July 14. Now it’s getting serious.
July 14. Now it’s getting serious. No…not that Moodys put the US rating on review because of debt ceiling problems (following China’s Dagong), but much, much worse. From WSJ: “More than 300 bars and liquor stores in Minnesota can’t buy alcohol to sell to consumers because their $20 alcohol-purchasing licenses have expired, a casualty of the July 1 shutdown.” Now there’s a fiscal CRISIS.
— Bernanke spoke (prepared to respond if economy worsens) and gold soared to a new high. Curve flattened with 2/10 treasury spread edging to a new low of 252. Even with ten year yield sub 3%, demand at the auction was robust. 30-year bonds sold today.
–There was heavy buying of TY calls on the day. Block trade of TYU 124.5 calls for 119 (23k), though total volume in the strike was only 35k and open interest up 3500. TYQ 126.5 call were bought in the pit covered mostly at 6, open interest fell in the strike by 12570. TYU1 futures OI up 49k.
–Debt negotiations seem to have taken a turn for the worse as Obama insisted he won’t accept a short term debt ceiling measure. The only market that seems to care is gold. Credit concerns are not being reflected in higher rates. If anything, the market is taking to heart something mentioned by Bernanke, that gov’t at all levels is contracting which is negative for GDP.
–News today includes PPI expected -0.3% and +0.2% Core. Retail Sales expected +0.0. Jobless Claims 405k (possible below 400?) –From Bernanke’s speech: “Households report that they have little confidence in the durability of the recovery and about their own income prospects. Moreover, the ongoing weakness in home values is holding down household wealth and weighing on consumer sentiment.
On the positive side, household debt burdens are declining, delinquency rates on credit card and auto loans are down significantly, and the number of homeowners missing a mortgage payment for the first time is decreasing.”
