Scuffling

Macro Man is scuffling to put out a few fires in his portfolio today, courtesy of a painful expiration goolie-squeeze and the sort of correlation breakdown that was discussed in the comments section of yesterday's 20 Questions.

While yesterday's macro data was better, encouraging a bump in stocks and a drift lower in bonds, the real carnage was caused by the abrupt sell-off in the eurodollar strip, apparently courtesy of a broadening of the composition of the panel.

Perhaps Macro Man is a simpleton, but he struggles a bit to see why this should cause much a change to the existing LIBOR fixes. After all, the ICAP New York three month rate has been virtually identical to LIBOR all year after occasionally printing quite a bit higher last year.
Like many other market developments these days, perhaps it's a function of positioning. Over the year's, Macro Man has found that positioning can often explain the abrupt correlation shifts that are the bete noir of his management style. Speaking of which, once more unto the breach, dear friends....
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Anonymous
admin
June 19, 2009 at 11:55 AM ×

the BBA have published a statement on their website about the supposed broadening of the panel, it's a non-story.

positioning is by far the most important driver of price action right now.

i think the dollar strip is too taxing at the moment, whereas there are opportunities in Euribors where volatility is lower, as "air pockets" in market depth have been less frequent (possibly due to the persistent bullishness of the central bank of euribor). indeed this morning has seen (yet more) chunky accrual condors go through.

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Anonymous
admin
June 19, 2009 at 12:34 PM ×

Realise am a day or two late on this but interesting read from a year ago from Paul Tudor-Jones re the merits of technicals/tape-reading.

http://www.iimagazine.com/Article.aspx?ArticleID=1964189

I was hearing that JPM partly responsible for $ Libor squeeze as the last couple of months they have been offering but they were seen bidding yday. Maybe that $25 yards of TARP did have its uses...

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Anonymous
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June 19, 2009 at 3:21 PM ×

Just thinking out loud here, but do iTraxx tranches or index dispersion offer any sort of hedge on correlation jumps? I know your risk is cross mkt rather than intra, but are jumps in cross mkt correl mirrored in tradeable products?
JL

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Macro Man
admin
June 19, 2009 at 3:27 PM ×

The dealer appetite to sell that sort of thing is virtually nil at the moment...it's too risky and it's much easier to make money quoting wide spreads in more vanilla products.

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Anonymous
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June 19, 2009 at 5:20 PM ×

nice goosing of EURUSD and cable going on...surely that story is a bit old to keep shorting the dollar? any thoughts out there...looks a bit like more stop trading going on..

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Anonymous
admin
June 21, 2009 at 10:00 PM ×

uhhh maybe downgrade of Cali (or very high probability of such) might be causing a stir in the US dollar short pot. that being the case, it almost gurantees the US being downgraded. bonf market though hearig none of it.

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Anonymous
admin
June 22, 2009 at 8:50 AM ×

http://www.google.com/hostednews/afp/article/ALeqM5iRw87gr-3_UO7ug6OIlLxTm-3tDA

chinese commodity story

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Anonymous
admin
June 22, 2009 at 9:36 AM ×

the bit i do not get about california is it is an entity that can tax to finance some of the budget. therefore, cut the budget to make yourself a credible credit...what is so hard about that. oh, sorry, forgot about the politicians.....

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