Mar 24. Ten yr swap spread goes negative

Mar 24. For the first time the ten year swap spread edged into negative territory, -1 bp.  The 30 yr is around -18 while 2 yr is +17.  Bloomberg described this pressure as related to corporate bond issuance which is swapped back to floating rates.  In my opinion it could have something to do with the US Gov’t taking on increasingly shoddy paper – FRE, FNM, FHA, GMAC, C, etc.  In any event, the eurodollar curve is reflecting the situation with narrowing calendar spreads out the curve.  For example, red/green pack spread is nearing 100 bps at only 111.  Red/gold declined by over 2.5 bps to new recent low of 246.
–Other factors are Yellen’s comments that indicate no desire to raise rates (quite negative about housing), and Geithner’s hollow testimony on the agencies. Sample headline from HuffPost: Geithner: Fannie, Freddie Need To Be Changed – But We Don’t Know How.
–Stocks blithely dance higher as the largest companies see low rates and high liquidity. 
–Today’s news includes Durables expected +1.0% and New Home Sales, expected 315k.  Less than a year ago New Home Sales were around 600k annual rate.  Five year note is auctioned today…some softness ensued after 2’s yesterday. Continued exit of midcurve Dec put spreads; paper sold EOZ 9700/9750p s at 13.0.

Posted on March 24, 2010 at 5:22 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply