Dec 20.

Quiet session Monday with flatter curve.  Ten year yield fell 4 bps to 1.81.  I marked 2/10 treasury spread at only 158 bps, a recent new low, and would have been a new low for the year if not for the ‘operation twist’ announcement in Sept when the spread briefly traded 152.  Treasury auctions 5 yr notes today and 7’s on Wednesday.
–News on the equity side was BofA’s break of the $5 barrier.  But all financials were weak.  For example Citi is around 25, only half the value of the 10 to 1 reverse split which had priced the stock at 50 as opposed to 5.  It’s an eye opener to look at a longer dated chart of Citi, which had a high over 500 in 2007 (backdating the reverse split)…now a flatline. Yesterday, UK Chancellor of the exchequer George Osborne was advising banks to shed risk and put firewalls around retail ops, perhaps adding to weakness in US financials at the margin.  RBS also nearly at a new low.
–One notable change in pricing yesterday concerns back month Fed Fund contracts.  FFF’14 was up 5 bps to 99.705, (only 29.5 bp yield).  Every contract up the that point trades below 30 bps, and the net change in prices subsequent to Jan ’14 was even greater than 5 bps. There was very little volume associated with this change…it’s simply an extension of the idea of low rates…forever.

Posted on December 21, 2011 at 7:13 am by alexmanzara · Permalink
In: Eurodollar Options

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