Aug 5. Treasuries. Priced for perfection?

Aug 5.  Some huge option trades yesterday.  UBS a buyer of about 90k TYV 125.5/127.5 c spread for 14. Appears to target 2.5% yield.  Paper sold about 30k EDU0 9962c at 4.0 to 3.75 and 15k EDZ0 9950/9962c spds…both exits.
–Service ISM and ADP data were a bit better than expected, causing yields to edge slightly higher.
–Not too long ago (2007?) people were saying that stocks were “priced for perfection” so high that prices could only be justified by economic conditions that were just right.  In some ways, it seems like treasuries are priced for perfect armageddon.  Rates are low and trending lower, but what if QE is delayed?  What if economic data begins to show some strength?  What if foreign buyers begin to shy away from adding to purchases?  The point is that risk is probably a bit more to the downside at this point, with the five year note hovering around 1.6%. 
–News today includes Jobless Claims expected 455k.

Posted on August 5, 2010 at 4:23 am by alexmanzara · Permalink
In: Eurodollar Options

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