June 14. Obama urges new $50 bln “emergency” spending

Yields fell Friday and the curve flattened as 2/10 treasury spread dropped 4 bps from 253 to 249.  Ten year fell to 3.22% from 3.31%.  Near eurodollar one-year calendar spreads plunged, with EDZ0/EDZ1 down 9.5 bps to 79.5.

–From yesterday’s Washington Post…Obama urges $50 bln “emergency” spending measure for state and local gov’ts to save teacher, police and firefighter jobs.  The problem is that this “emergency” isn’t ending.  For example, Fitch downgraded Illinois on Friday.  From the Financial Times: “Yields on some Illinois bonds on Friday rose above those of California, the poster child for local financial problems. The state’s 10-year bonds were quoted at 4.20 per cent while California’s 10-year bonds were quoted at 3.95 per cent, according to one trading desk.”

–It seems to me that the BP crisis in the Gulf of Mexico simply grows more devastating by the day.  From a financial standpoint it is a huge drain of wealth/cash away from the UK.  I don’t know where I read this, but one of every seven dollars in dividends in the UK is from BP.  That money is almost certain to be transferred to US clean-up efforts, and a huge amount of wealth has simply evaporated.  From a central bank standpoint, fears of declining assets feeding into a deflationary spiral have likely increased; a policy of pound depreciation/money printing seems a likely outcome.

From Shedlock…interesting note about sales tax collections in TX:

“The true measure of retail sales is tax collections, and those tax collections have been miserable and are about to take a turn for the worse.”

Posted on June 27, 2010 at 1:02 pm by alexmanzara · Permalink
In: Eurodollar Options

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