Thursday, July 26, 2007

I have a very bad feeling about this...

Thoughts on today.

  • Today is a classic flight-to-quality pattern, where the curve steepens tremendously and anyone who doesn't control printing of US Dollars is lagging the Treasury market.
  • I heard it was one of the most busy mornings in 10-years at large dealer desks.
  • I'd say bid/ask spreads were widening, but that implies that there is a bid.
  • CDX-HY (a basket CDS contract on a series of high-yield names) 30+ bps wider TODAY. Here is the graph through yesterday.

  • I'm wondering if I'll have to repost this piece from 2/27 before the day is done.
  • I'm busy playing liquidity provider today, but only on very very very high quality stuff. I might be the only one bidding.

7 comments:

BD said...

Q: What's worse than CDX HY out 30?

A: IG +8.5!

Anonymous said...

Could you give me some info on how the spread b/w the 10-yr. treasury and the FNMA 30-yr. 6.5% has widened in the past week or two?

TDDG said...

BD:

No kidding.

Anon:

~12 bps on OAS.

Fishonhook said...

Great posts keep them up- even if some of it goes well over my head..

the cds trader said...

i see your post was from thursday...well, all i can say is that FRIDAY was 5 times worse. their truly was NO BID to corporate bonds. it's up there with the worst I can remember from past crises. the pain out there is awesome, i suspect friday may force some hedge funds out of business. and it doesn't feel like a 1-day puke out, to be followed by a rally, it feels more like we are going through a major period of deleveraging. another couple of days like this and the Fed are gonna have to cut rates ASAP. buy treasuries, sell anything else.

flow5 said...

"Monetary policy has its limits," Federal Reserve Chairman Ben S. Bernanke told Congress during special hearings today.

The 2/27 drop was entirely the fault of the FOMC's trading desk. The U.S. pricked the bubble, not the Chinese.

TDDG said...

Fish:

Thanks. Keep reading and contributing and I'll keep posting.

CDS:

No kidding. Friday I was just praying no clients called needing cash, because I had no idea how I was going to raise it. Read my next couple posts. I'm going to try to think this out. I agree w/ no quick rally.

Flow5 is clearly our new house monetary economist. Thanks for contributing.