Jan 22. Obama handcuffs banks
Stocks had some tough sledding thursday, with DJI down over 200 points (2%) and SPH down 23 points. There was a large chunk of volume around 1121 to 1122, about 300k e-mini S&P or more went through, supposedly some 60k from one seller, who was also said to be buying VIX. Never was the market able to trade above that level again.
–Obama proposed new bank restrictions on proprietary trading. Call it the Volcker revolution. This guy can actually stand up to special interests. And they’re going to need someone like that now that the Supreme Court ok’d unlimited political spending. In any event, new uncertainties have been introduced, including questions over Bernanke’s confirmation, with Senate Dems saying they are not sure they have the votes.
–A big part of the economic stabilization has come from regained stock prices. Continued selling could portend a double dip. Mayor Bloomberg came out against Obama proposal, knowing that NY economy depends on financial services.
–Treasuries rallied, drawing buyers in a more uncertain landscape. Ten year yield fell 5 bps to 3.605%. Curve was slightly flatter on rally.
–Eurodollar straddles were under selling pressure, with EDM 9962 sold down to 19. EDU 9900 and 9925 straddles both heavily offered, trading 60 and 50 respectively. Feb treasury options expire today, with TYH threatening the 118 strike (though only about 33k open interest in the calls). It could be a volatile expiration.
