Dec 15. Bonds continue lower after FOMC

 –Bond bear market continues though the Fed maintained its commitment to QE2. The FOMC announcement said growth is too slow to foster lower unemployment.  The upcoming fight between the Fed and Ron Paul is sure to highlight issues with the Fed’s dual mandate. 
–Saw an item on Zerohedge that mentioned a built in DECREASE of Fed buying related to lack of mortgage refinancing at now higher rates, which means the Fed doesn’t have as many mortgages called away necessitating reinvestment. 

–Muni bonds continue to sell off as “Build America Bond” program ends and issuers race to take advantage of the program before year end.
–Copper continues to post new highs, (though a bit lower this morning).  There are reports that one entity holds 90% of LME warehouse receipts.  This article (HuffPost) mentioned concentrated positions in nickel and zinc as well.  My takeaway is that volatility could grow as exchanges step in to prevent a squeeze, or they don’t.
–All eurodollar calendar spreads continue to make new highs.  EDH11/EDH12 spread closed +7.5 to 67.5.  In early Nov this spread was 20.  The market is pushing forward the idea of Fed snugging though once again the statement repeated “exceptionally low levels for the federal funds rate for an extended period.”

–Though retail sales were strong, Best Buy (BBY) had a poor Q3, sending the stock down 15%.  Though perhaps company specific (losing sales to Amazon and Walmart), it makes me wonder just how firm the retail environment is…
–News includes CPI expected +0.2 with Core +0.1.  Empire State 5.0.  Industrial Prod +0.3 with Capacity 75.1.

Posted on December 15, 2010 at 6:46 am by alexmanzara · Permalink
In: Eurodollar Options

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