Sept 17
Sept 17. Significant reversal in eurodollar contracts Wednesday. Early in the morning reds were up about 9 bps, but closed -7.25, as rumors swirled about a Medley piece claiming two Fed governors were in favor of near term tightening, (though most would prefer to wait at least six months).
–The curve flattened. Price action in tens wasn’t as dramatic; early in the day 10 yr yield was around 3.40% and closed 3.47%.
–Economic news continues to outdo expectations, with Ind Prod up 0.8% and Capacity up to 69.6 from expected 69. Today’s releases include Housing Starts expected 600k, and Job Claims expected 575k. Philly Fed was last 4.2, expected 8.0.
–Implied vol continues to firm in eurodollars which hints at market concern for reversal of trend and further downside.
–According to BBG China and Japan were still accumulators of treasuries in July, but with new power structure in Japan that might change. Perhaps more interesting in TIC data is increased equity purchases (net $24B private, and $4.6B official compared to total $18.1B in June).
–Irish banks rally on government plan to buy bad assets (related to commerical real estate) at 30% discount. Sort of what the original TARP plan in the US was for.
–Auto sales reportedly dismal in Sept…cash for clunker hangover. (BBG) “…Fiat/Chrysler boss warned that “we are going to see harsh reality in September.”
