Aug 18. Flattening continues…

Aug 18. Flattening continues with red/gold pack spread down nearly 9 bps to just under 207 bps.  Red/green pack spread now around 46.5 bps, also a new low.  Option trade has shifted further out the curve, with significant trade now occurring in blue midcurve calls, again expressing the trend toward a flatter curve.  For example, there was a new buyer yesterday of 40k Blue Dec 9875/9900c spd for 5.5(E3Z with EDZ14 underlying 9835s).

–While the 10 year note closed at only 2.16%, there continue to be news items that point to inflationary possibilities.  For example, (Reuters) – Prices for farmland in the heart of the U.S. grain belt were up 17 percent in the second quarter compared to a year ago, the biggest jump since 1977, the Federal Reserve Bank of Chicago said on Wednesday.  Also, yoy PPI reported yesterday was up 7.2%.  And while the price of gold may or may not be specifically related to inflation, Venezuela’s Chavez yesterday announced nationalization of that country’s gold industry, apparently sending redemption notices to several internat’l vaults.

–Fed dissenters Fisher and Plosser were both out yesterday explaining their reservations with current Fed policy, probably making QE3 even less likely.  Plenty of news out today, including CPI expected +0.2 both headline and core, Jobless Claims 400k, Existing home Sales expected 4.92m, LEI +0.2% and Philly Fed 4.0 from 3.2.



Posted on August 18, 2011 at 12:40 pm by alexmanzara · Permalink
In: Eurodollar Options

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