June 18. Curve flattening

Tremendous flattening as data was weaker than expected, with Philly Fed expected 20 but actually an anemic 8.  Jobless Claims were much higher than expected at 472k.  While the first four eurodollar contracts were barely higher, reds were up 8 and golds were up 13.5.  2/10 treasury spread fell 6 bps from 255 to 249.

–Ten year yield fell 9 bps to 3.19% and appears ready to test 3.0%.

–Gold surged near new highs.  GLD (the ETF) essentially matched two previous highs made in the past month or so.  A drop in treasury yields in concert with rising gold prices indicates global economic strife, notwithstanding somewhat higher equity prices.  EDU10/EDU11 calendar spread settled at only 52.5, down 6 bps on the day, a pretty clear signal that the market has no fear of near term fed hikes.  Economically sensitive copper was down nearly ten cents.  When considering the evidence of various markets, I will take hints from industrial metals and interest rates rather than stocks any day.

–No substantive economic news today.  There has tended to be a flight to quality before the weekend recently, which could be accentuated today. 

–However, according to Politico.com, Obama and Biden plan on kicking off “Recovery Summer” celebrations.

Posted on June 27, 2010 at 1:04 pm by alexmanzara · Permalink
In: Eurodollar Options

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