Feb 5. A Lehman moment
–By the end of the day Thursday tens were still squeezing higher, trading 130-14. The ten year yield is going into the employment report at the low (186 as of futures settle, -2 bps on the day), right around the low from last April. Payrolls are expected 190k. Avg hourly earnings expected +0.3.
–There’s a bit more evidence of reaching for calls, for example +10k TYM 137/142cs for 6/64’s covered 129-25. The 137 strike is somewhere around 1%. Of course, there has already been significant activity in 100 calls across the euro$ curve. Yellen speaks next week on February 10; all we need is a weak employment report and a hint of negative rates at her testimony to blow the hinges off the doors.
–A lot more attention being given to Deutsche Bank, and it’s not the good kind. The stock price has imploded (as has happened with several global financial firms). The Daily Shot features several charts also showing Preferreds, CoCo’s or Contingent Convertibles, and CDS, all of which have had severe adjustments in the past few days. (For example, according to the chart, DB preferred from 27 a few sessions ago to nearly 22 yesterday). The press regularly bandies about the quantity of derivatives on DB’s balance sheet, at about $75 trillion. Here’s a link from the annual report if anyone’s interested:
https://annualreport.deutsche-bank.com/2014/ar/management-report/risk-report/credit-risk/exposure-from-derivatives.html
Looks to me as if it’s merely 52 trillion EUR. That’s not too bad, right? I suppose it’s enough to push swap spreads in the US higher, and to create a bid for treasuries. How does one ‘bail-in’ DB? Attention may shift from oil prices and economic growth prospects to the global financial architecture. Again.
–A lot more attention being given to Deutsche Bank, and it’s not the good kind. The stock price has imploded (as has happened with several global financial firms). The Daily Shot features several charts also showing Preferreds, CoCo’s or Contingent Convertibles, and CDS, all of which have had severe adjustments in the past few days. (For example, according to the chart, DB preferred from 27 a few sessions ago to nearly 22 yesterday). The press regularly bandies about the quantity of derivatives on DB’s balance sheet, at about $75 trillion. Here’s a link from the annual report if anyone’s interested:
https://annualreport.deutsche-bank.com/2014/ar/management-report/risk-report/credit-risk/exposure-from-derivatives.html
Looks to me as if it’s merely 52 trillion EUR. That’s not too bad, right? I suppose it’s enough to push swap spreads in the US higher, and to create a bid for treasuries. How does one ‘bail-in’ DB? Attention may shift from oil prices and economic growth prospects to the global financial architecture. Again.
