Dec 21. China warns about treasury purchases

Interest rate futures fell Friday.  Ten year yield got back above 3.5%, closing at 3.544%.  Light volume, though there continues to be buying in EDH10 9975c, for 0.75 and 1.0 bp.

–From the Shanghai Daily quoting Zhu Min, deputy governor of the PBoC: “The United States cannot force foreign governments to increase their holdings of Treasuries,” Zhu said, according to an audio recording of his remarks. “Double the holdings? It is definitely impossible.”

–Banks are reluctant to lend when they can simply ride the treasury curve, regulators don’t want banks to make bad loans, but the administration wants more lending.  A weekend clip in the WSJ says “Some mortgage insurers and lenders are beginning to relax their down-payment requirements, in a sign of increased confidence in the housing market.”  However, with respect to CRE, the notion that additional financing can solve things doesn’t hold water.  For example, would Morgan Stanley have kept the San Fran buildings instead of walking away had there been more financing?  The cash flows just aren’t supporting asset prices. 

–A couple of interesting pieces on Reuters regarding food stamps: “The number of U.S. food stamp recipients roared to a record 37.2 million in September.” From a separate article: “At 11 p.m. on the last day of the month, shoppers flock to the nearest Walmart. They load their carts with food and household items and wait for the midnight hour. That’s when food stamp credits are loaded on their electronic benefits transfer cards.”

Posted on December 20, 2009 at 4:43 pm by alexmanzara · Permalink
In: Eurodollar Options

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