Nov 16. Now France yields moving higher

Tuesday morning began with lower treasury yields and higher implied vols as yields in France joined Spain and Italy on an upward trajectory.  However as the day continued concern subsided and US rate futures closed with little change while stocks closed positive.
–The ECB is again buying Italy and Spain debt.  This morning I saw headlines that Italy 10 yr yield was back below 7%, but a quote on Bloomberg said there are really no buyers except for the ECB.  So for now, it’s the ECB (like the Fed) as the last line of defense while the political process plays out and hopefully sends reinforcements to the front line.  In my mind there is not enough time for the fundamental process to catch up because uncertainty begets weaker economic activity and lower tax revenues, exacerbating the problem of having to roll debt (and issue more).  And Germany doesn’t want to dilute its wealth by backstopping the rest of the EU.  It’s not as if Germany runs big budget surpluses…debt to GDP is still around 83%.
–In the US economic news has been improving.  Retail Sales were stronger than expected yesterday.  Today Jobless Claims are expected 395k and Philly Fed expected 9.0 from 8.7.

Posted on November 21, 2011 at 12:40 pm by alexmanzara · Permalink
In: Eurodollar Options

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