June 16. Heavy put selling (liquidation) in US tens

–Yields declined and stocks fell as the situation in Greece doesn’t appear any closer to resolution.  Additionally, economic data released Monday was soft, with Industrial Production -0.2 vs expected +0.2 and Empire State survey at -2 vs expected +6.  The ten year yield dropped 2.7 bps to 235.8.  Green and blue eurodollar packs closed +3.5 on the day.  5/30 treasury spread steepened by 2.8 to 139, as the 30 year bond underperformed on the rally (yield down only 0.7 bp).

–There was heavy liquidation selling on the day in TYQ and TYU 123.5 puts.  Open interest fell in both, down 31k in August and down 19k in September.  Because of this selling, implied vol was down across the treasury complex.  For example, TYU 125.5 straddle was 2’36 Friday but settled 2’30 yesterday, down 0.1 to 5.8.  Risk off, with wider peripheral spreads in Europe: Italy +14, Spain +16 and Portugal +21 to 236, 240 and 321.  Yields this morning are up another 9, with Spain at 249, right where the US ten year yield traded last week.

–Stocks are under pressure, testing last week’s lows.

–Last week, a Colt .45 revolver owned by General Patton, sold for $75,000 at auction.  http://www.foxnews.com/science/2015/06/12/colt-45-revolver-owned-by-patton-fetches-75000-at-auction/

Yet, the iconic gun maker declared bankruptcy yesterday, “…in large part because of more than a decade of dubious financial engineering and accumulating debt.”  According to the Bloomberg article below, the private equity firm that controlled the firm saddled the company with too much debt.

http://www.bloomberg.com/news/articles/2015-06-15/behind-colt-s-bankruptcy-financial-engineering-that-backfired

Even in a low interest environment, high debt levels can be deadly, but the situation is exacerbated, of course, when rates begin to rise.

Posted on June 16, 2015 at 5:20 am by alexmanzara · Permalink
In: Eurodollar Options

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