Chart below shows 10yr. futures quick reaction to Bernanke’s prepared text – highlighting the current unemployment situation in the US. In today’s WSJ in the opinion section there was a piece highlighting the math involved in getting payrolls back to full employment may not be attained for decades.
With a labor force of 153 million of whom 14 million are officially counted as unemployed – getting to a level of full employment (defined as 5% unemployment) would mean bring that 14 million number down to 7.7 million. If labor growth could grow at 1.2% which is current trend – and assuming the we get another 1.8 million people coming into the labor force each year. With these stats and basic assumptions a monthly gain in NFP of 250K/ month would get us to full employment by 2018, and right now we are not producing jobs anywhere near that level.
Below brief notes on today's 10yr. auction.
Look for the auction to surprise to the upside – even though yesterdays 3yr. note saw poor
Demand especially from foreign centrals – sources indicate there was some selling in 5yr.
Swaps for good size unrelated to the auction however trying to move size during the 3yr
Auction – basically exacerbating the price action - meaning the 3yr. auction was’nt necessaryily
As bad as it looked
Todays 10yr. with the potential for a 3.75 coupon the highest since middle of last year should go fine – there
Was talk of some buying in Japan this morning. Given the employment outlook the feds
Hands are tied in terms of raising rates and you should not have the large seller contaminating
The market like you did during yesterdays 3yr. auction.
Larger trades from a.m. session listed below:
| 2/9/2011 | |||||
| Paper | S | 500 | EDH13 9725 put | 10 | ^9749 |
| Paper | B | 2,000 | EOU 9700/9750//9800 p fly | 5.5 | N/A |
| Paper | B | 5,000 | EDZ12 9700 puts | 0.43 | ^9780 100% |
| Paper | B | 500 | Red pack 9837 strad striip | 4.20 and 4.22 | N/A |
| Paper | B | 1,500 | EDZ12 9775 strad | 133.5 and 1.40 | N/A |
| Paper | S | 2,000 | EDH 93/95/96 p fly | 0.5 | 9966.5/67 |
| Paper | B | 10,000 | EDU1 9937 put | 31.5 | N/A |
| Above is a large short covering trade. | |||||
| Fed Fund opts | |||||
| Paper | S | 1,000 | FFZ 9900 puts | 6 | 9956.5/57 |
| paper | S | 500 | FFV 9975/9981/9987 c fly | 1.75 | 9970/70.5 |
| Paper | S | 500 | FFQ 9981 c | 2.75 | 9977.5/78% |
| 10yr. | |||||
| Screen a.m. | |||||
| Paper | B/S | 3,500 | TYH118.5/119.5 c spreads | 0.18 | 11802.5 area |
| Open outcry | |||||
| Locals | B/S | 500 | TYJ113/115 p spread | 0.26 | 11805/06 |
| Mann | B | 750 | TYH118.5/119.5 c 1X2 | 0.09 | 1185/06 |
| Swiss B | S | 2,000 | TYH119p | 1.04 | N/A |
| Paper | B | 1,900 | TYH119/TYM115 p diagnol | 0.18 | ^ H 11817 |
| Locals | B/S | 500 | TYM115.5 put | 1.28 | ^116/18 |
| New Edge | B | 500 | TYJ119/121 c 1X2 | 0.09 | ^11613 |
| New Edge | S | 2,000 | TYH120 strad | 2.00 to 1.62 | 11605/06 |
| JP Morg | B | 1,000 | TYM115/117 p 1X2 | 0.23 | 11807/08 |
| Paper | S | 10,000 | TYM114 put | .56 and .57 | 11803/08 area |
| Paper | S | 7,000 | TYK114 put | .41 and .40 | 11803/08 area |
| Above 2 trades were done on screen did not show anything in pit! | |||||
| JP Morg | B | 5,000 | TYM 111 put | 0.23 | 11807/07.5 |
| paper | S | 500 | TYH119/120 c 1X2 | 0.07 | 11807/07.5 |
| Barclay | S | 1,000 | TYH121/122 c spread | 0.01 | ^11805 |
| TJM | B | 2,500 | TYH 115.5/116.5/117.5 p fly0 | .09 and .10 | 11804 area |
| RJO | S | 1,000 | TYJ114 puts | 0.23 | ^11620.5 |
| Smith B | B | 1,820 | TYH 118c | 0.44 | 11805/06 |
| Smith B | S | 5,000 | TYH 119c | 0.16 | 11805/06 |
| Above 2 trades were executed as a call spread ratio. | |||||
| Goldman | B | 5,000 | TYM 110 puts | 0.17 | 11803/03.5 |
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