Activity in Fed fund options remains brisk as dealers continue to take off bullish option structures, see players list below. I read some more research regarding the Fed’s announcement on Tuesday that they would be including – thus targeting GSE’s as eligible for being counter parties to the Fed’s Reverse Repo’s. Those again will facilitate the removal of excess funds from the system. From what I have read so far no one argues that in general liquidity removal will tend to push rates higher. But when you start to analyze the relationship between IOER and overnight rates the analysts tend to believe that there will still be enough liquidity to keep the overnight rate well below the IOER. Never the less a fair amount of trade has occurred in Fed Fund options and we have seen liquidation of some sizable positions in Eurodollar calls as well today.
Elsewhere Jeane-Claude Juncker of the EU-zone finance ministry stated in the press that the IMF may not release funds to Greece if they fail to enact measures deemed necessary to win said funds. This has caused a decent rally in Bunds - Bonds and Tens and this will persist until we here something otherwise. Data out this morning was on the weak side as well – however as noted with last weeks data – you have to take natural disasters – weather in the US – Earthquakes in Japan – as factors that are affective certain sectors. The uncertainty has the bulls somewhat in control for the moment but we shall see.
Larger flows from a.m.session.
| 5/26/2011 | |||||
| Paper | B | 5,000 | EOM 9900/9912 p spread | 1 | |
| Paper | B | 5,000 | EDU 96/97c 1X2 | 6.5 | |
| Paper | B | 500 | EDZ12 90/92/93 c tree | .5 pieces over | |
| CSFB | S | 10,000 | EDM12 9887/9912 p spread vs 9962c | .5 call over | |
| Paper | S | 2,000 | EOU 9900/9912 strad stupid | 70.5 | |
| TJM | S | 5,000 | EDU/H 9962 call stupid | 15.5 | |
| Paper | S | 5,000 | EDU/EDZ/EDH 9975 c strip | 3 | |
| Paper | S | 5,000 | EDH96/97 c 1x2 | 5 | ^9949.5 |
| Paper | S | 5,000 | EOZ 9837/9850 p spread | 12 | 9881/81.5 |
| Paper | B | 20,000 | EOZ 92/93 c spread | 3.5 | 9981/81.5 |
| Fed Fund opts | |||||
| Morg St | S | 9,000 | FFZ 9981/9987 c spread | 3.5 | 9982.5/83 |
| 4 K sold yesterday OI delclies to about 18K and will drop by at least 9K more after today. | |||||
| Seeing some good liquidation in ED calls as well. | |||||
| Paper | B | 2,000 | TYQ 9981/9987 p spread | 1 | 9988/88.5 |
| Paper | B/S | 250 | FFX 9975/9981/9987 p fly | 1.75 | 9983.5/84 |
| Morg St | S | 5,000 | FFG9956/9962 psprd vs 9981/87 csp | 2 cspd over | 9978/78.5 |
| This one looks to be liquidating as well… | |||||
| 5/26/2011 | |||||
| New Edge | B | 3,000 | TYN121p | 0.28 | ^12126.5 |
| Mann | S | 2,000 | TYQ124/125 c spread | 0.1 | 12127/27.5 |
| Paper | S | 500 | TYQ118p | 0.09 | 12131/31.5 |
| Paper | S | 1,000 | TYQ122 strad | 2.12 | ^12129 |
| RJO | S | 850 | TYN125c | 2.11 | 12202.5/03 |
| 30yr. Opts | |||||
| Paper | B | 1,000 | USN125c | 0.57 | ^12404 |
| floor sources indicate this bid filled after RJO sold the July straddle in 10's - open outcry - no substitute | |||||
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