Jan 25. FOMC releases projections. Yen falling…

–Light volume trade Tuesday…interest rate markets took a breather from recent trends…wait and see for FOMC. The curve edged slightly flatter. Vol was lower.
–Doesn’t appear to have been much reaction to State of the Union address. Stocks are down a bit this morning (in spite of AAPL’s blow-out quarter) due to european malaise.
–Perhaps one of the most notable moves in the last couple of days has been the fall in the yen. USD/JPY up at 7820, EUR/JPY at 10147 which touched a low around 9700 just last week. I don’t know if it’s a precursor for “risk-off” trade, but bears watching.
–In eurodollars there continues to be buying of calls in green and blue midcurves in spite of the curve having steepened the past few sessions. There is also a consistent buyer of EDM2 9925p vs 0EM 9912p, which is a conditional flattener on EDM12/EDM13, now trading about 8.5. Yesterday the option spread was done for flat. If a true funding crunch occurs due to europe spiralling out of control, then EDM2 would likely decline and M12/M13 would conceivably invert…perhaps not a bad trade in that event. I myself am long EDJ 9900p for the same reason (1.25s).
–Today brings FOMC Summary of Econ Projections, predictions, guesses…. Also 5 year note auction.

Posted on January 25, 2012 at 5:51 am by alexmanzara · Permalink
In: Eurodollar Options

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