May 17. Move to higher yields reverses abruptly

–Yesterday’s economic news was decidedly soft with Jobless Claims up, Philly Fed -5.2 and CPI -0.4 with Core only +0.1.  However, it took comments late in the day from SF Fed’s Williams to cause a downturn in stocks, saying that the Fed may reduce bond buying by this summer.
–This morning the dollar is stronger, Aussie at new low.  Precious metals slightly lower, but stocks are again edging higher!
–Interest rate futures reversed much of the bearishness of the past 2 weeks.  Curve flattened aggressively, implied vol was sucked out.  TYM traded nearly to 50% retrace of May’s sell off, 5’s got to around 38% retrace.  Bill Gross says bond bull market probably ended with the end of April:
–Today’s news includes Consumer Sentiment expected 76.4 and Leading Indicators expected +0.3.  Bernanke speaks Saturday:  The title of his speech is “Economic Prospects for the Long Run”.  And he appears Wednesday in front of the Joint Econ Committee; FOMC minutes also released Wed.
–Reuters has an item about the ECB using upcoming regulatory powers to discipline or close problem banks. “Central banks provide liquidity against collateral. But what do you do for addicted banks?” said one person familiar with ECB thinking. “If a bank returns continuously to get liquidity, (the ECB) will make it more difficult. You will have to pay a higher price. You will have to change the rules for provision of liquidity.”
There is an additional story about a troubled Austrian bank where losses will be taken either by taxpayers or by a bad bank, funded in part by capital provided by healthier lenders, (who are balking at the plan).
–Are depositor bail-ins about to return to the headlines?

–And finally, here’s a story about a future soybean options trader:

Posted on May 17, 2013 at 5:41 am by alexmanzara · Permalink
In: Eurodollar Options

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