Nov 16. 5 yr note nears 1.5%, was 1.03% two weeks ago

Rout continues as retail sales stronger than expected.  Ten year note and five year both up 15 bps, to 2.91% and 1.49% respectively.  Fives have jumped nearly 50 bps in a week and a half.
–Eurodollar calendar spreads make new highs, with red/green pack spread out to 72 bps.  Fronts to reds now around 55 bps…still low if the market were to believe tightening could occur over the next year. 
–Tightening expectations could shift forward if inflation jumps.  UK reported unexpectedly high level of 3.2%.  US reports PPI this morning, expected +0.8% both headline and Core.  Also Ind Production and Capacity today, expected +0.3 and 74.9. 
–TYZ 125p still have 103k open interest going into the last 2 weeks before expiration.  The backlash against QE2 has made life more difficult for previously enthusiastic strangle sellers, with TYH vol surging to new recent high of 7.6%, from 7.1. 
–Ireland and Portugal have taken the limelight away from Greece for the time being.  Dollar Libor settings remain stubbornly unchanged, causing a rally in EDZ to nearly 9968.  EDZ puts under some selling pressure as the simmering european crisis has not translated into any sort of funding crunch for the front end of US curve.

Posted on November 16, 2010 at 6:41 am by alexmanzara · Permalink
In: Eurodollar Options

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