Eurodollar futures tripped up by euro-cash pressure

Canadian bills – Canadian bill prices surged with the implied yield on the December contract at one point falling to 1.37% in the heat of the moment on Thursday. The sustained gains for Canadian credit were directly opposed to the fall in Eurodollar futures meaning that the two curves compressed substantially. The spread between the year-end contracts north and south of the border closed Wednesday at 100 basis points and today has breached that level for the first time since October. The calendar spread narrowed to 88 basis points during the melee. Deferred bill futures advanced harder shaving six basis points off the yield. Government bond yields in Canada are unchanged ahead of lunchtime with the 10-year yield marginally below comparable U.S. debt at 2.94%.

Australian bills – Aussie bill prices wrote-off Wednesday’s threat of further monetary action and rallied sharply. A 12 basis point slide in implied yields came in defiance of Governor Stevens’ delivery in Brisbane midweek in which he said inflation risks were only likely to accelerate over the next few years raising the chances of resumption of monetary tightening. The 10-year bond yield slid by four basis points as Pacific investors realized that monetary tightening was becoming an obsolete threat as sovereign issued weighed heavier.

Japanese bonds – Spurred on by a midweek rally in U.S. treasuries on account of growing weakness in the Greek government and consequent rise in default fears, Japanese bonds jumped again overnight sending the benchmark yield lower by five basis points to 1.105%.

Andrew Wilkinson is a Senior Market Analyst at Interactive Brokers LLC

Note: The material presented in this commentary is provided for informational purposes only and is based upon information that is considered to be reliable. However, neither Interactive Brokers LLC nor its affiliates warrant its completeness, accuracy or adequacy and it should not be relied upon as such. Neither IB nor its affiliates are responsible for any errors or omissions or for results obtained from the use of this information. Past performance is not necessarily indicative of future results.

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About the Author
Andrew Wilkinson

Andrew is a seasoned trader and commentator of global financial markets. He worked for several London-based banks trading cash and derivatives before moving to the U.S. to attend graduate school. Andrew re-joins Interactive Brokers following a two-year stretch at a major Wall Street broker-dealer as their Chief Economic Strategist. His coverage of stocks, options, futures, forex and bonds regularly surfaces in global media, and over the last several years Andrew has made many TV appearances on Bloomberg, BBC, CNBC and BNN and Yahoo Finance.

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