June 25.

Interest rate futures traded a bit heavy as auctions concluded this week with yesterday’s 7 year.  In spite of a soft close in stocks treasury yields edged slightly higher.   July treasury options expire today. 
–One year calendar spreads in eurodollars remain quite tight, with EDH11/EDH12 notching a new low at 65.5 bps.  Red/green pack spread is around 93 bps, while fronts to reds average only around 60.  Partially this is due to fears of another cash crunch as the ECB ends its one year liquidity program, so near eurodollar contracts trade at a significant discount to the current 3 month libor setting.  However, I think it is still worth buying EDH11/H12/H13 butterfly at levels below -30.
–BP made a new low and stocks like RIG and HAL also gave back some recent gains as the gulf oil spill shows no signs of abating. 
–Sort of an interesting (and sad) commentary on gov’t budget problems is that Greece is looking to sell parts of islands to raise money.  Hungary had a failed bond auction. US states also are searching for ways to “privatize” to make money.  In this political environment the ability of the federal government (US) to contain the leakage of state budgets is analagous to BP’s efforts to contain the oil spill…there’s not enough cash.  The stock market appears to be coming to grips with the conclusion that monetary velocity continues to decline, even though Freddie 30 year mortgage rate hit new record low…

Posted on June 27, 2010 at 1:12 pm by alexmanzara · Permalink
In: Eurodollar Options

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