Oct 25. Europe still grasping for solutions in front of tomorrow’s summit

–Quiet trade yesterday.  Curve has a steepening bias, with 2/10 out a couple of bps to 195.  In eurodollar options there was a buyer of 15k E2Z 9900c for 13-13.5, (new) and E3X (blue nov) 9825/9850c 1×2 (also new).  Good seller of 5k FVF 121.5/122.5 strangle at 60.
–NY Fed’s Dudley says the Fed has not run out of bullets.  Stocks embrace the idea that if the Fed has ammo, it will keep blindly shooting and providing liquidity. Perhaps it all keeps running, though Netflix would appear to be a cautionary tale…many bears were carried out as it rallied 50% from 200 to 300 from the start of year through July.  Now it’s at 86 after another bad report yesterday.
–Europe still grasping for a solution… may ask the IMF for help in issuing bonds.
–Near crude oil contract was up $4 yesterday, and ZH notes that CLZ11/CLZ12 has gone into backwardation (near contract higher in price).  It wasn’t too long ago that the glut of supply as evidenced by full tankers idling by ports had near contracts at a steep discount as there was no room for storage.
–Continuous reminders of fiscal tightness in the municipal arena.  The state of PA is getting ready to take over the capital city’s finances (Harrisburg) in a fiscal emergency.  Cook County is raising all sorts of sin taxes and cutting jobs to fill a $315m gap in $3 bln budget.  I especially like the idea that it will cost $4.75 to park at the Cook County Criminal Courthouse for a citizen fulfilling jury duty service and making $17.  Note that state and local govts are 17% of GDP;  reduced budgets are a very real drag.

Posted on October 25, 2011 at 5:56 am by alexmanzara · Permalink
In: Eurodollar Options

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