Eurodollar Future – June 2010

Nicole Elliott from Mizuho Corporate Bank at 01/08/10

Comment: The US yield curve is steeper than anything seen in the last thirty years, twos-tens at 278 basis points as compared to 1992’s peak of 250, and bankers are now being castigated for not lending. Meanwhile they are being urged to offload dodgy ‘assets’ into separate entities, re-build core capital, fund government fiscal black holes, encourage the public to save more money, be socially useful…one at a time please! Meanwhile the Fed correctly worries about what will happen when they stop propping up Government Agency debt. Eurodollar futures are trading higher as delivery dates come closer and recovery hopes fade a little. Expect more of the same with Sep10 and Dec10 currently probably offering the best upside scope.

Strategy: Attempt small longs at 99.440, adding to 99.385; stop below 99.340. Upside target contract high at 99.535 then 99.680/99.725.