Nov 20. T-bill rates near zero

–Short end yields continue to slide, with three month t-bill now at 1 bp.  Two year note yield is 71.5, down 3 bps yesterday.  Fed’s balance sheet hit new record high yesterday.

–Treasury bill yields at these levels can only mean stress, though not apparently in the stock market. However, some banking names are showing declines.  For example, Northern Trust (NTRS), which was lauded for having side-stepped many of the bigger bank problems last year, is back at March lows.  The regional bank etf KRE has basically traded sideways since May.  Even with full government backstopping of most banks, I would say there should be some chance of a bounce in three month libor.

–Other themes, well known but getting louder, are problems in  Commerical Real Estate, and calls for Geithner to resign (yesterday point blank, by Rep Kevin Brady of Texas).  New high in residential foreclosures and the only buyer of GSE debt currently is the federal government.  “A report from the Mortgage Bankers Association also found that 14 percent of homeowners with a mortgage were either behind on payments or in foreclosure at the end of September. It was a record-high figure for the ninth straight quarter.”

–Japan says it’s again experiencing deflation.  The US Post office lost somewhere around $3 B last year. 

–Dec Treasury option expiration today. TYZ has 1.287m open interest.  TYZ 120c have 112k open.  Ironically the 119.5c and 120.5c have about 45k each in open interest…as if the only guy with a position is the one who bought 119.5/20/20.5 c fly the other day for 6.

Posted on November 20, 2009 at 6:39 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply