Bond rally nearing an end?
- Thread starter gharghur2
- Start date
JohnL,
Those Sep 100 30yr puts are actually related to a curve play, buying the Sep 100 30yr puts versus selling the Sep 102 puts in the 10yr (1:1 ratio). CSFB did 10,000 of them yesterday paying 1 tick for the 30yr puts, and did it again today at least 5,000 times paying 2 ticks for the 30yr put. Those were done in the 10yr options pit, so option locals in there go back into the 30yr options to leg out of the spread, hence the huge volume in the 30yr put side. This is a new position, steepening play through the options. I'm sure RiskArb can chime in whether this play makes sense in terms of richness/cheapness in option price. Fundamentally, I think this trade makes good sense. The move in 10yr SWAPS has been strange, as the Treasuries steepen they shouldn't be narrowing, maybe more related to volatility, which has seemed to calm down a bit as of late. Its definitely not as crazy as the vol bid when the 10yr started trading away from the 107 strike, which is when I think most of the Swaps bid arrived (and the big put buying by the Bear Stearns mortgage account).
Those Sep 100 30yr puts are actually related to a curve play, buying the Sep 100 30yr puts versus selling the Sep 102 puts in the 10yr (1:1 ratio). CSFB did 10,000 of them yesterday paying 1 tick for the 30yr puts, and did it again today at least 5,000 times paying 2 ticks for the 30yr put. Those were done in the 10yr options pit, so option locals in there go back into the 30yr options to leg out of the spread, hence the huge volume in the 30yr put side. This is a new position, steepening play through the options. I'm sure RiskArb can chime in whether this play makes sense in terms of richness/cheapness in option price. Fundamentally, I think this trade makes good sense. The move in 10yr SWAPS has been strange, as the Treasuries steepen they shouldn't be narrowing, maybe more related to volatility, which has seemed to calm down a bit as of late. Its definitely not as crazy as the vol bid when the 10yr started trading away from the 107 strike, which is when I think most of the Swaps bid arrived (and the big put buying by the Bear Stearns mortgage account).
Is Mr. Bill always like this?
http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2006/IO+May+2006.htm
http://www.pimco.com/LeftNav/Late+Breaking+Commentary/IO/2006/IO+May+2006.htm
Gross is always a macro player, he always differentiates between the cycles and secular... Having said that, I think asking the Fed to revive the economy, as he seems to be suggesting here, is micromanaging the situation and could well be dangerous... Cheap money is not the answer to GM's long running problems, they simply make cars nobody wants to buy... In fact, lowering rates will just make it easier for GM to issue more cheap paper, exacerbating the eventual collapse...
Gross also seems to be a pessimistic guy in general.
Maybe it comes with age. Also, possibly a defensive posture for when/if things do go wrong he can always say I told you so.
The problem with american manufacturing is simple: labor contracts. What was good during the depression was not done way with after the war. These corrupt unions, legally extorted companies, by holding their skilled workers hostage in the name of better wages, before the advent of automation. And instead of addressing the problem, these companies just passed the cost onto the american consumer. Sort of like free agency in sports these days. As the world grew smaller, their house of cards is collapsing around them.
The only legal solution is to declare bankruptcy, bust the unions, retool and rehire at sensible wages. Or, do like the US government does. Instead of hiring additional union workers they source out these tasks to foreign countries. I love the fact that the IRS gets its work done in India
Maybe it comes with age. Also, possibly a defensive posture for when/if things do go wrong he can always say I told you so.
The problem with american manufacturing is simple: labor contracts. What was good during the depression was not done way with after the war. These corrupt unions, legally extorted companies, by holding their skilled workers hostage in the name of better wages, before the advent of automation. And instead of addressing the problem, these companies just passed the cost onto the american consumer. Sort of like free agency in sports these days. As the world grew smaller, their house of cards is collapsing around them.
The only legal solution is to declare bankruptcy, bust the unions, retool and rehire at sensible wages. Or, do like the US government does. Instead of hiring additional union workers they source out these tasks to foreign countries. I love the fact that the IRS gets its work done in India
Excellent post! You're right on, on every single point.