April 2. Bonds turn down

–The long end of the US bond market turned ugly awfully quickly Friday afternoon, for no other reason than the apparent completion of end of the month/quarter buying. Take the visual of the wile e coyote running off the side of a cliff and looking directly into the camera as he realizes the acme rocket tied to his back has suddenly run out of fuel.
–Citi was a seller of some 20k TYK 131c at 14-15 (looks new) as tens edged higher. I was a bit surprised that futures continued to grind higher in the face of the equivalent of 5k futures sales (calls ultimately settled 10). And just prior to the sell off, one player (we’ll call him wily), sold about 5k US5H (expired friday) 139 p at 2-3 when futures were 139-02. Within an hour the contract traded down to 137-15. Ten year yield was as low as 2.14% in the middle of the day before ending at 2.22%. The bond was up at least 10 bps off the low yield of the day, finishing at 3.35%. The near part of the curve was pretty much unchanged. Eurodollar straddles all settled unch’d, though treasury vol firmed. It feels as though the upper end of the yield range will be tested going into employment. Curve was steeper with 2/10 up 5 bps to 188. Red/gold up 8.25 to 188 as well.
–Today’s news includes ISM expected 53. Interesting to note official Chinese PMI was 53.1 (maybe they were just leaking the US data), while the HSBC estimate for China PMI was only 48.3. I would lean toward the latter estimate, as Korea’s exports which had been expected +1.3% were actually -1.4.
–Eurozone PMI miserable at 47.7.

Posted on April 2, 2012 at 5:04 am by alexmanzara · Permalink
In: Eurodollar Options

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