July 8. Shanghaied

–China down another 6% this morning, Nikkei down 3%.  Remember when we thought Greece was the big problem?

–Though treasury futures closed well off their highs yesterday, yields were still lower on the day, with tens down 4.7 bps to 224, and 30 yr bonds -5.6 to 302.7.  Ten year auction today, followed by 30’s tomorrow.  FOMC minutes this afternoon, though given international developments, value of the minutes has been diminished.  To zero.  The Fed’s emphasis on the importance of its communication to guide global markets rings a bit hollow these days.

–New lows in near euro$ calendar spreads.  January Fed Funds settled 99.695, just 17.5 bps below near contracts…odds of just 70% for only one hike by the end of the year.

–A couple of quotes from Reuters (China shares): “I’ve never seen this kind of slump before. I don’t think anyone has. Liquidity is totally depleted,” said Du Changchun, an analyst at Northeast Securities.

“Originally, many wanted to hold blue chips. But since so many small caps are suspended from trading, the only way to reduce risk exposure is to sell blue chips.”

–When things really start unraveling, that’s how it works: You sell what you CAN, not what you WANT to sell.  Shanghai shares suspended?  Then raise some money in Hong Kong (HSI down 5.8%).  How’s the commodity financing play working out?  Iron ore made a new low for the year yesterday.  As did silver.  Ditto copper.  Crude is down about 15% in the past 11 sessions.  By the way Du (short for the Dude, or Duderino…) we HAVE seen this kind of slump before.  In 2008.  And many times, in many markets before this.

–Back to Greece: “The discussion took place in a positive climate,” [Tsipras] said. “The process will be extremely fast. It starts in the coming hours, with the aim to conclude by the end of the week at the latest.”  I love this guy…we’re going to shoot for the end of the week…  In the same Reuters piece, European Council President Tusk said this:  “The stark reality is that we have only five days left … Until now I have avoided talking about deadlines, but tonight I have to say loud and clear that the final deadline ends this week.”  When is a deadline not a deadline? “Iran and major powers gave themselves at least until Friday to negotiate an agreement on the Iranian nuclear program, but a source from one of the powers said on Tuesday they had to wrap up in the next 48 hours.”

–Finally, just to show that there still is karmic justice in the world I saw this headline: “Man who was struck and killed by lightning ‘was carrying selfie stick.’

Alex Manzara


Posted on July 8, 2015 at 5:21 am by alexmanzara · Permalink
In: Eurodollar Options

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