Oct 2. ISM higher, but interest rate market doesn’t believe it

–Flatter curve. Lower vol. A surprise jump in ISM to 51.5 sent interest rate futures lower early in the day, but there was no follow through, and a rally ensued that took some back month eurodollars to contract highs (e.g. EDZ15). Gold tested 1800 early (multi year high) but faded. Still above 1780 this morning.
–Reuters reported late yesterday that Spain is ready to request a bailout but that Germany suggests holding off.
–Australia cut rates this morning, another sign of global economic malaise.
–Copper is telling a different story, having surged in the month of September after languishing between 330 and 350 the previous three months. Now at 374 and attempting to push higher.
–While data and commodities suggest a mixed picture, slower global growth is the dominant theme. I feel that the longer end of the US curve already has it priced, and is thus vulnerable to the downside.

Posted on October 5, 2012 at 5:55 am by alexmanzara · Permalink
In: Eurodollar Options

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