Jan 25. New high EURJPY…risk on?

–This morning finds the US bond flirting with 145 strike and tens below 132 strike as Feb options expire. New highs being made in USDJPY and EURJPY. In the former, 38% retrace from 2007 high of 124 to low just above 75 in 2011, is 94, looks like next target, currently 90.80. And in EURJPY the high in 2008 was 170 vs low of 94 in 2012, 38% is 123, now 122.
–EURUSD is also making recent new highs, apparently partly related to today’s LTRO repayment to the ECB, expected around €100 B. Risk of higher repay numbers suggest liquidity reduction and perhaps even more strength in EUR, though that might loop back into peripheral bond weakness.

–Yesterday in the US there was new position buying in gold march 9800p for 6-6.5, 20k (EDH’17 underlying, 98.295s). Curve steepened a shade as ten year yield rose 1 to 184. There was also a buyer of 85k Feb VIX 16 calls with index just below 13, paid up to 0.55. I suggested yesterday in a note that VIX calls could be used to hedge a long US curve position. In any event, VIX still made multi year lows this week, and stocks are again higher this morning.
–Fed balance sheet now over $3 T. Adjusted Monetary base new high of $2.8 T. The liquidity has to go somewhere, right? And while stock inflation probably contributes to income inequality, the levitation of assets in dollar terms helps to alleviate underwater mortgages and underfunded pensions.
–Today’s news includes New Home Sales expected 388k from 377. Home sales have stabilized and edged higher… in 2007 New Home sales ran around 700k, but mortgage rates were 6%. Now with 30 year around 3.25% the annual rate is edging nearer to 400k.

Alex Manzara 312 432 4457

St. Louis Adjusted Monetary Base (BASE)

2013-01-23: 2,796.041 Billions of Dollars Last 5 Observations

Bi-Weekly, Ending Wednesday, Seasonally Adjusted, Updated: 2013-01-24 3:31 PM CST
Graph of St. Louis Adjusted Monetary Base

Posted on January 25, 2013 at 5:25 am by alexmanzara · Permalink
In: Eurodollar Options

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