Aug 10

Aug. 10–Better than expected employment data (NFP -247k vs -300exp) sent rates higher.  Red pack fell over 16 bps; ten year yield rose nearly 11 bps to 3.85%.
–This week brings the quarterly refunding and the FOMC meeting, which should keep the market under pressure.  In the auctions a couple of weeks ago, poor 2 and 5 year results were followed by strong demand for the final leg, the 7 yr note.  After the fact, data was released that showed Fed buying of MBS and, according to zerohedge.com, this exact same 7 year was bought in Open Mkt Ops early the following week.  Of the announced $300B treasury purchases, a bit over $240B has been completed.  The question in my mind is whether there will be Fed sponsorship to support these auctions.  Though the program of QE likely needs to be expanded, it probably won’t occur at this FOMC, especially since Cash-for-Clunkers juiced the economy and is getting additional funding.  My own thought is that c4c not only pushed forward future purchases, but also stole from other retail buying.  Same store sales were weak in July, and collaborating a sense of skittishness, Consumer Credit for June (released Friday), declined by more than $10B, twice as much as expected.  Deleveraging is still the trend.
–There was a buyer of 35k EDZ 9725/9800p spread for 2.0. Appears new, as open interest was up 19k in 9800p and up 25k in 9725p.

Posted on August 10, 2009 at 4:31 pm by lesliemanzara · Permalink
In: Eurodollar Options

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