Nov 15. “No confidence” vote for QE2

In a little over a week five year Treasury yield went from near 1% (around 1.02) to Friday’s level of 1.34%, in what can only be construed as a vote of “no confidence” in QE2.  Eurodollar calendar spreads, though still at fairly low absolute levels, made new recent highs.  For example, EDH1/EDH2 one-year spread jumped from a low of 19.5 one week ago Thursday to 49 bps Friday.  Red/grn/blue butterfly was -91 early in the month, but closed -75 Friday. 
–There seems to be a dispute on whether of not Ireland is going to take a bailout, with Germany pressing Ireland to accept “help”.  The real question is whether buying time can lead to solutions.  From US experience in mortgage and housing mess, it doesn’t seem to work all that well, though the alternative could be catastrophic.
–Saw article on BBG that tumeric, used in curry, was up something like 68%.  That turkey for thanksgiving is up 28% y-o-y. (so of course, if you were considering curried turkey for the holiday, it’s a sad state of affairs). Met a guy at Iowa-NU game who is a milk puchasing mgr for the largest co-op in the US. (Purchased about 10% of the entire country’s milk supply for grocers)…and he was talking about increased prices for butter and milk.  In short, there is no commodity that is not seeing price increases, except for labor. 
–Today’s news includes Oct Retail Sales, expected +0.7% and +0.4% x-auto.

Posted on November 16, 2010 at 6:38 am by alexmanzara · Permalink
In: Eurodollar Options

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