Nov 23.
Yields slid, stocks rallied on a liquidity surge. Green euro$’s up over 17 bps on the day. Red/green pack spread which made a new recent high Friday at 75 bps, fell to just over 66. Ten year note yield dropped to 2.81% from 2.87%.
–N Korea lobbed missiles at S Korea; threatening to escalate into a larger conflict. Dollar and treasuries modestly bid, stocks lower.
–EDU11/EDU12 spread fell 13.5 bps yesterday to 49.5, a huge move for a one year spread. Even though there have been assurances from the Fed to leave rates low for a long time, deferred one year spread at less than 1/2% seems too cheap, especially given uncertainty that seems to be building (Europe’s rolling crisis, China’s next move), and the extreme amount of liquidity. M1/M2 in front settled 45, so there is negative rolldown. Recent low in the spread has been 31. I would try to buy around 45 with stop out of 37 to 38.
–Today’s news includes Q3 GDP expected 2.4%, Existing Home Sales, 5.4M, 5 year note auction, Fed minutes.
