Feb 13. Ten year note yield again testing 2%

–Yields edged higher yesterday with 10 year up 3.5 bps to 1.98, and this morning trading 2.00% in front of today’s ten year auction.  30 year bond to follow tomorrow.  Curve was a bit steeper with 2/10 at 172 and red/gold pack spread up nearly 4.5 bps to 163.25.  Recent high has been 166 which is being tested this morning.
–Today’s news also includes Retail Sales, expected +0.1 in January with Core +0.3.  NFIB reading yesterday had a marginal rise from depressed levels.
–Art Cashin notes that the monetary base continues to make new highs, with possible inflationary repercussions.  Charts attached.  It feels as if the theme in the long end may be shifting from emphasis on economic growth (or lack thereof) to possible inflation, especially as stocks grind to new highs.
–Implied vol was down in dollars with all straddles down a bit. However, there continues to be interest in buying long dated puts and straddles in greens.  There is also consistent buying in Short Dec midcurve 9937 straddle which traded 30 early, settled 29.0.  Green March midcurve 9925 straddle settled at 12.5 ref 9928.5.  I think there should be plenty of chance to scalp gamma with 31 days until expiration.
–Soc Gen reported a larger than expected quarterly loss, underscoring weakness throughout EU banking system.
“A messy set of fourth-quarter figures, with multiple exceptional items,” said a Paris-based trader…

http://research.stlouisfed.org/fred2/series/BASE
https://research.stlouisfed.org/fred2/series/MULT
 

Posted on February 13, 2013 at 5:33 am by alexmanzara · Permalink
In: Eurodollar Options

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