A trader's market commentary

[flow5]

Re: A trader's market commentary

May 2007

Date	1 mo	3 mo	6 mo	1 yr	2 yr	3 yr	5 yr	7 yr	10 yr	20 yr	30 yr
05/01/07	4.69	4.90	5.01	4.89	4.63	4.56	4.54	4.57	4.64	4.89	4.81
05/02/07	4.72	4.91	5.02	4.90	4.65	4.57	4.55	4.58	4.65	4.89	4.82
05/03/07	4.74	4.90	5.03	4.93	4.71	4.62	4.59	4.61	4.68	4.91	4.84
05/04/07	4.74	4.90	5.03	4.91	4.68	4.59	4.55	4.58	4.65	4.88	4.80

http://www.treasury.gov/offices/dome...te/yield.shtml

	4 WEEKS		13 WEEKS		26 WEEKS
DATE	BANK DISCOUNT	COUPON EQUIVALENT	BANK DISCOUNT	COUPON EQUIVALENT	BANK DISCOUNT	COUPON EQUIVALENT
05/01/2007	4.59	4.68	4.76	4.90	4.81	5.01
05/02/2007	4.62	4.71	4.77	4.91	4.82	5.02
05/03/2007	4.64	4.73	4.76	4.90	4.83	5.03
05/04/2007	4.64	4.73	4.76	4.90	4.83	5.03

Daily Treasury Bill Rates: These rates are the daily secondary market quotation on the most recently auctioned Treasury Bills for each maturity tranche (4-week, 13-week and 26-week) that Treasury currently issues new Bills. Market quotations are obtained at approximately 3:30 PM each business day by the Federal Reserve Bank of New York

3 month treasury bill; secondary market -- 2007
http://research.stlouisfed.org/fred2...=Refresh+Graph

AAA Corporate Bond yields
http://research.stlouisfed.org/fred2...=Refresh+Graph

Everything looks copacetic to me. Short term bottom (in yields) is just seasonal, i.e., rates will continue to fall.
There will be no recession. Actually, the fed will have difficulty holding down economic growth.
Last time I was in SF I was protesting George Bush senior's war in Iraq.

[Tet]

Re: no rate cut, as seen by the “inverted yield curve”

Fed not likely to cut rate, more likely to stay where it is now, as seen by the “inverted yield curve”.
fficeffice" />
ffice:smarttags" />US economy is more of goldilocks now, even Buffet said today subprime is not an issue.

I am afraid that “euphoria of goldilocks” is catching up, pushing indexes highter, and M&A guys, the big “capitalists” have just been doing that for a while, and small ones start to jump in with their two feet.

Thanks

Expectations are everything, I'm thinking more regarding what expectations are going to be. I would think a rate cut needs to come as a suprise, can't have home buyers deciding to wait until the next Fed meeting and put off the purchase of a house. Looks like the BoE is meeting this week as well, just got this from my banker this morning.

Record number of people declared themselves insolvent in the first
three months of the year in Britain. The government said personal
insolvencies rose almost 25% y/y to 30,075 in the first quarter. Britons
are among the most indebted in the world, with more than a trillion
pounds borrowed in the form of mortgages, personal loans, credit and
store cards and overdrafts.

I wonder what the BoE does with their rates, I've always viewed the BoE to be the dog and the Fed to be the tail, I never see their Ex BoE chairmen coming over here and being knighted. Goldilocks is definitely in the house. Maybe the Queen is in town just to remind Bush that she'd like some of Her Majesties money back.

[flow5]

Re: A trader's market commentary

Daily Libor rate:
http://www.interestonlyloans.com/libor_rate.html

[bart]

Re: A trader's market commentary

There will be no recession.

We're already in a recession based on the old definition.

If the NBER had a clue about the real inflation rate and GDP deflator, they'd call one now too.
The wiggle room the NBER has with the "new and improved" recession definition makes the call of a recession too political for my taste.

Actually, the fed will have difficulty holding down economic growth.

Depending on the time frame you reference:
Nominal economic growth... perhaps.
Real economic growth... unlikely at best.

[flow5]

Re: A trader's market commentary

Table 1.--Real Gross Domestic Product and Related Measures: Percent Change From Preceding Period
[Quarters seasonally adjusted at annual rates]
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------
2004 2005 2006 II 03 III 03 IV 03 I 04 II 04 III 04 IV 04 I 05 II 05 III 05 IV 05 I 06 II 06 III 06 IV 06 I 07
-------------------------------------------------------------------------------------------------------------------------------------------------------------------------
Gross domestic product (GDP). 3.9 3.2 3.3 3.5 7.5 2.7 3.9 4.0 3.1 2.6 3.4 3.3 4.2 1.8 5.6 2.6 2.0 2.5 1.3

http://www.bea.gov/newsreleases/nati...ewsrelease.htm

[bart]

Re: A trader's market commentary

And another view of nominal & real GDP:





Adjustments to CPI are per John Williams excellent public work at shadowstats.com.

[grapejelly]

Re: A trader's market commentary

(1) The dollar is strengthening
http://www.dailyfx.com/charts/Chart.html?symbol=EUR/USD
(2) Gold is softening
http://www.netdania.com/ChartApplet....Ccomstock_lite
(3) Stocks have flattened
http://finance.yahoo.com/charts#chart3:symbol=^dji;range=5d;indicator=volum e;charttype=ohlc;crosshair=on;logscale=off;source= undefined

The FOMC remains tight, and monetary flows (mvt) are dis-inflationary. Having just passed the seasonals c. May 5th, there should be added downward pressure on most commodities and the broad stock averages. Regardless of short term FOMC pressures, interest rates could still fall, as the economy is decelerating.

yes it seems it could be so. Brian Pretti of contraryinvestor.com has run pieces in the recent past that suggest potentially a "mid cycle correction" a la 1995 rather than the beginning of recession. There is no way to tell at this point. Not yet.

But I don't see where you get that the stocks flattening part. In a daily chart it seems pretty much straight up from March and still rocketing higher...no?

What are the "seasonals c. May 5th"?

[flow5]

Re: A trader's market commentary

http://www.atimes.com/
Liquidity boom and looming crisis
Henry C K Liu (May 8, '07)
Excellent Article


http://www.financialsense.com/Market/wrapup.htm
Derivatives

[flow5]

Re: A trader's market commentary

The "stop out" (lowest rate accepted) for repos on open market operations since 4/27/07 has been under 5.15. This looks like downward pressure on yields.
http://www.ny.frb.org/markets/omo/dmm/temp.cfm

[flow5]

Re: A trader's market commentary

This year - 2007 Economy slowing:
======================
XAU topped c. 4/22
EUR/USD topped c. 4/27
3 month T-Bills yields topped c. 2/26
30 mortgage yields topped c. 2/15
AAA corporate bonds topped c. 4/27
MZM topped c. 4/16
===========================================
21st Century
===========================================
3 month T-Bills topped 6.17 11/2000
30 mortgage yields topped 8.33 2/2000
AAA Corporate Bonds topped 7.78 - 2/2000

[flow5]

Re: A trader's market commentary

MZM
Looking at a weekly graph (not monthly), & using the custom graph (changed the date range to 1/1/2007 - present. It reflects the seasonal pattern (which I referred to).

http://research.stlouisfed.org/fred2...=Refresh+Graph

[flow5]

Re: A trader's market commentary

Stop-out down to 5.09

Deal Date: Wednesday, May 09, 2007 Delivery Date: Wednesday, May 09, 2007 Maturity Date: Thursday, May 10, 2007 Type of Operation1: Repo Settlement: Same Day Term of Operation2: 1 Day Operation Close Time: 09:40 AM

Results

Amount ($B)

Rate (%)

Collateral Type	Submitted	Accepted	Stop-Out3	Weighted Average4	High	Low
Treasury	11.200	5.500	5.09	5.092	5.11	5.05
Agency	11.100	0.000	N/A	N/A	5.16	5.08
Mortgage-Backed	2.350	0.000	N/A	N/A	5.17	5.09
Total	24.650	5.500

[bart]

Re: A trader's market commentary

The stop out rate, while it can be helpful, is only an indicator for repo markets and purposes.

The actual daily Fed Funds rate from the NY FRB site since 4/4 has only varied between 5.19 and 5.31.

[flow5]

Re: A trader's market commentary

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[flow5]

Re: A trader's market commentary

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