Archive for July, 2014
Monday, July 14th, 2014
Prices of Treasury coupon securities have edged a touch lower in quiet overseas trading. The frantic trading which developed last week with the problems at the Portuguese bank have subsided and with that the urgency to trade has faded. One analyst also noted the France is closed for Bastille Day ...
Posted in Uncategorized | Comments Off on July 14th 2014 Opening
Monday, July 14th, 2014
I began my career shortly after Paul Volcker introduced incredible volatility into the fixed income markets in late 1979 with his plan to crush the withering inflation of the 1970s. That action by Volcker induced incredible volatility with frightening price movements. Those of you who have been initiated into the ...
Posted in Uncategorized | 4 Comments »
Sunday, July 13th, 2014
This article is from the WSJ and it is a mostly critical look at foreign policy under the incumbent President. The article notes that the President confronts a tense globe with crisis in Iraq and Syria and the Ukraine. Those geopolitical minuets play out against the backdrop of a President ...
Posted in Uncategorized | Comments Off on Obama Foreign Policy
Sunday, July 13th, 2014
ECB May Adopt Non-Conventional Measures: Coeure to Kathimerini
By Nikos Chrysoloras
July 12 (Bloomberg) -- European Central Bank is committed to adopting non-conventional monetary measures if necessary, Executive-Board member Benoit Coeure says in interview with Greek newspaper Kathimerini, to be published tomorrow.
* ECB’s focus at the moment is to allow enough time ...
Posted in Uncategorized | Comments Off on ECB Open to Non Conventional Measures
Sunday, July 13th, 2014
This story I received from a fully paid up subscriber and it is another article on the potential for a US style housing crash north of the 49th parallel. I am not going to hold my breath. I worked for TD Securities from November 2009 until my very amicable retirement ...
Posted in Uncategorized | Comments Off on From the Oh Canada Department
Saturday, July 12th, 2014
I will confess that I have paid little attention to this but commodity prices are at multi year lows. The Department of Agriculture issued an estimate yesterday on the corn and soybean harvest and that forecast sent prices reeling.
Via the WSJ:
Commodities
Corn, Soybeans Plunge as Forecasts Top Expectations
USDA Forecasts Record Soybean ...
Posted in Uncategorized | Comments Off on Falling Commodity Prices
Friday, July 11th, 2014
This one deals with the increasing number of fails and deep specials in repo. According to the story dealers are devoting less balance sheet to the product and the result in my opinion is more specials and less liquidity.
I had previously published this article earlier in the week.
Via Bloomberg:
Repo Market-Making Capacity Has Begun Decline, Barclays Says
2014-07-11 14:29:55.601 GMT
By Alexandra Harris
July 11 (Bloomberg) -- Increasing dealer balance sheet
scarcity is changing how dealers trade repo, pushing fails
higher and “simultaneously moving cash-long investors” to the
Fed’s RRP, Barclays strategist Joseph Abate writes in weekly
note.
* There may be a permanent increase in volume of both specials
and fails across a “broader mix of securities” than
“calendar-influenced” OTR 10Y
* Historically, OTR 2Y note has “rarely traded deeply
special in repo -- that is, until this year”
* Volume weighted avg “specialness” surged in June, 85bps vs
27bps avg. Jan.-May; avg. premium widened to highest level
since Sept. 2011
* Fails volume avg. $58b on cumulative basis Jan.-May, or
~1% of daily dealer Treasury transactions
* Dealers have become less inclined to take “balance sheet-
consuming” repo positions
* Pre-crisis, a dealer might “willingly” take an
outright short-term or long-term position in repo
markets, “particularly against a specific issue trading
at a premium in repo”
* Reluctance to “freely trade” balance sheet may increase
overall “specialness” across all issues
* Increase in repo demand for OTR collateral has “run up
against a bottleneck caused by a lack of lendable supply”
* Although Fed’s UST portfolio ~$2.4t, “its OTR cupboard
is bare” since the after-effects of Operation Twist
* Historically, Fed has reinvested its maturing Treasuries
in next available Treasury security at next auction
* With no maturing USTs until Feb. 2016, Fed has been
unable to buy new OTRs and has avoided buying them as
part of its monthly QE purchases
* 10Y OTR a “special case” and “recurring theme” in repo
market
* In month after first auction, 10Y note trades special in
repo, then cheapens “considerably” with each reopening
* Makes short base in 10Y OTR “initially bigger” than
available supply, which makes security expensive to
borrow
* “Recurring bouts of specialness have gotten deeper” since
2013
Posted in Uncategorized | Comments Off on Another Repo Article
Friday, July 11th, 2014
WSJ is carrying a Hilsenrath authored piece on the public discussions and debate among regional Reserve Bank Presidents on the topic of when the Fed should start hiking rates. The article does not break new ground and quotes statements already in the public domain. it begins with a citation of ...
Posted in Uncategorized | Comments Off on Hilsenrath Story
Friday, July 11th, 2014
The Treasury market is rallying and the curve is flatter. I spot 5s 30s at 170.5 versus 171.5 early this morning. Dealers report light activity on this beautiful summer Friday. I think the reason for the rally is twofold: supply is out of way and so the powerful flattening trade ...
Posted in Uncategorized | Comments Off on Treasury Market
Friday, July 11th, 2014
Via a fully paid up subscriber:
{CA} Highlight of our session has been USDCAD where a weaker employment report took us through 1.0700 but we've since found very good longer term RM sellers up here and have more offers on the books now into 1.0740-60. Meanwhile I expect there to be ...
Posted in Uncategorized | Comments Off on FX