Jan 12.
Light volume day in eurodollars with decided upside bias in the short end. The curve steepened again to a new high. Red/gold pack spread exploded another 7 bps higher. In front of the auctions over the next couple of days 2/10 spread edged out to 289 (new high). 30-yr bonds actually rose 3 bps in yield to 4.73%.
–At the end of the day Fimat came in and sold 30k EDU 9825/9875p sprd at 7.0 to 6.5. Looks to be new. Then sold 15k EDM 9950c to buy 9875p at 13.5 to 13.0, this trade appears to be an exit. Open interest in puts -19k and in calls -5k. There was also a seller of EDU 9962c at 4.0 in size of about 30k; open interest rose 30k.
–News today includes 3 year auction and Trade Data expected -35B.
–China raises bill rates again.
— A sign of states troubles from the Chicago Tribune: “Illinois unpaid bills hit a record $5 billion and the cries of pain are growing.” I have seen several stories in the press detailing the economic chasm between main street and wall street…analagous to budget constraints on states vs lack of constraint on federal govt, and the continued rally in the stock market versus short end rates which remain low and falling (2 yr yield had moved above 1%, closed yest at 93 bps). Also, saw a story that gasoline prices are moving toward $3 gallon…”Motorists are paying about $50 more a month for gasoline than a year ago, and the total fuel bill for Americans now tops $1 billion per day compared with $650 million per day last year.”
