July 1. Worry beads

–Not much change in interest rate futures as Greece missed the IMF payment. Various news headlines were flying around throughout the day about possible deals, making it seem as if even the weekend referendum isn’t etched in stone.

–On Monday, some of the financials were hit, for example DB fell from around 32 to 30, and JPM, GS both gapped lower.  However, fears of financial contagion appear to be fairly muted; there’s still plenty of faith in “the authorities” that it will all turn out ok.    What is sort of interesting is the parallel financial crisis going on with Puerto Rico, where the Governor is saying there’s not enough money to pay creditors.  Stocks like MBIA and AMBAC (bond insurers) were crushed, reminiscent of the subprime mortgage crisis, with MBI dropping from 9 to 6 in four sessions, and AMBAC plunging from 24 to 16.64 in the same time frame.  Now THAT’S concern, a move of 1/3 in a few days… In other financial stress news, Chicago is barely squeaking out a payment of $634 million to the Chicago Public Schools pension system, leading to what’s known in the CPS as ostierity.

–Strong rally in grains due to the crop report (where in the hell is Beeks?).  Corn has had a moonshot 20% rally from 3.65 to 4.35 in a couple of weeks.  Enough to make you stand up and take notice.

–Bill Gross’ Janus missive was out, another voice in the chorus of warnings bemoaning lack of liquidity. “While private equity and hedge funds have built-in “gates” to prevent an overnight exit, mutual funds and ETFs do not.”  It’s fairly clear that liquidity has been lost in the thirty year bond future.  Late in the day yesterday there was volume of 293k vs 1.632m in tens.  Size in the bonds is often only 100 a side.  When I was first in the bond room at the CBOT we used to routinely say that size was at least 100 up, and that’s when the notional coupon was 8% and the price was well below par…

–Today’s news includes ADP expected 220k, Mfg ISM expected 53.2 from 52.8 and Construction spending which has been accelerating for the past several months.

Posted on July 1, 2015 at 5:16 am by alexmanzara · Permalink
In: Eurodollar Options

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