Jan 22. Green eurodollars (3rd year out) continue to lead curve to higher yields.

–Greens continue to be the weak link, with green pack closing down 2.125 while reds were up 3/8 bp and blues were down 1.25,  The red/green/blue butterfly made a new high just over 5 bps and was more like 6 right after the floor close, and higher yet this morning.  This fly has rallied over 40 bps in two months, as it was -37 in late November. Along the same theme, new recent lows in: 5/10 (-1.5 to 118), 5/30 (-3.0 to 209.8), red/gold (-0.375 to 279.5).  In the last hour of trade yesterday there was a seller of about 3k green packs.
–There was some rolling of Green Feb and Green March 9850 puts into Green April 9825 and 9812 puts.  Total open interest in green futures was up about 18k; I thought some of the moves in butterflies suggested liquidation, but that does not appear to be the case.
–There was also a buyer of 20k (new) EDZ4/M5 9950 call calendars (+ Dec, settled 5, Dec over), the same directional play as futures spread which had been bought in size of about 45k a week and a half ago for 27-30.  Futures spread Z4/M5 settled 30 yesterday.
–Straddle spreads in green to blue midcuves continue to compress.  The highest atm spread spread is June which is 4 bps. Green June 9825^ 52 and Blue June 9725^ 56. All are 2 to 4 bps, blues now only marginally higher despite their strike prices being 100 bps higher in yield than greens.  On a related note, 5 yr vol has firmed relative to tens and bonds, as the latter remain close to monthly lows.

–ZeroHedge reports that bad loans in Italy were up 23% yoy to new record high, suggesting that Europe is not out of the woods as ECB stress tests loom.

Posted on January 22, 2014 at 4:52 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply