Nov 11.

Quiet day Tuesday.  Ten year note lost some ground after the auction, but generally rates were marginally lower and the curve slightly steeper. Red/gold eurodollar pack spread edged to a new high at 249, and 2/10 treasury spread remains around 264.  In early June red/gold pack spread traded 300, while 2/10 was around 275.

–There was an option trade related to one year calendar spread EDU10/EDU11.  Buyer of 10k EDU10 9937/9962c spd vs EOU 9837/9862c spd for 5 bps (settled 4.75).  This spread fills out to max value of 25 if 3 month libor remains below 37.5 bps by September, and the one-year calendar spread remains above 135 or so.  (For example if EDU10 eventually rolled up to 9972, then the U10 c spd would fill out to 25; if the one yr spread were 135 at that point then EDU1 would be 9837, so the EOU call spread would expire worthless.  Sort of a sad commentary on the market that a 5 to 1 trade is placed 10 months out with an expectation of almost no change in the current interest rate environment.

–Gold continues to press to new highs. 

–Another reflection of the economy is found in Google Domestic Trends (search patterns).  If one searches through the various categories, about the only one making new highs in UNEMPLOYMENT.  In July Larry Summers noted a decline in searches about “economic depression” indicating a turn for the better, (which appears to have been spot on).  I am not certain what the increase in UNEMP searches portends, but it’s not likely to be one of the administrations talking points. http://www.google.com/finance?q=GOOGLEINDEX_US:UNEMPL

Retail categories are flatlining, though in a glimmer of hope, YOY changes are turning positive.

Posted on November 11, 2009 at 8:25 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply