Archive for the ‘Eurodollar Options’ Category
Sept 27. Fed’s Stein suspects other investors have influence on bond yields; more research needed. :- l
–Relatively quiet yesterday as yields backed up slightly after the recent rally. Auctions concluded with a somewhat soft 7 yr, but the ten year yield only rose 2.7 on the day to 2.64. Implied vol was better bid, perhaps not surprising given congressional shenanigans related to a shutdown. –Yesterday’s GDP Price change was +0.6, the […]
In: Eurodollar Options
Sept 26. Fed’s Flow of Funds report shows deceleration of credit growth
–Once again all one year calendar spreads in dollars went to new recent lows. For example, EDU5/U6 settled 102.5, down 2.5 on day, just below the spike low after FOMC. However, while near contracts have recaptured nearly all of the sell off since May, deferred contracts haven’t. For example, EDU17 hasn’t even come back to […]
In: Eurodollar Options
Fed policy in the rearview mirror. Revisiting Bullard’s ‘Seven Faces of the Peril’
St Louis Fed President wrote ‘Seven Faces of “The Peril”’ three years ago in 2010. The peril he describes is an undesirable “steady state” with rates near the zero lower bound combined with low to negative inflation. “This new long run outcome can involve deflation and a very low level of nominal interest rates. Worse, there is presently an important economy that […]
In: Eurodollar Options
Sept 25. Bonds continue to rebound…
–All one-yr euro$ calendar spreads made new recent lows as yields fell across the board. EDU15/U16 closed at 105, down 4 on the day. (This and EDZ5/Z6 are the highest points on the curve). It had spiked as low as 103 on FOMC day. Ten year yield fell over 6 bps to 265. Red/gold euro$ […]
In: Eurodollar Options
Sept 24. Risk markets erase FOMC gains while bonds test highs from last week
–Interest rate futures rose yesterday as Draghi pledged low rates for a long time and Dudley said the Fed must act forcefully to push against economic headwinds, including fiscal uncertainties. Ten year yield ended 2 bps lower at 2.71. Near one-year euro$ calendar spreads fell to new recent lows, for example EDM14/M15 closed below 1/2% […]
In: Eurodollar Options
Sept 20. Market continues to digest Fed’s inaction….
–Adjustments continued in the fixed income arena in the wake of the Fed’s decision to stand pat. After a large flattening of the euro$ curve immediately after the Fed, a stealth steepening crept back into the market yesterday, in part a reaction to strong data (Philly Fed soared to 22.3). For example, late Wed the […]
In: Eurodollar Options
Sept 19. To paraphrase Al Haig, BB: I’m in charge here…
–I can’t help thinking of the old beer commercials… I can see Bernanke lifting his stein in a mock toast, “Here’s to you Mister I’ll sell short Dec strangles and buy blue put spreads…” When the Fed indicated they wanted to “push back” against perceptions of tightening, they weren’t kidding. Lack of taper caught the […]
In: Eurodollar Options
Sept 18. FOMC announcement and economic projections
–FOMC this afternoon with announcement at 1:00pm Chicago time and press conference at 1:30. Economic projections will extend to 2016. Housing Starts this morning expected 915k. –Steepening in the eurodollar curve yesterday pretty much tells you everything you need to know about consensus: strong forward guidance through 2015 and a small 10-15b tapering with additional […]
In: Eurodollar Options
Sept 17. Forward guidance trades…
–The market has been pre-occupied with whether or not the Fed ‘tapers’, but communication on forward guidance is likely to be at least as important. The eurodollar curve appears to be reflecting this dynamic as greens outperform. EDZ5/EDZ6 is up 4 bps to 117. The highest this spread has been is 118. This is now […]
In: Eurodollar Options
Sept 17. FOMC begins today…Summers rally fades.
–An exaggerated rally due to Summers’ withdrawal from the Fed race faded as the day progressed, with the long end especially weak. While tens fell a couple of bps to just above 2.87, the 30 yr bond rose 2.5 bps in yield to 3.87. In euro$s, greens were the strongest with green pack nearly +12, […]
In: Eurodollar Options
