Sept 30. And that’s when I kicked his ass…

Curve continues to bull flatten as near eurodollar contracts like EDZ15 see long liquidation, perhaps related to Pimco.  Red pack to everything behind it made a new low.  For example, red/gold pack spread dropped 4.5 bps to 176.  Red/green pack spread fell almost 2 to close 97.5.  Ten year yield fell over 4 bps to close at 249.  5/30 spread made a new low of 141 bps.  Flatter curve might ordinarily be interpreted as a sign that central bank policy is getting tight.  But don’t worry…Chicago Fed’s Evans said QE could be restarted if the economy falters. :- l
–There are overt signs of social stress, most obviously in Hong Kong, with tomorrow’s national holiday and start of Golden Week a possible flash point.  In the markets, the Emerging Market etf EEM continues to slide, falling 2% and closing below the 200 day MA.  New lows yesterday in the Russian Ruble, Brazilian Real, and ZAR is getting close.  Eurozone CPI was just +0.3 yoy.  Ford sharply cut its earning outlook, in part based on EU weakness. Hi yield etf’s tacked on another couple of bps and spread to 5yr treasury widened by 5.
–Friday’s premium buying was somewhat reversed yesterday.  For example, USZ 138 straddle closed 3’30 on Thurs, 3’38 Friday and 3’28 yesterday.  There were some large option spread trades in dollars yesterday, but right at the end of the session there was a seller of over 25k Short Dec 9900c at 5.5.  Looks to be a new position, and again related to heavy long liquidation of EDZ15.  Maybe the trader tasked with reducing exposure in that part of the curve can’t bring himself to sell outright at 1.10% yield with a spread of 27.5 bps to EDU, and just launched calls instead, knowing that Gross will come in Monday morning with the intention of scooping that stuff right back up.
–If it’s slow here’s a good read of pure Americana:  “His fondness of spaghetti Westerns was only surpassed by his love of bacon, beer and butter pecan ice cream. He fondly reminisced about good friends, good drinks and good times at the Tri-Valley Sportsmens Club in Burgettstown. He was a long-time member of the Elks Club in McKees Rocks where he frequently bartended and generously donated his tips to charity. Quite a teller of tales, Big Al’s elaborate stories often were punctuated with the phrase, “And that’s when I kicked his ass.” He enjoyed outlaw country music: Waylon, Willie, Hank, Johnny. He was also on a first-name basis with the Four Horsemen of liquor: Jack, Jim, Johnnie and Jose. – See more at: http://www.legacy.com/obituaries/postgazette/obituary.aspx?n=raymond-alan-brownley-big-al&pid=172561140&fhid=9852#sthash.tkiRVD42.dpuf

Posted on September 30, 2014 at 5:25 am by alexmanzara · Permalink
In: Eurodollar Options

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