Aug 5. Severe risk-off meltdown yesterday…

Aug 5.  Severe risk-off meltdown yesterday.  Stocks, treasury yields, and emerging markets all plunged.  2yr note made a new low yield of only 27 bps.  Tens dropped below 2.5% to end 2.47, down 13 bps on the day.  SPX was down nearly 5%, while Nasdaq fell just over 5%.  Gold was at new contract high in the morning, but had an outside key reversal and closed lower.  Crude Oil sank below $90/bbl…at one point CLV was down 5.50.  One month T-bill rates edged negative, and BONY announced a fee on large deposits of 13 bps, a charge on safe haven flows. New lows DB, UBS, RBS, BAC…things aren’t good in the financial sphere.

–Confidence in the world’s consuming engine (that would be the US) is waning.  We already know from Walmart that low income shoppers are stretched extremely tight, and now if stock market losses shake the confidence of upper income consumers then it’s game over.  Add a run on Italy banks, stir in a plunge of over 6% in Brazil. Could be like late 2008 when consumption stopped…a Kevorkian cocktail.

–Employment today.  I saw a quote on BBG that this number was “crucial”.  Look…we all know that gains in NFP aren’t large enough to pull down the rate unless discouraged workers drop out of the work force.  This number, while it could spark a bounce, isn’t ‘crucial”.

–From FT: “‘Crisis is over’ as AIG posts profit…Benmosche says insurer could handle severe downturn.”  Well sir, you might get your chance…

Posted on August 5, 2011 at 12:35 pm by alexmanzara · Permalink
In: Eurodollar Options

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