Oct 27. European agreement

Global markets are staging a strong rally on the European rescue agreement.  The 50% haircut for Greek bonds is not being called a ‘credit event’, which is difficult to understand.  Also, with Greek GDP of 230 bln euro and declining fast (according to ZH) against outstanding debt which still stands at 250 bln after the write off, I think this solution will prove temporary.  Italy debt to GDP is 118%, which is the current source of concern, and Greece is only coming down to a similar level. In any event, markets are encouraged by the liquidity.
–US news today includes Q3 GDP expected 2.5%.  Treasury auctions 7 year notes. 
–Good buying of EDZ12/EDZ13 yesterday for 30 (settled there). The year spread in front, EDU12/EDU13 is only 16 bps. Red/green pack spread still only just above 50.  All of these calendars are very cheap if indeed the market perceives success in addressing financial imbalances.

Posted on October 28, 2011 at 8:44 am by alexmanzara · Permalink
In: Eurodollar Options

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