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.
