June 17. The story related to Greece still dominates…

June 17. The story related to Greece still dominates; a default could seriously impair bank capital and create cascading insolvency. The curve is getting whipsawed as safe haven buyers reach for treasuries and deferred euro$ contracts, while the very front end is selling off to reflect a funding risk premium.  Eurodollar one year calendar spreads again made new lows.  EDZ1/Z2 (dec/dec) fell 2 to only 45.5 bps. On the last day of May it was 71.  EDU1 fell 4.5 bps to 99.57, even though the LIBOR setting barely budged.  EDU1 now 18 bps cheap to where EDM1 just expired, but I am not at all convinced that the capitulation in the front end is over, notwithstanding this morning’s small rally.  Interestingly, EDU1 saw the heaviest volume of any euro$ contract yesterday at 756k.  Open interest fell 15k in U1, but first four contracts fell 105k in total open interest, with EDH2 falling 57k.  There was a large screen buyer of EDZ1/H2 spread mostly 6, (settled 5.5), must have been an exit.  Red/gold pack spread -7 to 272.  Ten year yield fell to 2.91%.

–At the end of the day there was a seller of 50k EDZ1 9900/9925p spread at 3.0, also an exit as open interest fell 19k in 92p and 11k in 90p.

–Treasury vol made new highs.  TYU atm straddle settled 3-13 (7.4 vol), versus a week ago at 2-50.  Buyer of 10k each TYU 119p and 120p.

–Today’s news includes Leading Econ Indicators expected +0.2 from -0.3

Posted on June 17, 2011 at 12:09 pm by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply