Employment report

Nov 6.  Employment report today with nonfarm payrolls expected -175k. 
Liquididty trade in full swing yesterday as stocks rebounded and interest rates edged lower.
–Slight new highs in 2/10, to 265, and red/gold to 246.5, both up a couple of bps. New lows in near eurodollar calendar spreads, with EDH/EDM down 2 to 27. 
–There continues to be selling of EDZ9 9962/9975 strangle vs buying of EOZ 9787/9812p spd, paying 1 over for the p spread.  The risk to the trade is probably that EDZ9 goes above 9975, as rates simply trend toward zero. 
–Fannie Mae now planning to allow “homeowners” to rent back their houses from Fannie Mae, presumably at lower monthly fees than current mortgage payments.  Which (and this is only my personal conjecture), works out nicely as it creates tax losses for FNM which can then be sold to GS at a large discount to offset some of the tax liability on the perpetual $100 million days.  Completing the circle (in my mind at least), the homeowners can go to church and hear GS executives explain that banking is the backbone of the economy and goes hand in hand with Christian values.  “See? Everybody wins.” 
[Bloomberg article: Profit `Not Satanic,’ Barclays Says, After Goldman Invokes Jesus ]

Posted on November 6, 2009 at 5:28 am by alexmanzara · Permalink
In: Eurodollar Options

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