Jan 6. Yields fall in front of employment data
The rally in interest rate futures continued, and even included longer maturities yesterday. The ten year yield dropped 8.5 bps to 3.755%. Curve flattened slightly. Having shaken off a solid ISM number Monday, what happens if the employment data is much weaker than expected Friday? Market is apparently expecting +10k for NFP with rate of 10.1%.
–Heavy buying of EDM10 9962c yesterday from 4.75 to 5.5. About 50k traded, open interest was up 18k. Also, buying of EOH 9850/9862/9875 c tree for 1.0. Good trade for curve roll up.
–Barney Frank said yesterday that FNM and FRE are essentially a “public policy instrument of the government”. At least he’s not pretending that they still somehow have a private aspect besides the executive pay.
–On political side, Dodd and Dorgan, both Dem senators won’t be seeking re-election. Likely settle into political gridlock during the next term.
–California is still struggling with budget gaps of up to $21 B over the next year. Schwarzenegger gives state of state speech Wed and budget proposals later this week or next. It appears CA can only hope for more federal money; tax revenues are not meeting needs (what does that say for nat’l economy?). Greece is facing similar problems, though ECB’s Stark said other EU nations are not going to come to its rescue.
