Aug 27. Jackson Hole

Stocks started on a promising note but slid lower into the close, as the market awaits GDP revision this morning, expected to be revised down to +1.4%. However, what I believe is telling is weakness in financial stocks. JPM, BAC and WFC are all pretty much at their lowest levels since July 2009. The bigger news will likely be Bernanke’s comments from Jackson Hole. Usually comments by the Fed chairman would tend to rally interest rate contracts, though the real move could be in the curve, which is in a recent trend of flattening (which looks poised to accelerate). In fact, flattening of the curve appears to be leading bank stocks down…2/10 at 197 bps is at its lowest level since May 2009.  The trade is probably to buy bank puts and buy curve…
–While many hope the Fed will provide clarity for policy going forward, it is really fiscal, political, and regulatory uncertainty that has business on the sidelines.  Not much the Fed can do about that.
–EDZ0/EDH1 made a new low of 5 bps.  EDU/Z/H butterfly has recently jumped from around -3 to current +7.25.

Posted on August 27, 2010 at 4:31 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply