Oct 14, 2014. And….it’s gone

–From The Center for Infectious Disease Research and Policy, “We believe there is scientific evidence ebola has the potential to be airborne.”  http://www.americanthinker.com/blog/2014/10/experts_defy_the_cdc_on_ebola.html

–If that’s true, it changes everything.  Gonna be a lot of people inside watching reruns of the Andy Griffith show and eating cheetos (not just me) rather than going out.  Could be devastating for the economy.
–In interest rate markets yesterday, treasuries maintained a solid bid through the day.   Ten year yield is just 2.20 this morning, down from 2.30 during the day yest.  There was a buyer of about 20k Blue Dec 9775c for 9.5 that appeared to be an exit.  Unsurprisingly, vol was strongly bid in back end of the curve.  For example TYZ 126.5 straddle settled 1’43 on Friday, but yesterday the TYZ 127.0 straddle closed at 1’48.  All eurodollar calendar spreads made new lows.  The peak one year spread is EDU15/EDU16, but that fell 4.5 bps to a new low of just 98.  To repeat, there are no one-yr spreads over 100.
–Stocks see-sawed in a gappy session, and closed on the lows.  New lows in hi yield ETF’s HYG and JNK.  Junk spreads were, of course, wider as treasuries rallied.  Get used to MUCH less liquid conditions.
–Oil has been under consistent selling pressure for three and a half months, now around $85/bbl.  I remember trying to fade the rally up to $140 in 2007.  I think I’ll just sit this one out.  No doubt, it’s a gift to consumers; a colleague mentioned something like $44 billion in stimulus thus far. (I can’t recall if that was a monthly figure or simply total).   However, I also calculated the drop in total (Wilshire) market cap since the end of September, and that comes to $1 TRILLION.  (about 5% of 21T).  There are always equity market fluctuations, so it’s probably a little early to panic about the wealth effect in reverse.  A little early.

Posted on October 14, 2014 at 5:09 am by alexmanzara · Permalink
In: Eurodollar Options

Leave a Reply