Mar 12. Curve flatter in spite of bond auction

Selling pressure continues in eurodollars, though net change was modest with reds -3.25 bps.  There was a seller of 40k (or more) EDM0 9962c at 5.5.  The treasury completed this week’s auctions with the 30 yr bond, and surprisingly enough, that was the only place where yields fell.  Tens were unchanged at 3.72%, bond yield fell 3 to 4.66% and two year notes rose 3.5bps to 94.5.  A flatter curve in a week where 10’s and 30’s were auctioned is a strong indication of more flattening to come.  2/10 spread at 277.5 is about 17 bps lower than last month’s high.

–Stocks continue an upside run even as the short end of the curve trades defensively in front of next week’s FOMC.  Yellen was selected as a replacement for Kohn, ensuring dovish continuation at the top of what appears to be an increasingly divided Fed. 

–Today’s news includes Retail Sales expected -0.2% and Consumer Sentiment, expected little changed at 74.0.

–Q4 flow of funds was released yest.  Household total debt continues to contract, falling 1.2% to $13.5T.  Business debt likewise contracted 3.2% to $11.0T.  Fed’l gov’t debt growth continued to expand of course ($7.8T), though at a much slower growth rate: Q1 +22.6%, Q2 +28.2, Q3 +20.6 and Q4 +12.6%. 

–Tax Foundation says 36% (52 million) of Fed tax returns pay NO income tax.

–FHA Commissioner David Stevens says raising the minimum downpayment from 3.5% to 5.0% could negatively affect potential homebuyers and the economy as a whole.  Weren’t low downpayments a big contributor to the problems in the first place?  And the won’t the end of the homebuyer tax credit also be a large negative for housing going forward?

Posted on March 12, 2010 at 1:48 am by alexmanzara · Permalink
In: Eurodollar Options

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