OpenMarkets

Today’s Number: Mid-Curve Eurodollars

Jun 8, 2012 || David Reif || No Comments

The weak jobs report last Friday sent markets into a flurry of activity, but lower stocks and Treasuries weren’t the only result. Trading in Eurodollars – U.S. denominated deposits in foreign banks – also saw a significant spike, with traders particularly active in our short dated three year mid-curve options, called Blue mid-curve options.

We launched this product in late 2010 to provide hedging and trading opportunities on the mid-range of the yield curve – hence the name “mid-curve” options. The recent jobs data, matched with ongoing uncertainty in the Eurozone, prompted trading of 637,842 contracts on Tuesday, our third largest trading day ever for Blue mid-curves. Open interest also increased by 355,000.

Analysis of the United States and European economies forced the yield-curve to flatten three years out, which made this an attractive option. But the economic data will continue to flow, and the Fed will continue to share its views, making the mid-curves something to watch for the foreseeable future.