Friday saw a monster steepening in the Treasury curve and about 10 basis points on the week for the 2yr vs. 10yr spread. Mid-2007 Eurodollars pricing 2 cuts may be a bit crazy, remember the Fed HAS to keep their tough rhetoric on inflation with PCE still running above their comfort level in sake of not looking like idiots on inflation targeting. The interesting thing was that we hit the 4.40% convexity warning level that a dealer had put out earlier in the week for the 10yr (futures traded 109-20 about 4.40% cash) and those convexity buyers never came in. As soon as Countrywide started selling some of their March 110 calls (about 5,000) it was a pretty good sale up there for a quick day trade. Why would a mortgage house shed calls unless they knew the convexity flows would not accumulate Friday. Wells Fargo is long about 75,000 March 109 calls and so far are okay without downside protection, but if next week we start sliding back to 109 this move could be exaggerated a bit on the downside as they will have to buy at least 75,000 puts.
Bond rally nearing an end?
- Thread starter gharghur2
- Start date
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Lance Carson
LOL , That's like asking a CBOT Pit floor Trader where the stops loss orders are, lol
I couldn't help myself - I had to try....the Fed. is full of shyt.....
talking about inflation and doing coupon passes every week without fail.....
The last time the system was given an enema was during the Volker era and that's when high wealth folks got killed in the real estate market.....
so we are witness to semi-controlled devaluation where your savings in US dollars evaporate as purchasing power plummets
an opinion of course.............
talking about inflation and doing coupon passes every week without fail.....
The last time the system was given an enema was during the Volker era and that's when high wealth folks got killed in the real estate market.....
so we are witness to semi-controlled devaluation where your savings in US dollars evaporate as purchasing power plummets
an opinion of course.............
I watch it trade in front of me on the floor. I run a squawk box from a desk pretty much in the absolute middle of the floor, so pretty good information flows. I pay attention all day and try to decipher and anticipate flows rather than throw spitballs like most my colleagues (although the latter is fun).
Dealers seemed to have that ISM services number about an hour or so before it was released. Goldman sold 1000 in the 10yr right on the high of the day at 109-20.5 in the pit right after the weak ULC and Productivity numbers. Pretty much straight down to 109-14 from there with size sellers on the screen hitting 3-5k lots bids the whole way. Managed a small bounce before ISM services was released and then back down to 109-07. Countrywide is legging in and out of a Feb 109-March 110 strangle the last week or so, 5000 each time. Greenwich (maybe house account) sold 17,000 x 10,000 in the NOB spread today, feels more like taking profits on a steepener than re-initiating a flattener. Still lots of long calls out there on the mortgage front without proper downside put protection, which screams that convexity worries are still there upside . . . .
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Lance Carson
This is the most boring, nonsense payroll report in 20 years, the pit traders must playing with their fingers or something.
I agree, an absolute dud. Maybe the Fed can shake things up (lol).