July 21. Bernanke semi annual congress testimony

July 21.  Bernanke semiannual Congressional testimony begins today. Rumors swirled that the Fed is considering doing away with paying interest on excess reserves, this given as a reason for strength in near eurodollar contracts.  I personally don’t see any justification for such a move…is the removal of 25 bps of interest going to suddenly open the floodgates of lending to questionable businesses and consumers in a fragile economy?  I don’t think so.  On the other hand there may be hints at unlocking small business lending in the testimony, which would be welcomed.
–EDU0 settled 9952 or 48 bps, well below yesterday’s three month libor setting.  The two year note likewise probed lower yields, trading 56 bps (new low).  There was continued buying in Green midcurve call structures (EDU12 and EDZ12 9825/9850/9875 c flies for 12.5 to 13 as package). Also, Fed Fund 98.875c in Oct and Nov were bought for 0.25 bp, domo arigato.
–Apple blew away earnings estimates and rallied sharply in after hours trading, however, top line revenue shortage fears in other companies appears to be the dominant concern so far.

Posted on July 31, 2010 at 8:56 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply