Jan 20. US curve steeper as long end yields rise

–Interest rate futures came under selling pressure as Jobless Claims plunged to 352k and fears over europe ebbed. Ten year note jumped 8 bps to 1.97%. 2/10 treasury spread closed at its recent high of 174 and red/gold euro$ pack spread was up nearly 9.5 at new recent (monthly) high of 170.5.
–As we approach the FOMC (where the Fed will likely forecast ten year rates at 1.9% forever), the market sent a reminder that the long end isn’t always easy to control. This morning’s WSJ has this quote, “Federal Reserve officials are waiting to see how the economy performs before deciding whether to launch another bond-buying program.” In other words…waiting for spring before announcing…
–Treasury vol jumped, but mostly because we shifted to lower strikes.
–According to BBG, China PMI still reflecting soft conditions. “The preliminary January reading of 48.8 for the gauge, released by HSBC Holdings Plc and Markit Economics today, compares with a final 48.7 number for December.” Shanghai Composite has been in a defined downtrend since summer, now trying to bottom, either in spite of weaker econ data or because monetary easing might result… Hang Seng appears to have bottomed already, trying for an upside breakout.
–Existing Home Sales today in the US.
–Google dropped 10% after yesterday’s earnings release but overall stocks held near highs. Interesting note on ZH from TrimTabs: “…a large number of indicators suggest institutional investors are more optimistic than at any time since the ‘waterfall’ decline in the summer of 2011.”

Posted on January 20, 2012 at 5:25 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply