March 29. Everyone else is concerned about inflation. Is Yellen?

–Atlanta Fed’s GDP Now forecast for Q1 tumbled from 1.4% on March 24 to just 0.6% yesterday, as Personal Spending for January was revised lower from an initial +0.5 to +0.1.  The next forecast is, fittingly, on April Fool’s day, which coincides with the employment report.

–The big event today is Yellen’s speech to the Econ Club of NY (12:20 EST).  Yesterday’s data supports a dovish outlook, although concerns about increasing inflation are becoming more prevalent. “We like inflation-linked bonds and gold as diversifiers.” BUY GOLD! Sounds like something lifted from ZeroHedge, right?  Nope, it’s from BBG quoting a BlackRock report. http://www.bloomberg.com/news/articles/2016-03-29/blackrock-joins-pimco-warning-investors-to-seek-inflation-hedge
–Activity yesterday was unsurprisingly muted.  Fitch downgraded Chicago’s debt to one notch above junk, due to the Illinois Supreme Court striking down pension reform legislation.  According to BI, S&P is also one notch above junk and Moodys is already there.  Yields in general were down a couple of bps across the curve.  Good selling yesterday in 2EJ 9862 straddle at 17 (settled there, expires April 15) and in TY week 2 (April 8 expiry) 129.5^ at 62 to 61.
–Interesting story on BI notes that IPO activity ytd is running about 25% of last year.  http://www.businessinsider.com/top-wall-street-bankers-on-in-the-ipo-market-2016-3
The article trots out five experts, who give boilerplate excuses for the slow activity: ‘markets hate uncertainty’, ‘activity in Q2 will increase’, (though SPX is right around where it was in Q1 last year).  But there’s an alternate explanation in a Vanity Fair piece citing VC investor Chamath Palihapitiya: “The reality is, great companies can go public in any market. When we talk about the I.P.O. slowdowns what we’re really saying is that there really just aren’t that many good companies being built.” 

http://www.vanityfair.com/news/2016/03/chamath-palihapitiya-interview-says-start-ups-are-mostly-crap?utm_source=fark&utm_medium=website&utm_content=link

Posted on March 29, 2016 at 5:20 am by alexmanzara · Permalink
In: Eurodollar Options

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