Nov 15. Stocks love Yellen
Yellen at yesterday’s confirmation hearing: “I consider it imperative that we do what we can to promote a very strong recovery,”
–Rates fell again yesterday, with a strong performance in deferred eurodollars as the blue pack jumped 10 bps. New lows in some of the near spreads, for example EDH14/EDH15 fell 2.5 bps to 21.5. Red/green pack spread declined 4.75 and now rests at recent low of 70 bps. It had been at 79 in the first week of November prior to the employment report. In contrast, green/blue pack spread is 106.
–This morning the yen is weaker and appears to be breaking down from a five month holding pattern. Copper is also a bit weaker as metals have mostly ignored Yellen’s proposal of continued liquidity which was warmly welcomed by stocks (new highs). ESZ is higher this morning though Moody’s downgraded JPM, GS and MS.
–US data today: Empire State expected 5.5 and Industrial Production +0.1.
–Premium is for sale in US rate markets, with Jan ten year straddle at only 4.7 vol. Eurodollar straddles also lost 0.5 to 2 bps as fears of a move to higher yields have evaporated. November midcurves expire today.
