Eurodollar futures poised to move sharply higher as market starts discounting sharp fall in rates
Fred Day
Oct. 21, 2007

The Euro Dollar futures are moving sharply higher. The sharp rise is due to deteriorating corporate and mortgage credit markets. There is a rush to capture relatively high yielding treasury bills and euro dollar futures before yields go sharply lower.

In the last three days the six-month (March 2008) euro dollar futures have risen 30 points or $750 per contract on a $750 maintenance margin. That a 100% return in three days!

The reason for further possible rise is the fact the major market players are just realizing that recession is on its way and will hit the main street hard by the first quarter of 2008.

Credit default swaps are also confirming the trouble in the non-Treasury bond market. The risk reward ratio in the mortgage backed and corporate bonds is so high right now that Euro dollar futures, Tbills and Treasury bonds are trading at a very high discount.

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