We get two rounds of Fed purchases today, and we get two rounds tomorrow. Given the thinner market conditions, I would expect the buying will be supportive to the market. Also supportive to the market were forecasts circulating this morning about the month end duration extension. It looks healthy for treasuries and very healthy for MBS.
Re: Pomo - see zero hedge story regarding the increase on the limit on holding at most 35% of any one treasury CUSIP to 70%. This strikes me as highly manipulative even though they do say the securities will be available in the repo markets and they will lend them out as needed. For good reason zero hedge is very vigilante on the Federal Reserve and did expect this increase to come to pass. Bernanke remains vigilante against deflation regardless of the implications for China and other parts of the world.
The RSI on the daily chart has moved above 30% level and looks like long position is going to work out well. MACD should cross to up next couple of days confirming trend change on the daily outlook. More later.
Larger trades from a.m. session listed below:
| 12/20/2010 | |||||
| ED | |||||
| Paper | B | 3,000 | EDH1 9912/9937 p spread | 2.25 | 9957.5/58 |
| Paper | S | 1,500 | EDH95/96 c spread vs. 9825p | 9 c spread over | 9958.5/59 |
| cont'd | |||||
| Paper | B | 5,000 | EDH13 9875/9912 c spread | 2.5 | ^9807.5 10% |
| New Edge | B | 25,000 | EDH13 9825/9850/9912.5 c fly 1X2X2 | 3 | 9804.5/05 |
| Large buyers in this one last week as well. | |||||
| 10yr. | |||||
| Paper | B | 3,600 | TYG121/123 c 1X2 | 0.22 | 12018/18.5 |
| Paper | B | 500 | TYH116/119 p spread | 0.41 | 12017.5/18 |
| New Edge | S | 1,500 | TYF120p | 0.16 | ^12016.5 to 15.5 |
| Swiss B | B | 5,000 | TYH117.5/120.5 p spread | 0.62 | 12017/18 |
| CSFB | B | 2,500 | TYG121.5c | 0.08 | 12017.5/18 |
| Paper | B | 600 | TYG119p | 0.41 | 12017/17.5 |
| 5yr. | |||||
| Paper | B | 4,000 | FVG120c | 0.06 | 11724.7/25 |
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