Nov 28. Student loan default rates surging

–Strong underlying bid in treasuries as end of year approaches. Beckner suggests strong support at the Fed for replacing Operation Twist, which ends in December, with further outright purchases to expand the balance sheet. (Twist leaves balance sheet unch’d as shorter maturities were sold while long end was bought). This topic will likely be decided at the next FOMC on Dec 12.
–Zero Hedge has an interesting article about student loans, now nearly $1 trillion ($956B) and soaring default rates.
http://www.zerohedge.com/news/2012-11-27/scariest-chart-quarter-student-debt-bubble-officially-pops-90-day-delinquency-rate-g
Around 11% are 90 days delinquent! These loans only get paid from income, and the job situation is still fragile. Maybe the Fed can just buy the $30 billion of monthly production of these loans… The crunch in higher education is just around the corner.
–Flatter curve in eurodollars, with red/gold down 1.625 to 115.5. Looks like this spread will go out near the low of the year which was 107. (High was a bit over 200 in March, started the year at 160).
–Relentless vol selling in interest rates, with an early seller yesterday of 2k TY straddles for Friday (TY5X) at 23 to 22 ref 133-01. This straddle is now 28 intrinsic with TYH 133-14.
–News today includes New Home Sales, 5 yr note auction, Beige Book.

Posted on November 28, 2012 at 5:47 am by alexmanzara · Permalink
In: Eurodollar Options

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