QEII is coming, and chances are it will be larger than the recent amounts discussed which were in the 100 bln. Per month range. After being re-aquainted with the taylor rule via some research put out by Goldman Sachs it seems very clear that the Fed will want to push the Real Funds rate quite a bit lower. Their estimates were that the rate will have to fall to a negative 7% area in order to provide the stimulus necessary to meet their employment and inflation targets.
Given this broad background the odds are a further rally in fixed income may start building. Current trends on daily out looks are still down as a lot of the QEII was priced in based on speeches made by Bernanke back in August and other means. Markets quickly took 10yr. notes below 2.50% in terms of yield and since have seen profit taking turn price action lower.
Given the leanings of the Fed to employ asset purchases, I would be cautious about underestimating the size needed given the assumptions the Fed uses to weigh the number of basis points their current policy tools are achieving. Furthermore if they lower their growth estimates (which is expected) for the economy, this will increase the need to push the funds rate lower, by any means possible.
Larger trades from this a.m.'s session listed below.
| 10/25/2010 | |||||
| Screen this A.M.; | |||||
| edx0 9962 put trades 2/1755 | |||||
| edx0 96/97 strangle trades 2.5/500, 2.75/900 | |||||
| Paper | S | 500 | EDZ0 96 strad | 11.5 | 9966 |
| New Edge | B | 1,000 | EOH 9900 p | 5.5 | 9934 |
| Paper | S | 500 | EDZ2 9887p | 8.5 | ^9896 |
| New Edge | B | 10,000 | EOZ92/95 c1X2 | see below | |
| New Edge | S | 10,000 | EOZ 91/93 c 1X2 | 4 92/95 over | 9943.5 |
| Paper | B | 2,500 | EDH3 80/85/90 p fly | 3 | 9934.5 |
| Paper | B | 5,000 | EOH9900p | 5 | N/A |
| Cube | S | 2,000 | EOH91/92 c spread | 10 | 9936 |
| Paper | B | 3,000 | EOH90p/EDZ3 91 c - strangle | 11.5 | N/A |
| RJO | S | 1,000 | EDU2 91 strad | 70 | N/A |
| New Edge | B | 12,000 | EDZ2/EDH3 91 call stupid | 12 | N/A |
| RJO | S | 1,000 | EDU2 91 strad | 69.5 | N/A |
| Paper | B | 700 | EDH 96 strad | 18 | 9963 |
| Paper | B | 500 | EDZ0/EDH1 95/96 ps spread | .75 H over | N/A |
| Paper | B | 500 | EOX 92/93 p spread | 1.5 | 9945 |
| Paper | B | 1,000 | EDZ0 95 p | 2 | 9967 |
| Paper | B | 500 | EDM1 97/98c1X2 | 2 | 9958.5 |
| TJM | B | 10,000 | EOX92/93 p spread | 2 | ^9943.5 15% |
| Drax | B | 15,000 | EDH3 88/91c 1X2 | 5 | 9983 |
| Paper | B | 7,000 | EDX0/EDZ0 9975 c sprd | 0.75 | 9967 |
| 10's | |||||
| New Edge | B | 1,000 | TYF125p | 0.59 | 12621/21.5 |
| Paper | B | 1,000 | TYZ130c | 5 | 12621/22 |
| Paper | S | 1,000 | TYZ123.5/125 p stupid | 0.29 | 12623/24 |
| Mann | B | 1,000 | TYZ129c | 0.13 | 12623.5/24 |
| Paper | S | 1,000 | TYZ126.5 strad | 1.57 | 12623/24 |
| Paper | S | 500 | TYZ127 strad | 1.55 | 12628/28.5 |
| Paper | B | 10,000 | TYZ0 127.5/128.5/129.5 c fly | 10 | N/A |
| BCG | B | 12,000 | TYZ125.5 put | 0.27 | ^12629 |
| JP Morg | S | 1,000 | TYZ127 strad | 1.56 | 12626.5/27 |
| Paper | B | 3,000 | TYZ127.5/128.5 c spread | 0.21 | ^12626.5 |
| Fed Fund | |||||
| May | B | 1,000 | FFF9975p | 0.5 | N/A |
| Paper | B | 700 | FFZ 9987c | 0.75 | N/A |
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