Aug 29. Spain closer to formally requesting aid?

–Extremely light volume Tuesday, with red euro$ contracts averaging about 60k and greens less than 50k. Not one contract month traded over 100k. Curve edged slightly lower. Red/gold near 120 is approaching this year’s low (107 in late July as opposed to over 200 in late March).
–From Draghi piece today in Die Zeit: “For fiscal policies, we need true oversight over national budgets. The consequences of misguided fiscal policies in a monetary union are too severe to remain self-policed.” Interesting that Draghi makes an appeal for unity in a German newspaper just before constitutional court ruling on ESM. Especially as Spain moves closer to formally requesting aid. Catalonia asked for aid from the national gov’t, and Reuters reports that in July nearly 5% of private deposits were withdrawn from Spain’s banks. Italy to auction E 7.5b 5’s and 10’s Thursday. If Spain asks for aid, then “true oversight” over its budget falls into place, and Draghi’s condition for bond buying is met…bullish for euro and bearish for long end of debt markets?
–In the US, Consumer Confidence slid yesterday. Today’s news includes Q2 GDP revision, expected up to 1.7 from 1.5, five yr note auction, and Beige Book.
–Zero Hedge reports that total US federal debt now stands at record $16T. Add in this: (Reuters) – America’s 50 state governments owe $4.19 trillion, including outstanding bonds, unfunded pension commitments and budget gaps, according to a new report. $20 trillion ( ! ) It’s a wonder that confidence remains so high in US debt markets…or is it just hope that Bernanke again signals unlimited support on Friday?

Posted on August 29, 2012 at 5:26 am by alexmanzara · Permalink
In: Eurodollar Options

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