July 27. Dying of Money

July 27.  Today’s news includes Consumer Confidence (expected 51) and 2 year note auction, followed by 5’s and 7’s Wed and Thurs.  Little change in interest rates yesterday; the ten year note remains just under 3% yield.  Slightly lower levels in TYU yesterday early, but there was heavy selling in TYU 122.5 straddle, which settled 1-37 from Friday’s close of 1-47.  Fear of the downside simply isn’t reflected in option prices.
–In eurodollars there continues to be buying of EDZ0 9925p and EDH1 9912p, about 5-10k of each yesterday, adding to position. 
–India raised rates by more than expected, repo rate to 4.5% vs expected 4.25%.  Korea also signals higher rates.  Food inflation in India is a factor in rate hike.  Also, China and India have both encountered demands for wage increases. 
–The Telegraph yesterday ran a story on a book, The Dying of Money, that details inflation stories from the Weimar Republic.  Apparently one of the themes is that the expanded money supply can all of a sudden catch fire, leaving policy makers unaware and surprised by the rapidity of price increases. Interestingly this book is from 1974 but is being sought after currently.  (Still feels like the excess liquidity here is going into stocks… the delevering household sector in the US trumps all else).

Posted on July 31, 2010 at 9:02 am by alexmanzara · Permalink
In: Eurodollar Options

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