Oct 7 Zimbabwe or Japan?

Oct 7. ADP report weaker than expected yesterday.  Jobless Claims today, employment report tomorrow.  The problem is that the US was an asset based market based on household leverage.  The official solution is to pump up paper assets with government leverage.  QE2 now accepted as foregone conclusion no matter what the economic data says.
–Two year yield at only 3/8%.  Five year TIP at -40 bps.  Ten year now at 2.40%. 
–There was continued selling in TYZ strangles.  One point in TY futures is approximately equal to 13 bps, so yesterday’s sales of 125/129 strangle represent a bit over 50 bps wide on strikes.
–Because yields are now so close to zero, straddle prices in eurodollars have become quite compressed.  At higher yields the last red, which is the longest dated straddle (about two years of time) was around 125 bps.  Yesterday the EDU12 9900 straddle settled 75.5.
–Hard to tell whether US stocks go the way of Zimbabwe or Japan.  Gold is starting to register a vote for the former, as is the dollar.

Posted on October 7, 2010 at 4:35 am by alexmanzara · Permalink
In: Eurodollar Options

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