Nov 3. Sarkozy tells Greece, “no more drachmas for you”

–(Reuters) – European leaders were preparing Thursday for Greece to leave the euro zone to preserve the 12-year-old single currency.
–Greek referendum set for Dec 4; it looks like Greece will finally exit, with Italy next up as Berlusconi is apparently behind schedule on implementing growth reforms. Sarkozy vowed not one more drachma…
–The Fed again revised future growth estimates down. It would be funny if it weren’t sad that the only dissent on the FOMC is now for further accommodation…I guess the protesters camped out across the street from the Chicago Fed on LaSalle really struck a nerve for Evans. The Fed’s unemployment forecast trends down over the next couple of years which hardly squares with recent empirical data. (For 2013 est was raised to 7.8-8.2%, longer term 5.2-6.0%, still quite high).
–After surging Tuesday, implied vol in treasuries fell back towards Monday levels. (Atm Jan TY straddle from 326 to 307). The Fed’s downbeat assessment with a stale pledge to do more if necessary probably caps yields, I’m not quite sure if true european stress is priced into the treasury curve…for now tens seem comfortable at 2%.
–The ‘kink’ in the curve after June 2013 (until which time the Fed promises to keep zero rates) has become less pronounced.  EDH13/EDM13 spread is only 3.5 bps; it was 6-6.5 in the latter part of October.  EDM12/13 is also only 3.5 bps, but even the following one year spread of EDM13/14 is less than 1/2% at 48.5.
–Today’s news includes Jobless Claims at 400k, Factory Orders -0.2% and Non-mfg ISM, expected to rise slightly to 53.5.

Posted on November 3, 2011 at 5:19 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply