May 18. Ten year yield has fallen to 3.12%…slower growth ahead

–New lows again in euro$ one-year calendar spreads.  EDM12/EDM13 down another 3 bps to 105. Red/green pack spread at new low of 102 bps.  Stocks broke down early but fought back…economic data yesterday was disappointing.
–Meredith Whitney is again warning about public finances, this time noting the problems with states’ budgets.  She has repeatedly warned about municipal finance, an issue on overt display in Chicago.  Facing a budget problem of some $560 million, Chgo’s new mayor identified $75 million in cuts on his first day on the job.  The new public transit appointee, Forrest Claypool, said the agency is in crisis and needs more federal money.  Not more efficiencies, more gov’t cash.  It might not be forthcoming in the current environment. Whitney points out contractionary impact of tighter state (and fed’l spending).
–Slower growth also on display in the public sector.  Both Walmart and Home Depot reported year over year comp stores sales declines of 1.1% for WMT and 0.6% for HD.  The interest rate market appears to be foreshadowing a lower growth profile going forward with ten year yield down to 3.12%.  Though I agree with the idea of slowing growth, I still bought EDZ2/EDZ3 for myself yesterday at average 102…I just feel as if the move is extended.
–FOMC minutes this afternoon.

Posted on May 18, 2011 at 5:38 am by alexmanzara · Permalink
In: Eurodollar Options

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