Feb 20. China cuts required reserves for banks by 50 bps
China cut bank reserve requirements by 50 bps to 20.5%. From BBG regarding China “…property market slowdown and the weakest export growth since 2009, with the commerce ministry last week calling the trade outlook “grim.”
–Yet China and Japan, also of decaying trade fundamentals, have said they will act together through the IMF to help europe.
–Fitch ugraded Iceland to investment grade (how long will Greece be “shut-out” of debt markets if it leaves the euro? Three years for Iceland…) Also oil is near 105 at a new high (CLH at 104.72) as Iran is cutting oil exports to UK, France.
–The eurodollar curve steepened Friday. One-year calendar spreads have been edging higher. As of this morning for example, EDZ12/EDZ13 spread is trading 18.5, a new high since early December. (settled 16 friday, was as low as 9 in past month). There are a lot of existing positions that are long EDM2, U2 and Z2 at the money puts vs short puts in same month midcurves. New highs in calendar spreads could cause pain for those trades and might entail further selling pressure on reds.
–US economic news light this week. Treasury auctions of twos, fives and sevens kicks off tomorrow.
