Aug 8.

Aug 8. From HuffPost: “The U.S. is “pretty darn f**ked,” [former Obama econ adviser Christina] Romer said during a segment on Real Time with Bill Maher called “How F**ked Are We?”, after Maher asked what the [S&P downgrade] news could mean for the U.S. economy. Perhaps a tongue in cheek comment, but the S&P move is another crack in fragile markets.  More importantly, news over the weekend in Der Spiegel that the German gov’t considers Italy too big for the EFSF to save should simply send european banks into a tailspin.  US banks are also sliding, with Bank of America the current postal child, having lost about 20% of its value in August, (due to continued mortgage regulatory woes).

–The downgrade itself probably isn’t that important, as both Moody’s and Fitch had already re-affirmed the US AAA rating.  No portfolios are likely to be FORCED to sell treasuries.  However, there is a risk that rating downgrades of european nations could ensue.

–Employment data from Friday is already a distant memory as financial market strains threaten to overwhelm market confidence.

–For the first time in eurodollar futures, and Fed Funds, there was sizable buying of 100 calls.  Notably, 100k EDM2 100c for 0.25 and 0.5.  FFU1 100c trade 0.25 in 1k.  FFZ1 100c trade 0.25 in 5k.  Risk AVERSION.

–Other disconcerting items: (HuffPost) The Postal Service said Friday it lost $3.1 billion in the April through June period and could be forced to default on payments due to the federal government when the fiscal year ends in September.  Also, food stamp use in the US rises to record 45.8 million.  And riots in North London are a reminder that economic fragility can break down into social instability.

Posted on August 8, 2011 at 12:36 pm by alexmanzara · Permalink
In: Eurodollar Options

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