Nov 8

Yesterday’s market moves are being completely erased this morning as sentiment shifts to a decidedly “risk-off” posture.  Italian yields have surged in spite of Berlusconi’s vow to resign; higher funding rates are simply untenable in a structurally stagnant economy.  SPZ, having rallied yesterday, is now below Monday’s close.  EURUSD is below 137 and at the lower end of the last seven days’ range.  The removal of leaders in North Africa and the MidEast (a trend that has now swept around the Mediterranean) seems to have produced little so far in the form of positive economic reforms.
–This morning new lows are being set in red euro$ to deferred spreads.  EDZ12/Z15 is down over 10 bps, and the ever popular Blue Dec EDZ14 (in terms of midcurve options) is nearing new highs, trading around 9858. Ten yr treasury looks to spend some time below 2%. (10 yr auction today).
–While markets swing widely, the underlying news related to the primary problem, which is too much debt, continues to show erosion.  For example, Fannie Mae needs $7.8 billion more due to Q3 loss of $5.1 B.  HSBC cites bad US loans and slowing growth in Hong Kong for disappointing results. The real economy or Main St economic data isn’t that bad, it’s just that it’s linked to gov’t largesse/liquidity to the point of dependence.
–Bernanke speaks at 8:30 Chicago time to Small Business group.

Posted on November 21, 2011 at 12:35 pm by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply