May 29. Whatever it takes?
–Eurozone stress is the dominant theme, with the Italian bank index (IT8300) plunging; it’s down over 20% in the past two weeks. Deutsche Bank this morning is sub- €10, a new recent low and down nearly 40% from the start of the year. And it’s not just Italy, with Spain’s Rajoy facing a no-confidence vote on Friday. The energy patch is also seeing volatility. I mentioned that WTI Crude posted a large outside range week and closed on the low on heavy volume. Lower this morning with Russia/ Saudi indications of increased supply.
–On Friday I had thought there was a chance of a large exercise in the expiring TYM 120c that might cause a flurry of buys on Sunday evening. (Late Friday TYM had ticked right up to the strike). While the market did move a bit higher, a market maker informed me that he had been exercised on less than 2% of outstanding short calls. So the idea was incorrect, but if anyone DID exercise and held on, they’re half a point in the money currently.
–Eurodollar curve is flattening on a flight to safety bid. EDZ8/EDZ9 again flirting with the 29/30 support area, now 31.0, having closed Friday at 33.5.
