June 12. Oil finally reacts to events in Iraq. Central banks cheer as there’s now a chance to hit inflation targets
–Crude oil up over $1/bbl this morning to new high over 105.50. Slo-motion reaction to events in Iraq.
–Quiet in US rates yesterday. There were some exit trades associated with expiring midcurves, other than that, net premium selling. TYN 124.0 straddle sold at 50, red midcurve Dec 9900 straddle sold at 36. EUR continues to break down, nearing the spike 135 low on the ECB meeting.
–Today’s news includes Jobless Claims, expected 309k from 312. Retail Sales expected +0.6% and +0.5 less auto and gas. It would be surprising if retail sales came out weak given the massive increase seen in the last consumer credit report.
–Crop report was released yesterday but caused little reaction. However, over the past 5 weeks or so Corn has traded steadily lower, from 520 to 440, and Wheat has gone from 740 to 592. Beans are at the lower end of a 1450 to 1500 range. I guess we’ll have to rely on higher oil prices and minimum wage increases to hit the 2% inflation targets. “We seem to be paying some of our employees an awful lot of money. Louis: Can‘t get around the old minimum wage, Mortimer.”
–Interesting note on Bloomberg: Regulations are causing a shift of risk in the credit derivatives markets from banks to non-bank investors. “Vilified for worsening the financial crisis, the credit derivatives market is undergoing a structural shift as money managers take on risk shunned by banks after regulators forced lenders to shrink their dealings.” That’s good right? Because non-banks (like AIG or LTCM) could never threaten financial stability.
http://www.bloomberg.com/news/2014-06-12/debt-risk-shifting-to-investors-as-bank-regulations-bite.html
