Feb 20. Revolution tipping point
–Interesting day Friday. US interest rate futures started the day under pressure, following a sell off in euribor on Smaghi comments that the ECB might have to raise rates due to global inflation. However, the front end of the US curve came back to close positive as Mideast tensions dominated the end of week trade. There were several large new option positions entered in size, including buy of 20k EOM 9887/9912c 1×2 for 4.5 and 40k EOZ 9887/9912 c spd for 3.5. Also a buyer of 9k FVM 118c.
–Not surprisingly the curve was steeper, with reds UP 3.25 bps while golds were DOWN 3.125. Inflation concerns are everywhere, so anyone looking for a safe port from international turmoil gravitates to the US front end, not bonds. It’s difficult to follow rapid changes in Mideast events, but the central theme seems to be geographic escalation and growing violence. News footage of demonstrations has caught fire. China has taken steps to quell a “Jasmine Revolution”. And while news reports about demonstrations in Wisconsin describe civility and somewhat jokingly say discussions are cordially taking place over beers (for which the state is famous), the problem with pensions and states finances threatens to spill over like a rapidly drawn draught.
–Monday is a US holiday. Treasury auctions 2’s, 5’s and 7’s starting Tuesday.
–Below is an interesting link about water, rather than oil, as a dominant theme in Mideast.
www.guardian.co.uk/environment/2011/feb/20/arab-nations-water-running-out
(like putting out fire, with gasoline…or something like that)
“In the future the main geopolitical resource in the Middle East will be water rather than oil. The situation is alarming,” said Swiss foreign minister Micheline Calmy-Rey last week, as she launched a Swiss and Swedish government-funded report for the EU.
The Blue Peace report examined long-term prospects for seven countries, including Turkey, Iraq, Jordan, the Palestinian territories and Israel. Five already suffer major structural shortages, it said, and the amount of water being taken from dwindling sources across the region cannot continue much longer.
“Unless there is a technological breakthrough or a miraculous discovery, the Middle East will not escape a serious [water] shortage,” said Sundeep Waslekar, a researcher from the Strategic Foresight Group who wrote the report.
