.5 and 6.5, rolling up short strikes).  Straddles came in by 0.5 to 1.0.
–Stocks continue to trade heavy, led by Russell 2000, which closed down nearly 1%, and lower on the year.  While the major indices are holding, weakness seems to be moving from the periphery to core.  For example, EEM, the emerging market ETF had a gap open lower on Monday and closed at its low yesterday, down about 7% from its high set earlier this month.  I would note that one of the factors that caused the Fed to pause on its tapering plan last September was turmoil in emerging markets.  While EEM is nowhere close to lows made last summer, several currencies are testing new lows, and new recent lows in industrial commodities like copper and iron ore suggest a global slowdown.
–Five year auction today.

EEM, Emerging Mkt ETF

EEM, Emerging Mkt ETF

Posted on September 24, 2014 at 5:22 am by alexmanzara · Permalink
In: Eurodollar Options

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