May 23. New lows in treasury yields (the day after my calls expired)

–Going into the last week of the month US treasury rates are pretty much right near their lows.  Tens fell a couple of bps to 3.15% Friday.  A few of the one-year eurodollar calendar spreads made new lows, for example, EDZ1/EDZ2 down 2.5 bps to 88.
–There’s really nothing particularly new going on.  The situation in europe continues to slowly deteriorate, with Greece circling the debt toilet, Spain the subject of widespread protests echoing those in the mideast, and Italy’s debt rating cut.
–New protests are also re-emerging in Egypt.  A military base in Pakistan was stormed by militants.  Yemen’s Saleh says he won’t step down.
–The good news is that the world didn’t end on Saturday, though another Icelandic volcanic eruption is a reminder that natural disasters seem to be increasing both in frequency and ferocity.
–Now back to the financial landscape.  There is simply not enough capital at ANY global financial institution to withstand marking down assets to their actual tradable levels.  So, the central banks must convince everyone to allow these assets to be marked near par.  It’s accomplished by printing up as much paper as necessary.  In the case of Greece, where tax collections aren’t even going to cover interest payments at some time in the near future, the scam is obvious.  But the charade continues…

Posted on May 23, 2011 at 5:05 am by alexmanzara · Permalink
In: Eurodollar Options

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