Treasury Trading Update.

Right now the situation is this – 3 month dollar libor setting has moved up by one basis point over the last 3 session basically from 28 to 29. However the EDZ futures have moved at least 5 basis points lower during that same time period. It seems very possible the cash inter bank lending markets could move higher and justify what is going on in the futures contracts.

Central banks have learned a lot during the crisis, one is printing money obviously, the other is by coming up with clever things to say and not say. These policies are starting to show some cracks as treasuries seem to be trending away from targeted levels. No buy backs scheduled for today, however next week shows over 30bln. Scheduled to be bought back in various maturity ranges below is a snapshot:

Below some of the larger flows from a.m. session. Note : Shortly after 11:00 a.m.c.s.t. on a block trade 30,000 Feb. 5yr. 121.5 calls traded at a price of .15 futures were around 11918.7 the instigator was clearly a buyer as the market for that option with futures at that price was offered for smaller size at 13.5. Given the trader wanted 30K and did not want to muck about in the pit a price of .15 was executed.

11/26/2010
Paper	B	2,000	EDF 9925/9937 p spread	2.5	9945 area
Paper	B	1,000	EOF 9950 c	0.5	9906.5/07
Cube	B	3,000	EDZ2 9875/9900 c 1X2	4.5	9862.5/63
Paper	S	500	EDH3 9850 strad vs. EDZ2 9862 strad	26.5 H over	N/A
Paper	B	2,500	EDM1 91/93 ps vs EDZ1 87/90 p s	1  M over	N/A
New Edge	S	12,000	EDH3 9900 calls	5	^9845.5 20%
New Edge	S	8,000	EDH3 9900 calls	4.5	N/A
10yr.
Paper	S	3,000	TYF 122.5 put	0.41	^12424/23/22.5
Paper	S	2,000	TYZ124.5/125 c spread	0.18	^12426
30yr.
Merril	S	5,824	USF 133c	0.11	12708 area
Merril	B	800	USH 128c	2.11	12708 area
Above trade being executed as a 100 X 728 ratio - working more getting out of Jan into Mar most likely
Fed Fund
Smith B	B	500	FFN 9981 call	2.75	9977.5/78