Aug 3.

Aug 3.  Treasury yields were again crushed with tens down 11 bps to 2.63% and fives down 8 to only 1.23%.  Euro$ calendars all made new lows as well, with EDZ11/EDZ12 at only 15.5 bps, down 6.5 on the day.  Red/green pack spread 65.5 bps. The lowest level of last year (on rolling basis) was 54, in late October.  The market is pricing in more QE without the Fed even hinting at it yet. EDH/EDM at only 1.5 on settle.

–Gold exploded to record high nearing $1650.  Corn also soared to limit (CZ above 7.15 and threatening record high), while stocks plunged with SP500 down 2.6%.  Moody’s retained US AAA rating but put on negative watch, (inviting a criminal investigation into rating agency roles in the subprime crisis?) –The dynamics of an overleveraged world resting on a foundation of loans/assets which require a steady cash flow for servicing are exposing the limits of central bank policy.  Both Europe and the US need GROWTH to ensure cash flows…rates near zero (or, in Swiss case, today at zero as SNB cut to stem the rise in currency) aren’t spurring growth.  Italy yields are rising to Spain levels as spreads vs Germany rise.  Italian banks continue to see share trading halted because of worries over holdings of sovereign debt.  Keynesian AND monetary policies both fail.  In the short term, lower govt spending will lessen GDP, but if Washington could confront longer term structural issues, confidence would return to the private sector and unleash cash on the sidelines.  But that effort failed as well, with resulting loss of confidence evident in stocks…

–Today includes ADP, Factory Orders expected -1.0 and Service ISM expected 53.0 same as last.

Posted on August 3, 2011 at 12:34 pm by alexmanzara · Permalink
In: Eurodollar Options

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