July 3. Risk on?

–Weaker than expected payroll report sent yields lower, with tens falling 2.6 bps to 239.  the curve steepened, with the five year note yield -5.7 to 164.3, but the 30 year bond down only a fraction of a bp from 319.5 to 319.2.  Thus, 5/30 yield spread made a new high of 155 as the market pares back odds of Fed hikes this year.  Red/gold euro$ pack spread gained 2.25 bps to 151.5.
–There was a new late buyer of 25k TYQ 130c for 3 and 4 prior to this weekend’s vote in Greece.  ZeroHedge cites the IMF as calling the debt dynamics “unsustainable”.  That has been the question all along, when are bad debts finally recognized for what they are, with creditor losses?  And, how much should current citizens have to pay for the sins of previous politicians?  The City of Chicago has just introduced a 9% tax on streaming web services like Netflix, which I’m sure will go a long way towards righting the ship and pulling it out of junk bond status…
–There is a general sentiment that a “yes” vote in Greece will lead to risk-on, though I don’t think that’s the case.  The ability to kick the can down the road is reaching the end line with the question of sustainability coming into sharper focus.  And not just in Europe, but in Puerto Rico, Illinois and even in the corporate world, as debt downgrades increase.  Another interesting post on ZH notes that in hi-yield, “…the upgrade/downgrade ratio has tumbled to its lowest since the crisis.”
http://www.zerohedge.com/news/2015-07-02/last-time-happened-credit-bernanke-unleashed-qe3
–China’s stocks continue to plunge, now about 30% off the high set last month, but still up on the year.  Crude oil also trading lower, now below $57/bbl, the lowest in 2 1/2 months.

Posted on July 3, 2015 at 5:13 am by alexmanzara · Permalink
In: Eurodollar Options

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