Jan 9. Green euro$’s crushed

–Big day in the front end of the US rate curve.  Green pack was the weakest, settling -14.5 bps.  Red/Gold pack spd nearly unchanged at 293 (-8 and -8.5).  Ten year yield rose 6 bps to 3% while 30 yr bond yield was up just 2 bps to 390.5.  There were some big volume trades, for example EDZ4/EDM5 bought about 125k on the day from 27.5 to 30, though open int up only 28k and 19k.  Heavy outright selling in EDZ5 (OI up 27k).   Late in the day Green Feb 9825/9812ps 2.5 paid for 75k. (This appears to be exit of the short put spread associated with 9850/9837/9825/9812p condors).  0EZ 9862p cover 9879 ppr paid 28 for 15k (new).
–5/30 treasury spread plunged 6 bps to 214.5 and was a couple of bps lower after pit close, new recent lows.  In 2013 the low in 5/30 was 203 at the September Employment report when tens first flirted with 3%.
–If one just looked at long end vol, one would think it was a pretty quiet session.  USH 129 straddle bled a few ticks to close 2’50 at 7.8 (new recent low).  Ten year vol hanging around 5% as yesterday’s auction sailed through and the employment report looms.  30-yr bond auction today.
–Green/blue straddle spreads further compressed with 125 bp strike difference straddles only 4-4.5 bps wide. Example 2EH 9850^ 34.0 and 3EH 9737^ 38.5. Red/green/blue pack butterfly jumped 8 bps to close +2.25 bps.  In other words, red/green pack spread +6.5 to 108.5 as greens were crushed, while green/blue pack spread fell 1.5 to 106.25.
–Probably worth taking a shot a buying bond vol here.

Posted on January 9, 2014 at 5:21 am by alexmanzara · Permalink
In: Eurodollar Options

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