May 6. Good morning, this is the margin department….

–The great speculative margin call has begun.  Staggering sell offs in silver (SIN at 35.20, -4.18), oil (CLM at 98.63, -10.61), gold (GCM at 1465, down $50) and euro (ECM 145.20 down 3.14).  [I marked these around 2:00pm close in interest rates yesterday]
–The day started with a large unexpected jump in Jobless Claims to 473k, with previous week revised higher.  Also, Trichet lost some of his vigilance as the ECB held rates steady, sending the euro tumbling. US interest rates continued lower, with ten year note -5 bps to 3.17%.  The curve flattened, with nearly all one-year eurodollar calendars making new lows, the highest still being EDM12/EDM13, -4 to 112.  2/10 fell to 259.  Red/green pack spread fell 4 bps to 104.5.  There was a large seller of red packs on screen (20k), appeared to be someone taking profit or perhaps selling reds and buying longer treasuries. (total euro$ open int down 17k).
–Unemployment report today with NFP expected 185k and Private Payrolls expected 200k.  Rate expected to remain at 8.8% but I wouldn’t be surprised to see 9%.
–Not that I would know from personal experience, but when one gets a margin call, (and there must be some doozies this morning), they sell WHAT THEY CAN to raise funds. Think stocks.  I would bet that in some cases the margin depts are the ones exiting the positions, and they don’t “work” orders.  They hit the bids, and usually there is more behind.  Perhaps the bulk of the washout has already occurred, but it seems to me that indicators like the VIX are still relatively low in this environment.

Posted on May 6, 2011 at 5:15 am by alexmanzara · Permalink
In: Eurodollar Options

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