May 20. If these guys don’t get us, the Mayans will

Interest futures clawed back from early losses to close mostly higher, as housing data and Philly Fed were both lower than expected, adding to a list of economic data that has disappointed. 

–No data today, though NY Fed’s Dudley speaks. (Summary: there is no inflation and we may need more QE). 

–June treasury options expire today.  As I write TYM is 122-21.  I have a hunch the close is around the 123 strike.  Open interest levels are 118k in 122c, 30475 in 122.5c and 37411 in 123c.

–LinkedIn IPO soared on the first day of trading.  Somehow I don’t think ‘social networking’ can be the great new US industry to win the future. 

–There’s an interesting note on zerohedge about General Collateral/Interest on Reserves collapse; the implication is that holding shorts in treasuries is very expensive with repo rates around zero to negative. The article indicates a Fed hand in this situation, though changes in FDIC insurance charges to banks appears to be the main factor. In my mind, the further implication is that the roll of the eurodollar curve, where EDM1/2/3 futures fly is -64.5 and EDU1/2/3 fly is -40.5 and Dec behind is -16 can continue to be exploited, e.g. sell the Dec fly and let it roll more negative.

Posted on May 20, 2011 at 7:00 am by alexmanzara · Permalink
In: Eurodollar Options

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