Friday, January 30th 2009

  • Home Prices Fell in 24 U.S. Cities in November as Foreclosures Intensified: Bloomy
  • Treasuries Advance on Speculation GDP Report Will Show Recession Deepened: Bloomy
  • Treasuries Will Extend Decline, Says Trader at ICBC, China’s Biggest Bank: Bloomy
  • Barclays Says 40 Percent of Japan’s Investors See Risk of Treasury Default: Bloomy

TGIF. There is fresh and new data this morning and we expect it to paint the very same picture as it has all week long. We’re anxious to see how it’s rec’d by the market and are very well aware that a market NOT responsive to good news, is well, NOT in a good way. This is cause for concern. We are ALSO concerned with couple of stories we picked up via Bloomy – trader at large Chinese bank suggesting that Treasuries will extend decline was bad. Worse, though, is story of Barclays survey suggesting 40% of Japanese investors see risk that US defaults on debt. SWEET. We want names and numbers of survey participants!! TGIF. We’ve got couple of technical pictures on the PDF (one that WE crafted and one from GCMs rate strategerists) and both somewhat more bearish conclusions. We’ve also got link and visual back to Barrons January 5th cover – Get Out Now! So far, that has been the call of the year! Have a great start to the end of the week! Best, Saul/Steve


Here’s an excerpt from today’s rant:


We are feeling very much abused by Mr. Market this past week. While we try to hang our hats on something positive – we’ve continued to think about and point out US UNDERperformance relative to Europe, truth be known is that we’ve not enough of that on. In fact we’ve pretty much booked every profit, seen the spread give us another chance to jump in (which we didn’t jump on) and then seen the ‘spread’ grind right back to about the same levels where about a week ago, we took profits. Being back at that sort of ‘square one’ as the Treasury market has essentially been a one way street (lower prices/higher yields) has been a somewhat disconcerting experience. This has been the case as we’ve gotten more than supportive data all the way along. In hindsight, the data series (Confidence, Used Home Sales, Initial Claims and Durable Goods) has been a very ‘well-advertised’ event and therefore provided very little in the way of NEW information to be transmitted in the rates markets.


Trying to think about things from the ‘glass-half-full’ point of view, we would say that at least the dealer community was given a concession (outright more so than curve) to take down 2s and 5s. Yes, they are both under water and that doesn’t ever make one feel good but again, we’re TRYING here to be optimistic. Does this mean that we’d prefer to see selling of UPtics so as the market gives accommodation to the upcoming refunding? Possibly.


We’re ALSO thinking about things from a couple of other perspectives. Firstly, we cannot help but think about the current market in terms of the bubble. Barrons had the CALL OF THE YEAR so far, and it’s been worth about 100bps in the 30yr, which as a good friend calls it, the Land Of The Big 01s’ …


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