Dec 1. Two year note nearing crisis low yield

–Japan announced ten trillion yen emergency lending facility that accepts a wider variety of collateral, though didn’t increase QE purchases. Concerns about Dubai are receding.

–Chicago PMI stronger than expected at 56.1.  ISM today expected 55.0 from 55.7.  For comparative purposes, between July 2006 and July 2008 ISM bounced around between 49 and 54. 

–Two year note is approaching the low yield made during the depth of the crisis which was around 64 bps in December 2008. I marked it at 66 bps at the futures close.  Ten year note is also nearing a recent low yield of 3.17% (3.193 at yesterday’s close), though the low late last year was 2.05%. New recent low in red/green pack spread at 111 bps.

–Obama admin plans to “shame” banks that aren’t making mortgage modifications.  Two questions: 1) don’t the banks have a responsibility to shareholders?  2) is shame still a potent factor in America?  Maybe it has an effect on Tiger Woods, but there was a story out yesterday about a business professor advising homeowners to walk away from mortgages “in droves”, saying that repair to credit scores could be accomplished in about two years. (Huffington Post).  It’s more of an admission that the mortgage modification program is having little effect, just as CRE problems escalate.

 Comments yesterday by Jon Greenlee, Assoc Director of Bank Supervision for the Fed to a Congressional panel

Loan quality deteriorated significantly for both large and small

 institutions during the third quarter of this year. At the largest 50

 bank holding companies, nonperforming assets climbed more than 10

 percent, raising the ratio of nonperforming assets to 4.8 percent of

 loans and other real estate owned. Most of the deterioration was

 concentrated in residential mortgage and CRE, but commercial loans

 also experienced rising delinquencies. Results of the banking

 agencies’ Shared National Credits review; released in September, also

 document significant deterioration in the performance of large

 syndicated loans, signaling likely further deterioration in commercial


Posted on December 1, 2009 at 6:40 am by alexmanzara · Permalink
In: Eurodollar Options

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