Mar 1. Liquidity driven

Interest rate markets continue to seek lower yields.  Ten year note fell 5 bps to 3.59%.  The curve flattened with 2/10 treasury spread down 2.5 to 279 bps and red/gold euro$ pack spread 280 bps, down 5.5 on the day.  All euro$ calendars are trending lower, with the highest one year spread, EDZ10/EDZ11 at 142, down 5 on the day.  This is a market that expects (and receives) liquidity, a fact not lost on the equity markets which remain buoyant in spite of otherwise negative news.

–For example, AIG lost another $8.6B in Q4 and is slashing rates to keep customers.  Fannie wants another $15B of taxpayer money, bringing the total to $76B. Senator Bunning is blocking action to extend unemployment benefits for 1.2 million workers. Think Greece is the only place where riots can erupt?  

–JPM’s ‘Mr Dimon told investors at the Wall Street bank’s annual meeting that “there could be contagion” if a state the size of California, the biggest of the United States, had problems making debt repayments.’

–News today includes ISM expected 57.5.  Personal Income and Spending are both expected +0.4%.  PCE expected 0.0 from +0.1%.

Posted on March 1, 2010 at 5:54 am by alexmanzara · Permalink
In: Eurodollar Options

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