Oct 1. Start of Q4. Feeling confident and secure?

 

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–In eurodollars, long liquidation related to Pimco continues.  Associated with large sell orders yesterday, open interest in EDZ5 fell 63k, H6 -27k, H7 -32k.  Total open interest in dollars was -124k.  Because of this outright selling, some of the near one-yr calendar spreads made new highs, for example EDH5/EDH6 rose 2.5 to 105.  Ordinarily one would interpret the higher spreads as an indication of faster and more aggressive Fed tightening.  However, in this case, it simply appears to be forced selling.  EDH16 is 1.385 yield.  Think we’re going to have 1.25 o/n rate by then?  I don’t, but will let the selling run its course.
–Other markets are projecting slack demand and global stress.  The gold/silver ratio has pushed above 70.  Dollar index continues on a tear higher, with $/yen breaching 110 earlier today.  Copper is testing $3.  Crude oil plunged over $3/bbl yesterday.  The Russell 2000 fell 16 points or 1.4% yesterday to 1102.  Another performance like that and it will be at a new low for the year (low this year just above 1080). Large caps are remarkably resilient, but warning flags abound.  News of the first ebola case in the US sent stocks on a leg lower right after the 4 pm close.   Is it any wonder that ebola is here?  The southern border is like a sieve and an intruder was able to waltz into the front door of the White House and find the Nixon tapes.  If we’re not careful swarms of Canadians are going to start leaping the fence.

Posted on October 1, 2014 at 5:45 am by alexmanzara · Permalink
In: Eurodollar Options

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