Oct 1.

Oct 1.  Beginning of Q4.  Chicago PMI was much weaker than expected at 46 vs 50 last, which immediately sent stocks lower, though the market recovered.  Yesterday’s action indicates that equities are becoming a little more vulnerable to negative news.
–Interest markets don’t tell the story of a robust economy, with Fed effective rate of 11 bps, and tens marching ever closer to 3% in the face of enormous supply.
–The curve was slightly steeper yesterday, the first bounce since Warsh comments.  Two year note closed below 96 bps, down nearly 4, while tens were up slightly in yield to 3.305.
–Plenty of news today.  Pers Income expected +0.1 with spending +1.1.  Core PCE expected +0.1.  Job Claims expected 537k. ISM expected 53.5 from 52.9.  Bernanke speaks about regulatory reform.  Treasury announces size of 3yr, 10 yr and 10 yr tip auctions for next week. 
–Though there often seems to be premium selling in eurodollars just before the employment report, straddles are continuing to firm, probably due to uncertainties regarding Fed policy in the aftermath of Warsh/Fisher.  For example midcurve Dec 9825 straddle was trading 50 two days ago, but up to 53 yesterday.

Posted on October 1, 2009 at 5:35 am by alexmanzara · Permalink
In: Eurodollar Options

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