Aug 15. Relentless flattening of eurodollar curve…

Aug 15. Relentless flattening of eurodollar curve.  All calendar spreads making new lows, with EDZ1/EDZ2 at -9.5, remarkable in a zero rate environment. Red/green pack spread made a new low just above 50 bps. And there is still interest in 100 calls, on Friday EDU2 100c traded 1 about 15k.  EDM2 99.625 straddle was heavily sold in the pit from 27.5 to 25.0, and then traded 20k on a block trade at 24.0 (new position).  Calls traded 36k with open int +28k and puts 78k with open int +68k.  EDM2 9962^ settled 25.0, and EDM3 9950^, expiring right around the end time of Bernanke’s pledge for zero rates in June 2013, settled at only 50.5.

–All ‘developed’ economies are now trying to cheapen their currencies to pay off future obligations with paper worth ever less against ‘things’.  For example, over the weekend Reuters had this item: “UK Chancellor George Osborne said deeper integration had been the inevitable conclusion from the start of the single currency project. Asked if the only answer for the health of the euro zone was some kind of fiscal union, he told BBC radio: “The short answer is yes.”  To the Swiss: ‘I’ll see you on euro peg, and raise to FISCAL peg…ALL IN’.  I wonder how GBP will trade after that bombshell.

–Consumer confidence is plunging, almost certain to transmit into ‘real’ economic activity.  See this chart posted on ZeroHedge:

Posted on August 15, 2011 at 12:38 pm by alexmanzara · Permalink
In: Eurodollar Options

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