March 2. Saudi oil pipeline explosion rumor causes surge to $110/bbl

March 2. Curve continued to steepen yesterday with ten yr yield gaining 5 bps to 2.03%, 2/10 up an equal amount to 174. In the space of three sessions red/gold pack spread went from from 146 to 162.5 (up 7 yesterday). Many one-yr eurodollar calendar spreads made new highs, for example EDZ12/Z13 rose 3.5 bps to 21.5. Option activity now favoring put buyers in greens and blues. Market feels vulnerable to higher rates; there may be more defensive positions taken prior to next Friday’s employment report as tens probe the higher end of the past several months yield range at 2.06%. Firmer vol at the longer end of the maturity spectrum supports this view.
–A rumor of an explosion at a Saudi oil pipeline caused April crude to jump to $110/bbl late yesterday, up nearly $3. The news was apparently from an Iranian source and was denied by the Saudis but the violence of the move gives an indication of sensitivity about further supply disruptions.
–Fed’s Evans and Bullard speak today. Evans always dovish but Pianalto yesterday was restrained: “There’d have to be a significant change to my outlook to change my position on policy at this time,” she said in rare press briefing. (Reuters). Fed sponsorship of longer treasuries in the form of QE3 may be increasingly in doubt.
–Yen continues to weaken to new lows, EUR/JPY has surged from 97 to 108.50 in the past month and a half.

Posted on March 2, 2012 at 1:38 am by alexmanzara · Permalink
In: Eurodollar Options

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