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Strategies & Market Trends : Mish's Global Economic Trend Analysis -- Ignore unavailable to you. Want to Upgrade?

To: mishedlo who wrote (30236)	5/17/2005 12:34:10 PM
From: russwinter	Read Replies (2) \| Respond to of 116555

The carry trade is looking more and more stretched, and tougher and tougher for the Pig Men and dealers to finance. Should the Fed move to a "measured" 3.25% Fed funds in four weeks, how is Bully going to make money on a two year yielding 3.57%, and a ten at 4.10%? Or for that matter a six month T-bill at under 3.20%? How would you like to be holding a bunch of intermediate term GSE housing paper at 3.80%. To quote the Wizard of Oz, there are not just desirous of losing money, they've lost it. It's incredible that banks and mortgage companies are trading as strong as they are. Plus the Wizards need to start preparing for a hike soon by draining off enough liquidity to get the day to day rate closer to 3.0% or even a bit above. Final happened today, ny.frb.org but they needed to drain off 8.5 billion in repos to do it. Going to be a tough operation, what with the Treasury about to come to market with fresh paper, at about the same time we go into a trade war, with one of our chief vendor financiers. Really looks dicey and like smack down time to me, but the Ministry of Truth is good, I must admit, lots of tawdry tricks.