Oct 18. Bacon beer milkshakes and gasoline
–Strong rally in interest rate futures with ten yr yield plunging over 13.5 bps to 2.583. The curve flattened with 2/10 down 10 bps to 227. Eurodollar one year calendar spreads made new lows, for example EDZ14/EDZ15 fell 3 bps to 59. EDZ15/16 is still above 100 at 102, but was down 5 on the day. Red/green pack sprd made new low just above 78, and red/gold pack spread dropped over 8 bps to 266.5, essentially tracing out the same path as the ten year yield. Both got up to around 3% and are now within a few bps of each other on the way back down.
–The euro made a new high and the dollar index looks quite vulnerable to a quick move lower. New highs in stocks (despite China’s rating agency downgrade of the US). It’s all fixed…back to the model of supporting financial assets with liquidity and a weaker currency. Almost unbelievable that the FT suggests a chance of December tapering, while the WSJ goes out on a limb and says an October taper is “unlikely”. Gee thanks. In any event the real economy, i.e. the US consumer, doesn’t seem particularly robust. For example Ebay is warning of weak spending without much hope of improvement in Q4. (Stock down 4%).
–There was early selling of TYZ 128 and 128.5c vs buying 124 puts that held futures down initially. I thought it was a cover of the short leg of 124/128 strangles that had previously been sold, but open interest was up in all strikes with TYZ 124p adding 33 k positions. Rumored to be in conjunction with outright buying of 7 yr treasuries.
–Texas. The best country in the world! …Of course there’s a bacon beer milkshake at Texas Motor Speedway. http://www.chron.com/news/article/Of-course-there-s-a-bacon-beer-milkshake-at-Texas-4901345.php?cmpid=hpts
Also, they’re not exactly going for the trendy Target shopper, but you’ve got to give Kmart a thumbs up for this one: http://www.youtube.com/watch?v=NmcCWNGz-Ns
