July 16. New low 2 yr yield 58.5 bps
July 16. While the ten year note yield fell back below 3%, ending at 2.98, perhaps more telling was that the two year yield made a new low at 58.5 bps. Economic data continues to surprise on the soft side, with both Philly Fed and Empire St weaker than expected. Stocks sold off early but regained early losses; it seems to me that expected liquidity measures to be undertaken by the Fed are outweighing negative economic data.
–Still big buyers of green (3rd year out) call structures…buyer of 30k E2Z 9825/9850/9875c fly for 5.
–Several related developments: JPM posted strong earnings, Goldman settled with the SEC and the Financial Regulation package passed the Senate. In a related item, Huff Post reports the Geithner opposes Elizabeth Warren as head of the new Consumer Protection Agency. It’s not surprising that JP would continue to have strong earnings as the Fed subsidizes the big banks with zero funding costs while accounting marks were relaxed. GS shares had a nice gain as it paid to put regulatory problems behind it. And the head of Treasury opposes one of the only heroes of the financial crisis, because she has been critical of his role in addressing (accentuating?) problems. There is really no way that I can believe a new financial bill will have an iota of effect given the political infrastructure in place, which has simply favored tbtf at the expense of all others.
–From BBG:
“There is little in this legislation that will fundamentally change the way that Wall Street does business,” said Dean Baker, co-director of the Center for Economic and Policy Research in Washington. “There is probably no economist who believes that this bill will end the risks of too-big-to- fail financial institutions. The six largest banks will still enjoy the enormous implicit subsidy that results from the expectation that the federal government will bail them out in the event of a crisis.”
