Feb 7. ECB meeting today

–I have been negative on the long end of the US curve, but yesterday turned short term neutral as peripheral EU bond yields remain stubbornly bid. Might as well include French yields as well.  Additionally, after a meteoric rise in USDJPY, a target was hit; a pause in yen weakness would likely result in consolidation or reversals in other markts.  SPH had a quiet day, however, a double top just above 1510 is holding for now.  A close below Monday’s low of 1490 would suggest further profit taking (and likely correspond with curve flattening). Additionally SHCOMP is nearing last year’s high and should find resistance there (2478 vs current 2435).  Brazil (IBOV) pretty much failed at last year’s high of 63430, having slightly exceeded that level reaching 63470 in early Jan.  It’s now 58862.  The point is that emerging markets show signs of being tired.
–The big event today is ECB meeting and press conference.  EUR a bit higher in anticipation.  US news includes Jobless claims expected 360k.
–Vol selling in treasuries.  April TY 130.5 straddle settled 1’41, down to 4.5, having recently traded 5.0.  Short term vol pressure allows longer term players to buy long dated out of the money puts (on greens/blues) for small premium outlay as insurance. Despite inaction out of the ECB, the larger theme of reflation will still likely result in a steeper US curve as the year unfolds.

Posted on February 7, 2013 at 5:18 am by alexmanzara · Permalink
In: Eurodollar Options

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