11:46 am - What Volatility?:The market has seen some minor league pops in size, but nothing to get excited about. The run up seen over the recent past has been volatile, not quite a straight shot, but the largest measure of volatility, the
VIX index has fallen off to the lowest level since early Nov, running at 51.41, but things aren't so sanguine out the calendar, with the Mar VIX holding near recent highs up near 32% from that time, versus the spot's 8.5%. As WSJ's Gaffen noted late yesterday,
"it suggests ongoing worry that economic conditions and the market outlook will remain perilous to a point that warrants additional caution." The bond options market has seen a dip in volatility pricing as well, after getting pumped up in to the FOMC, but remains on the high end with the 10-yr Mar running 13% versus 7.5% a year back, 30-yr at a whopping 20% versus, oh, 11% a year ago. So, while tempered, things are far from normal.
11:22 am - New Issues :
Walt Disney will sell 5-yr notes.
Thomson Reuters will sell $3B in debt.
Safeway will sell $500M in notes due 2014 at an expected +512.5 basis points.
(Bloomberg)
10:38 am - More Talk About Policy Tools: Looking out the fed funds folks are projecting the possibility that the Fed's "initiatives" will work, with 75% looking for the "policy tools" to be back to targeting .25% by the late-Jan meeting, while an
optimistic 15% see a move up to .50% by mid-Mar. The eye to the funds rate running at zero for the immediate future, not to mention additional measures to try to goose the economy, players say that underlying economic problems will improve, its just a matter of time. Mortgage rates are coming in as are relevant spreads indicating that credit issues may be ready to loosen up... "
The statement "will go down in the annals of Fed history along with Paul Volcker's Saturday announcement going to reserve targeting in 1979. Volcker's press conference was called the "Saturday Night Massacre." I nominate this one to be called the "Who Could Ask for Anything More?" statement. The Fed is throwing everything in its arsenal at the economic/financial situation. --Stephen Stanley, RBS Greenwich Capital"... "In practical terms, the decision to slash the target rate will do almost nothing to boost economic activity. However, it does
send a strong message to the markets that the Fed means business, particularly when combined with the commitment to leave rates at near zero for some time. With official interest rates now as close to zero as they are going to get, the Fed's focus has already switched to quantitative easing. --Paul Ashworth, Capital Economics (WSJ). (For more on rates, please see the
Rate Brief: Shock the Monkey)
10:36 am - For What it's Worth : The continuous 10-yr futures contract ramped up momentum again with the break of prior highs near 125-13, and then 127. Trade is parabolic and appears to be "targeting" the 129 handle which extends the breakout of 08 range top near 120 about a cool, clean 100%... for what it's worth.
10:21 am - Policy Tools: Trade is trying to extend gains but is getting in its own way, somewhat hampered the lofty levels reached. Bonds are eyeing stocks with some suspicion as the Fed's move and talk on rates doesn't exactly paint a pretty picture of the road ahead. "
So here we are: Rock bottom. We take no satisfaction from the vindication of our view that one basis point is the right rate for the U.S; it is a reflection of an utterly desolate economic picture, which will persist for the foreseeable future as the wrenching adjustment in household finances continues... The Fed's objective now is to "employ all available tools" to fix the economy... If zero rates don't work, they will try anything; good. But this is a terrible, chastening day. --Ian Shepherdson, High Frequency Economics" ..."The action taken today and the quantitative easing moves to come
speak volumes about just how petrified policymakers are that the economy is in danger of sliding into a deflationary spiral that would be disastrous considering the highly leveraged condition of the economy. Monetary policy is going to do whatever it can to try to avoid this outcome, and further substantial fiscal stimulus is also in the works. --Joshua Shapiro, MFR Inc." (WSJ)
09:55 am - Dollar Rolled, Again : The buck just can't buy a break with more levels giving way in thin early trade. The euro just took out stops above 1.42 as those looking for some traction at 50% retracement of Jul - Nov dollar gains have been dealt another blow (lost the 38.2% battle at 1.3750, too). The euro continues to capitalize on its meteoric momentum. The Fed's new expand the balance sheet at any cost policy is taking the buck to the woodshed. The big question is how currencies react to similar policies which will inevitably be endorsed throughout the G7. For now, trade is running with the flows and that looks to carry over to the new year. The
euro will likely want to test 1.4190 as support. Should that hold then trade will come gunning for 1.4625. In the meantime, buying euro dips is preferred to chasing the market. Against the yen, the dollar has broken the 88 barrier and now fumbles around for bids above 87.50. Resistance sits up near 88.40 and 89. The pound rambled up to 1.5720 before failing as unemployment spiked, sparking some profit taking. It has since found support near 1.5240 with offers near 1.5450. The BOE is being watched closely as it look to follow the Fed to zero. Spot gold is up at 867.43 (+9.33) while crude pared losses to 43.25 (-0.35).
09:09 am - Hello? Hello? Anybody Out There?: Trade has been running in leaps and bounds since the Fed pulled the trigger on a surprise rate move, taking the stance that they would be holding rates at extreme accommodative levels and do whatever necessary to keep the wheels of the economy greased. The market is running on fumes here, however, with holiday trade infecting the trade. The curve has stuck to the flattening track working on trying to hold the
2-10-yr yield spread through 150, now at 149.8, the 3-mo-10-yr has also tilted well flatter. The market is finding solid support in an uncertain and ever changing landscape. (For more on rates, please see the
Rate Brief: Shock the Monkey)
08:42 am - Mortgage Applications : The weekly MBA mortgage applications index rose 2.9% last week with refis up 6.5% and purchasing applications dropping 4.5%. The fixed 30-yr mortgage rate fell to 5.18% (-26 basis points) while the 15-yr fell to 4.93% (-16 bps) & 1-yr adjustable rate mortgages dipped to 6.63% (-13 bps).
08:24 am - Fuel for the Fires : The bonds were gassed up by the FOMC's new easing policy and most coupons look to be extending their rally this morning. Trade is thin and has deferred to spreads again with the short end dragging. 2-yr yields are backing off with profit taking and supply next week taking a bite out of prices while the long stuff remains well bid sending curves flatter and spread traders pouncing on a continuation of the trend off Nov's 255 on the 2-10-yr yield spread to 150.2. Bond prices in the EuroZone and Japan are better on expectations of similar central bank outcomes. Treasuries have nothing to work with today, but appear to be enjoying some positive follow-through nonetheless. Trade is thin and record low yields could be ripe for profit taking easing some of the upward pressure. Morgan Stanley reported deeper losses than expected and that is weighing on stocks, which invariably helps keep the bid in bonds. The dollar is licking its wounds with the euro consolidating gains above 1.40 while the yen remains firm below 89. Spot gold is shedding gains to 853.92 (-4.18) as is crude at 42.80 (-0.80). There is no data, nor Fed-speak.
anche questo è un buon motivo, ci si apsetta che possano utilizzare anche quest'arma perchè è stato ufficialmente detto.
