Oct 27. Dollar and risk assets reverse

Big reversal in EUR/USD which sparked reversals in gold, oil, stocks (risk assets in general).  The curve steepened signifcantly with new recent high in red/gold pack spread (+4.5 bps) and 2/10 treasury spread which was up over 5 bps to end near 253.  Ten year yield easily pushed through 3.5%; the yield chart has a head and shoulders bottom suggesting much higher rates.  There was a story circulating early in the day about the treasury issuing more ten year and extended maturities to lock in longer term funding costs. 
–New recent highs in all one-year calendar spreads with EDH10/11 out to 160, highest since August.
–This week’s auctions are 2’s (today), then 5’s Wed and 7’s Thur, which is also Q3 GDP. Consumer Confidence today, expected 54 from 53.1 last.
–India is beginning to withdraw liquidity by having banks hold more bonds, analogous to raising reserve requirements.  It’s been a global contraction but now monetary policy reversals are starting, having begun with Australia.
–Some news reports suggested that yesterday’s stock declines were related to home tax credit expiration for first time buyers.  If we have become so dependent on govt programs, even those rife with documented fraud, then stocks must really be on fragile footing!

Posted on October 27, 2009 at 5:27 am by alexmanzara · Permalink
In: Eurodollar Options

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