April 28. FOMC today

Turnaround Tuesday.  Treasury yields plunged as Greece and Portugal were downgraded.  Ten year fell 12 bps to 3.69%.  All eurodollar calendar spreads declined to new lows, with the highest one year spread, EDZ10/EDZ11 at only 127.5, down 13.5 bps on the day.  Red/green pack spread fell further to just under 112 bps. Volume was heavy.

–EDM10 fell 5.5 bps as downgrades and uncertainty in Europe caused libor funding concerns to flare up.  Vol exploded. VIX surged over 5 pts to nearly 23, biggest daily jump since 2008 according to Bloomberg.

–Stocks broke upward sloping trendline.  Ten year yield nearly broke support (though still in 3.60 to 3.95 range).  Euro plunged, yen rallied.  Gold fought back from a $6 deficit to close up 16.  Economically sensitve commodities like copper and oil were significantly weaker.

–The change in sentiment ran pervasively through various markets in a manner that should force position re-evaluation.  Against this backdrop it’s unlikely the FOMC meeting will produce substantive changes, though there will probably be a nod toward generally improving economic conditions. 

–Five year note auction today.

Posted on April 28, 2010 at 5:18 am by alexmanzara · Permalink
In: Eurodollar Options

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