Jan 24. Treasury yields creeping higher

In a continuation of recent trend, yields increased and the curve steepened. Ten year gained 4 bps to 2.07%. 2/10 treasury spread also up 4 to a new high of 183. Red/gold pack spread up over 5.5 to 185. New recent highs in some one year euro$ calendar spreads as well, for example EDZ12/EDZ13 settled 16.5. (Still very low for a forward one year, indicative of Fed on hold). Previous month range in this spread has only been 9 to 15.5.
–Feb treasury options expire Friday. Treasury vol was significantly higher first thing Monday morning, but faded after its initial surge, though still ended a bit higher on the day. TYH 130 straddle traded as high as 163 in morning but closed 153. USH 141 straddle traded 435, closed 422.
–The steeper curve and higher vol both suggest that the trend in yields is higher, though significant deterioration in europe could easily derail the move. IMF’s Lagarde is warning that more firepower is needed to contain the crisis. News this morning centers on Portugal and a surge in its CDS.
–Treasury auction of 2 year notes today. Obama State of the Union tonight.

Posted on January 24, 2012 at 6:51 am by alexmanzara · Permalink
In: Eurodollar Options

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