Another day, another SARS-Cov2 vaccine!

Eurodollar Futures

Most futures contracts are liquid out for a couple of delivery dates, maybe four or five if you’re lucky. The exception is Eurodollar futures (nothing to do with the Euro currency: just dollar deposits held by institutions outside of the US). They are liquid out for years, and have lots of options. The pricing of ED futures, interest rate swaps, and bonds is intimately linked. I once wrote a library to back out zero coupon yield curves from strips of the prices of these things, but that was a long time ago. I’d forgotten about this until I listened to The Market Huddle with Alex Manzara. I tend to listen to this while making a meal, and I can normally follow OK, but this episode is probably best listened to on YouTube so you can see the charts. A zero coupon rate curve is a prediction of future short term rates, as a simple arbitrarge argument will show. The reverse is true. I don’t have time today, but I am going to see what ED futures (symbol, confusingly GE, but nothing to do with General Electric) predict about the future. Everyone is predicting a melt up in long-dated yields, especially now Clarida is talking about the Fed issuing a digital currency. Once actual people can get their hands on Fed reserves (as opposed to commercial banks), we’ll really see some inflation moves.


This was a big risk-on day driven by the announcement of another vaccine, this one from Moderna. We now have Russia, Pfizer and Moderna all slugging it out. The Russian vaccine is already being given to members of the public, without a second clinical trial. I guess if there is anything wrong with it, we’ll be the last to find out.

The market seems to have lost interest in assets that produce no income: precious metals and currencies (well, developed market ones), and govt. bonds. The value stocks that were hammered by the pandemic are coming roaring back: energy, transport, banks. Copper seems now to be getting bid.

Chart for the day

The rich are different. They have more money. And they compound more money still, because they are exposed to exploding asset values.

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