Feb 28. US interest rate implied vol going lower

–With only small change in US market this morning vol likely to be hit again.  New lows in near 3 month calendar spreads with EDH1/EDM1 at 5.5 and EDM1/EDU1 at 8.5. 

–Big picture features remain the same.  Mideast turmoil, high energy prices, growing US internal dynamics pitting states against the federal govt.  This doesn’t just have to do with Wisconsin’s fight against public unions, I also saw a piece about 11 states trying to pare back medicare obligations.  In terms of oil pricing the question is whether a move to relative stability will bring down prices.  The articles I have seen suggest the Saudis are still the swing factor, and I would think they would keep prices high for the short term 1) to remind the rest of the world’s leaders that stability in SA’s regime can benefit them through energy stability and 2) to provide a transfer tax from the rest of the world to pay for social improvements in Saudi Arabia.  
–Besides the drag on consumers from high oil, there is another issue in the US, that tax refunds to date are $20 bln below comparable level in 2010 and $14b below 2009 (zerohedge).  Might affect consumption…
–Today’s news: Personal Income and Spending both expected +0.4%. Chicago PMI expected 68 from 68.8.  Dudley and Rosengren speak.

Posted on February 28, 2011 at 10:02 am by alexmanzara · Permalink
In: Eurodollar Options

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