Jan 2, 2013. Fiscal cliff averted

–Fiscal cliff averted; stocks continue Monday’s anticipatory rally and bonds decline. Next up: debt ceiling negotiations.
–Though markets have breathed a sigh of relief, it’s difficult to conclude that the real economy will respond accordingly. Payroll taxes are still going up 2% as the Bush cut expired. Confidence has been shaken. For example, last week’s Nat’l Restaurant Association report showed a stunning recent increase in restaurant operators who expect conditions to worsen in next six months (attached). Small business owner optimism reflects the same negative trend. On the other hand, Ambrose Evans-Pritchard predicts that extraordinary central bank liquidity pumping will belatedly ignite stocks… “Stocks to soar as world money catches fire, Calvinst Europe left behind”. http://www.telegraph.co.uk/finance/comment/ambroseevans_pritchard/9773911/Stocks-to-soar-as-world-money-catches-fire-Calvinst-Europe-left-behind.html
For now the markets have have voted to embrace the positive.
–Tens are again testing mid Dec level of 1.84 to 1.86 yield, with 30 yr around 3%. Option positions over the past week or so have favored the bearish view, for example TYG 132.5p have been bought in size of about 20k recently.
–Today’s news includes ISM, expected 50.5 from 49.5.

Posted on January 3, 2013 at 5:38 am by alexmanzara · Permalink
In: Eurodollar Options

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