Oct 22. US curve steepens as long end edges to higher rates

Oct 22.  From a Bloomberg article: “The government has earned $25.2 billion on its investment of $309 billion in banks and insurance companies, an 8.2 percent return over two years, according to data compiled by Bloomberg. That beat U.S. Treasuries, high-yield savings accounts, money- market funds and certificates of deposit. Investing in the stock market or gold would have paid off better.” This $25B gain has been hailed as a great success, and I guess it’s nice.  But it’s simply a drop in the bucket in comparison to other data like this: The federal deficit “totalled $1.294 trillion in the fiscal year ended Sept. 30”.  And this: “The government spelled out Thursday just how much the most expensive rescue of the financial crisis will end up costing taxpayers — as much as $259 billion for mortgage buyers Fannie Mae and Freddie Mac.”  Note that FNM and FRE together have cost $148 billion so far. It’s like a trader pointing to gains made in Microsoft since July while neglecting to mention he was short twice as much AAPL. 
–BofA down another 3.3% to 11.36.  Goldman getting ready to buy it for $2/share with gov’t guarantees on bad assets.
–Curve was steeper with 2/10 out 4 bps to 210.  Implied vol firmed slightly, as did the dollar.  No economic news today.  November treasury options expire.

Posted on October 21, 2010 at 5:33 pm by alexmanzara · Permalink
In: Eurodollar Options

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