Archive for the ‘Eurodollar Options’ Category
August 16. Weaker USD. Key to a steeper curve?
–Yields pushed a bit higher yesterday with tens up 3.6 bps to 155.1. Volume was light. Economic data continues to disappoint with Empire State -4.2 vs expected +2.5. SF Fed’s Williams said yesterday in a paper posted on the website that monetary policy can’t do it all, suggested raising the inflation target [which isn’t being […]
August 15. Serenity now
–Yields fell Friday as both Retail Sales and PPI disappointed. Retails Sales were 0.0 vs +0.4 expected and Core PPI fell 0.3. The ten year yield eased nearly 6 bps to 151.5. The tow year yield was down 4 to 70.6. The eurodollar curve from reds back flattened to new lows. Red/Green (2nd to 3rd) […]
Aug 14. Smothered
There’s an interesting article on Bloomberg about US life insurance companies unintentionally holding increased amounts of distressed debt. These were once high quality energy bonds which went pear-shaped. “Even if distressed holdings are largely accidental now, regulators are considering proposals that could ease the amount of capital life insurers can use to fund junk bonds, […]
Aug 12. Yields rise, but still depressed
–Yields pushed higher yesterday with the ten year up 6.6 bps to 157.3, as auctions concluded with the 30 yr. Crude oil more than reversed Wednesday’s sell off on Saudi comments that suggested support for the market; crude looks set to close at the high of the week. Eurodollar calendar spreads bounced from extremely depressed […]
Yields and inflation are negatively correlated, right?
I don’t usually watch Norway, but the divergence between inflation and yields is a prime example of broken markets…. 1% ten year yield with 3.7% inflation.
August 11. Strong payrolls? So what?
–Amazingly enough the US ten year note has almost completely retraced the sell off from last Friday’s employment report, and at 173-15 settle, USU is actually higher than it was one week ago on Thursday, just prior to the NFP report (173-05). The German Bund contract (RXU6) closed at a new high settlement of 167.84. […]
August 10. CB’s backstop the USD funding crunch?
–The main feature of Tuesday’s trade was huge put spread buying on EDU6 and EDZ6 contracts. (Details below). EDU6 at 99.10 and EDZ6 at 99.055, are the only interest rate contracts that closed lower on the day. Several research pieces came out yesterday suggesting that the 50 bp penalty on foreign currency swap lines ought […]
August 8. Hedging costs destroy carry
–Interesting article on Bloomberg today notes that currency hedging costs for overseas investors buying treasuries has increased to such an extent as to eliminate positive carry. “We’re at a point now where investors have to start thinking about this,” said Sachin Gupta, a foreign-bond fund manager at Pimco, which oversees $1.51 trillion. “As the cost […]
August 7. Return of the Bond Vigilantes
Friday’s payroll report was strong (NFP 255k), resulting in a jump in yields, with the Five year treasury up over 10 bps to 113, and Tens up nearly 8 bps to 158.2. Eurodollars also sold off, with reds through golds -10.25 to -12 bps. Notable was the decline in EDZ17, which fell 10.5 bps to […]
August 4. Comparison of Eurodollar Calendar Spreads
–In May of 2013, then Fed Chairman Ben Bernanke suggested the Fed could begin tapering its bond purchases. So began the infamous ‘taper tantrum’. In early May of 2013, pre-tantrum, near one-year euro$ calendar spreads were near their lows (they had been a bit lower during the height of the European sovereign bond crisis in […]
