Tuesday – September 29th, 2009

  • Bonds regain US investor appeal: FT
  • U.S. Treasury Aims to Start Toxic-Asset Cleanup This Week: Washington Post
  • Return of Old Thinking Threatens Economic Recovery, El-Erian Writes: FT


The Treasury market is aggressively UNCH today and we’re not sure if that’s a good thing or a bad thing. One thing is clear, however and that is when you have bond guys watching stocks, that’s ALWAYS NOT a good given its clearly OUT of our wheelhouse. Trying to divine a direction or an idea from stocks, though, well that right there’s trouble. THAT SAID, given the ‘outside-down-day’ last Wednesday in s&p as well as 10s, figured we should at least make mention that stocks are trying their hardest to overcome that day’s levels. Wednesday, September 23rd the S&P500 traded as high as 1080 and closed upon it’s lows of 1061’ish. Suffice it to say a failure of stocks right up HERE WHERE THEY ARE NOW would probably throw a bit MORE gasoline on THAT fire from last week. There. Nuff said. Stepping down off THAT soapbox, we’ll turn OUR attention to Fedspeak (we think tomorrows outweighs today) and a bit of econ data. We’re ALSO sitting here thinking about the curve and about supply. With supply in mind, the following quote from Ader strikes us as it’s a trade we’ve been following and thinking about too: “Ahead of next week’s auctions, the 3s/7s/10s butterfly is back on our radar – at 115 bp the spread is mid-range since July. Stochastics have crossed in the favor of the belly, and initial support is the 110 bp recent low, with the 107 bp level from July beyond there.  Supply dynamics (upcoming 3s and 10s) benefit 7s, as does the sector’s tendency to lead vs. the wings – in light of our in-range bullishness.” Alrighty then. Moving on, we’ll suggest having a look @ Daily Pivots given the market is just about right on top of them and as for the press, there’s a bunch linked in our bullets – PIMCOs El-Erian in the FT as well as another item suggesting bonds back in favor with US investors. NOBODY ELSE FINDS THAT INTERESTING?? Have at it and have a great start. Regards, Saul/Steve



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