Eurodollar Future – December 2010

Nicole Elliott from Mizuho Corporate Bank at 02/19/10

Comment: The Fed’s increase in the discount rate last night to 0.75% is seen as taking the spread between their borrowing and lending rates closer to ‘normal’. It may also signal dissent between FOMC members and act as a reminder to banks that eventually the lashings of money supplied by governments will be withdrawn. The problem for them is that the wholesale market is still dead. Eurodollar futures have dipped modestly on the news, correcting the overbought situation and erasing what little bullish momentum there had been. The move is seen as a buying opportunity for a move back up to contract high next month.

Strategy: Attempt small longs at 98.980, adding to 98.885; stop below 98.760. First target 99.080.