Monday, May 16, 2011
The best risk/reward market short remains eurodollars
With the TED spread at only ~24bps and short-term rate expectations sitting on lows, there isn't much lower LIBOR rates can go. http://www.bloomberg.com/apps/quote?ticker=.TEDSP:IND#chart. In the event of any kind of market panic, eurodollar futures will tank. In the event the equities and/or other markets continue trickling higher, your losses on short eurodollars will be minimal. Of course, this is only an intermediate-term hedge for equities, and cannot be relied upon for tight day-to-day correlation.