Nov 10. The market slams QE2

Huge move down in interest rate futures on large volume.  Ten year yield rose 10 bps to 2.65%.  EDZ0/Z1 and EDH1/H2 one-year spreads made new recent highs, gaining 8 and 12 bps respectively.  It appears to be a repudiation of QE2, selling accelerated after the ten year auction (bid to cover was on the low side).  Today’s 30 yr bond auction might be more indicative of real demand, as Fed sponsorship thru QE doesn’t reach that far out the curve.
–Red/green pack spread jumped nearly 6 bps from a new low Monday, closing at 58 bps, which is still 20 bps less than green/blue at 78 bps.
–Huge pullbacks in gold and silver.  CME raised margin requirements on silver…not surprising given recent moves.  However, it does spark a thought of cascading margin calls throughout the system.  Soybeans made new highs; up around 30% since the start of September.

–WSJ has a lead (negative) story about Ireland.  European problems continue to fester like subprime…
–Besides the bond auction, today’s news includes Trade data and Jobless Claims, expected 450k. 
–EOZ 9925/9937c spd was sold 50k yesterday, while 9887/9900p spread was bought late for 1.5 in size of 40k  The latter appears to be a roll as OI fell 25k in 90p and rose that much in 88’s.
–West coast back in selling TY strangles, this time TYG 124/129 10k at 59.

Posted on November 10, 2010 at 4:27 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply