Oct 26. G20 produces weaker dollar, new commodity highs

Oct 26.  Light volume Monday.  Dollar fell in the aftermath of G20 meeting.  New highs in many commodities including Cotton and Rice.  March Beans had new high settlement.  Copper also near recent highs.  Interest rate futures opened higher but faded from the best levels of the day.  FVZ had fairly big outside range and closed right on the low as the market prepares for 2, 5 7 year auctions. (Two year auction today).
–Implied vol generally softer. 
–Red/gold eurodollar pack spread was up by 4.25 bps, however 2/10 treasury spread only gained 1 bp and 30 year bond yield actually fell a few bps.
–BofA stock dropped another 2.5% to 11.16 as the mortgage fiasco shows little sign of abating.  Mortgage fraud doesn’t seem to be perceived as a systemic risk, as other financial stocks barely moved.  For example GS was down less than 1/4 %. In general there is little faith in the ability of the US gov’t to solve problems, but in the case of trouble at big banks, there is near certainty that the Fed and administration will paper over the rough spots.
–Splashy headlines noted the 5 yr tip auction at a yield of -55bps.  However, ten year treasury to tip spread continues to edge slightly higher, a sign that inflation expectations rising.

Posted on October 25, 2010 at 8:35 pm by alexmanzara · Permalink
In: Eurodollar Options

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