Thursday, April 30, 2015

Eurodollar Calendar Spreads Widen



We examined Eurodollar calendar spreads yesterday with an eye toward wider yield spreads likely to prevail (See ‘What if Fed Not ‘Off’ on ‘Dot Plot’?’).  Today, these spreads are well higher following a new low in initial jobless claims reported.  Claims have not been this low (262K) in 15 years, suggesting that the weaker March payroll report may not be the start of a weaker jobs trend. 

 

EDZ5-EDZ7 trades higher by 6 basis points to 138, but is still very much below the 250 bps the Fed’s ‘dot plot’ suggests.  With outright yields on Eurodollar and Treasuries having jumped as much as they have today, it makes sense at this point to consider using calendar spreads for any adds to bearish positioning.     



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