Nov 1. Warp speed…but in reverse

–Hitting on all cylinders, but going in reverse.  In Europe, Papandreou is putting the Greek plan to referendum (could ultimately cause Greece to withdraw from the euro), causing a stock slide (DAX down over 10% from high set 3 days ago).  In Asia, China PMI fell to 50.4, just above the expansion line.  Japan intervened yesterday.  Australia cut rates. In the US, MF Global bankruptcy filing is reverberating, (I was surprised to read that it would be in the top 10), and now there are disclosures that customer money was not completely segregated from the firm’s own cash.  MF is a stunning reminder of just how quickly things can turn, but the reversal of sentiment just days after the european plan is also shocking.  Markets will likely be thin going into the end of the year.
–ISM today expected 52,0 from 51.5. FOMC result expected tomorrow. The promise to keep rates low is wearing thin, leaving QE3 on the discussion table and making it tough to be short treasuries.
–Longer yields plunged yesterday, with tens down 14 bps to 217. 2/10 fell 11 from 202 to 191.  Red/gold dropped 10.5 to 210.  Near eurodollar calendar spreads again threaten to invert, with EDH2/H3 down 5 to just 2 bps.  There’s some hefty open interest in blue Nov and Dec 9825 thru 9862 calls…underlying EDZ14 9836.5s yest…looks like a target of 9850 to 9862.5 is reasonable.  Red/green eurodollar pack spread is 51, while green/blue is 81…worth considering a sale of green/blue to pick up roll going into end of year.

Posted on November 1, 2011 at 9:03 am by alexmanzara · Permalink
In: Eurodollar Options

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