Eurodollar Future – June 2010

Nicole Elliott from Mizuho Corporate Bank at 01/22/10

Comment: Over the last two weeks the US yield curve has flattened marginally from record highs (2-year/thirty-year 377 basis points) as Treasuries unwind the nonsense perpetrated in thin year-end markets. TIPS are still well bid, yields currently close to record lows (1.625% 2018 now a whisker over 1.00%). Calendar spreads in Eurodollar futures have narrowed and should continue to move towards flat, and the price premium over Euribor futures should narrow too. President Obama has swapped his old hobby horse, healthcare, to join the braying mob banker-bashing - this has had zero effect so far today on the money market as front month Eurodollar contracts push towards 100.00. We continue to favour slow cautious rallies, punctured by periods of sideways consolidation, in all money market futures.

Strategy: Attempt small longs at 99.600 but only if prepared to add to 99.515; stop below 99.490. Target: 99.680/99.725.