Oct 28. Stocks explode Thursday, yields rise

–Explosive reaction to the European debt deal. Stocks soared about 3%.  The magnitude and time of of the rally is similar to the late July early August plunge, I would expect consolidation here with wide interday swings for the next few sessions.
–The curve steepened dramatically. 2/10 treasury spread blew out 17 bps to 208, easily the widest since the last FOMC when operation twist was announced.  Red/gold moved an equal amount, out to 222.  Ten year note to TIP (inflation indexed note) has been edging higher as well, now out to 219 (though this spread had been much higher earlier in the year, 240-250 in June). Ten year yield climbed 19 to 239.
–Many other commodities had huge moves.  Crude made a new recent high near $94/bbl.  Dec Silver rallied nearly $2 to 35/oz.  The silver curve is just about flat; near contracts are again starting to trade at a premium to deferred.
–BBG item says US GDP finally surpassed the last qtr of 2007 ($13.33 T) to $13.35T.  However, the article also notes that at the end of ’07 138 million people had jobs, compared to 131.3 now.  I would also note that at the end of 2007 US govt debt as % of GDP was under 55%, and is now around 100%. Not much of a multiplier effect…  And stocks (using SPX, are where they were in early 2008, on the way down, and the middle of 2006, on the way up).

Posted on October 28, 2011 at 8:45 am by alexmanzara · Permalink
In: Eurodollar Options

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