Oct 19. Big flattener Monday

Oct 19.  All near calendar spreads in eurodollars made new lows as the very front end of the curve came under pressure.  Factors include bank stock weakness stemming from the new mortgage fiasco, which may cause re-evaluation of funding costs for exposed banks.  Also euribor 3 month setting has been trending higher, from an average of about 88 bps in Sept to 100 bps yesterday.  Front to red one year euro$ spreads average only 31 bps, reds/greens at 56.5 bps. 
–Dallas Fed’s Fisher said the Fed can’t do it alone…responsible fiscal policy has to play a part in removing uncertainty and providing hiring incentives, but the market appears pretty much convinced that the legislative branch is impotent. The dollar opened stronger but gave ground throughout the session. 
–Both AAPL and IBM were trashed after after hours, though both released good earnings reports.  Citi was able to report increased profits after lowering loan loss reserves. Doesn’t sound particularly inspiring. 
–Implied vol was way up in front end as puts on EDZ and EDH were bought, while treasury vol eased as yields fell on Fed buying. 
–Housing Starts and Fed speakers today.

Posted on October 18, 2010 at 6:19 pm by alexmanzara · Permalink
In: Eurodollar Options

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