Jan 3. Stocks soar yesterday…treasury yields rise

–It wasn’t just the US stock market which exploded higher as a result of the fiscal cliff deal. India, Brazil, DAX, Korea Kospi, Shanghai, Hong Kong, Japan etc all surged. Perhaps it’s more than just the US political system that is sparking a rise in financial assets. More related to central bank monetary measures as Ambrose Evans-Pritchard suggested yesterday? (And the expectation that the PBoC will supply more liquidity).
–In US interest rates the tone is bearish and trades reflect the mood. There is an accumulator of gold june 9775 put (EDM’17 underlying)….+20k for 15 yest bringing total to around 60k. Also a buyer of EDZ’5/Z’7 spreads for 124.5 to 125 in 10k.. appears to be new from open interest. In gold March 9850/9875/9900 c fly there was a seller of 40k at 4.5….exit.
–There is a seasonal tendency for rates to test higher levels in Q1…for the past three years the high yield for the year occurred in Q1 (or early April). Tens ended yesterday at 1.835, up 9 bps …but there are several old levels around 184-187 since August providing strong resistance (futures price support).
–News today includes ADP expected +150k and Jobless Claims 363k. Employment report Friday will likely determine whether yields break out to the upside or not.
–Just a couple of other notes. In 2012 “Japan’s population last year declined by 212,000, the biggest drop on record” (BBG) as number of births fell. Long term negative for yen contributing to bad demographics…
–Iran is telling residents to flee Isfahan (about 200 miles south of Tehran) due to radiation risk from nuclear plant (or uranium enrichment effort gone awry).
–More news about low level of Mississippi river creating transportation bottlenecks. Spillover into higher food prices?

Posted on January 3, 2013 at 5:40 am by alexmanzara · Permalink
In: Eurodollar Options

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