Aug 26. Relentless flattening of US dollar curve

— New low 5/30 and 2/10 treasury spreads, at 145 and 186 respectively using w/i 2’s and 5’s.  Ten year yield fell a bit over 1 bp to 239.  In euroollars, blue /gold (4th to 5th year) pack spread is flattening like crazy, down another 1.5 to just over 31.  This spread started the year at 71.  German Schatz plunged 5 bps in yield to – 4bps.  The US treasury auctions two year notes today, closed above 53 bps yesterday.  The spread between red dec euribor ERZ5 and red dec dollars EDZ5 is a record 90 bps.  Not surprisingly, the Euro fell below 132.  ECB banking stress test results expected in October… seems as if whatever stressful scenario they are trying to model is already in its incipient stage.
–There were some large eurodollar put flies bought late in the day.  50k Blue Oct 9712/9687/9662 put fly and 25k Green Nov 9787/9762/9737 put fly, both of which settled at 4.0.  Though there continues to be positioning for Fed ‘normalization’, the rest of the world seems anything but normal.  Capital flows which strengthen the dollar aren’t likely to be stimulative over time.
–Wildcard today is Durable Goods, expected over 5% due to orders from Boeing.  (Are bombs considered ‘durables’ because they seem to be flying off the shelves these days).

Posted on August 26, 2014 at 5:22 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply