Bill Wexler's Trading Cabana Message Board

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Non-Tech : Bill Wexler's Trading Cabana

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To: RockyBalboa who wrote (1610)	5/20/2007 6:46:01 PM
From: RockyBalboa	Read Replies (1) of 6370

Last I checked the treasury prices and the 30y is now under 110. After the subprime story broke in December, the same contract commanded 114.5 and above. Since then the yields try a flag breakout supported by strong European yields and two consolidations (one of them end of February when the subrime story culminated in the killing NFI and NEW) completed. The picture is not pretty and the contract is red the last 7 trading sessions. On the other hand, spreads are super-tight and priced for perfection. Perhaps this warrants a texas hedge? Short the treasury and short the spreads...,and on any corporate hiccup cover and buy treasuries regardless of price? Per the text book, the merger friendly situation and resulting immense capital needs are a detriment to corporate spreads. It will take some time until rating agencies also give up their "accomodative" rating policy. For now they appear to be immune to any corporate actions. There is one more trade which is still unbroken and no catalyst is in sight - the Yen carry trade. It appears to create billions out of nothing at nearly zero interest rates. This is the last man standing in the interest rate world.

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