March 18. Cyprus forced to announce tax on bank deposits
–Upon learning of the Cypriot bank account tax grab, Obama immediately asked aides to come up with a similar proposal, saying most large depositors didn’t earn their money without the help of gov’t. Hillary Clinton, having been in the know beforehand, had daughter Chelsea buy a $10.5 million condo (better than having money in a bank). Even the new Pope is a little concerned about keeping deposits in Italian banks and is considering diversification into Argentina. Others with good information sources out of the ECB simply bought US treasury notes. Negative repo in current ten year note isn’t helping the shorts. April treasury options expire Friday.
–Unsurprisingly, Friday’s rally in treasuries continued last night. Amazing that the euro held up as well as it did, having tested 129 last night and now around 129.60. Most of the market adjustment occurred in the first 2 hours after US screens opened. My guess is that Cyprus’ parliament will not approve the new tax and Cyprus will be the first out of the euro.
–There was a buyer Friday of 80k ESM (e-mini SP) 1550c, new position, open interest +84k. On its own it would appear to have been bad timing, (SP -1%) though there was some talk that cash equity positions had been pared back in this portfolio, with long exposure replaced by low vol calls, in which case it’s brilliant.
–FOMC this week. From last statement, “Although strains in global financial markets have eased somewhat, the Committee continues to see downside risks to the economic outlook.” Prescient.
