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May 2010

NOAA’s Hurricane Forecast More Often Wrong Than Right

NOAA announced its 2010 Hurricane forecast today catching markets off-guard with an expectation of 8 to 14 Hurricanes during this year’s season–much higher than average.  The forecast caused natural gas futures to close higher after falling earlier in the day due to inventory data.  While the implication of this forecast can’t be ignored, NOAA has […]

Purchase Aps Hit 13Y Low as Tax Credit Expires

Not since June 2008 has the housing sector been completely devoid of some form of tax incentive to help bolster sales, until now that is and it shows.  MBA purchase applications have taken a precipitous drop over the past two weeks falling to levels not seen since the end of 1997.  The government’s approach of […]

Fed Could Lower Spread for Currency Swaps to Increase European Liquidity

Rumors have been spreading across trading floors that the Fed may lower the penalty for using its dollar liquidity swap line to reduce stress in the interbank market.   As I mentioned in a previous note, a 100bp ‘penalty’ over the overnight indexed swap (OIS) rate for the Fed’s dollar liquidity swap line is preventing the […]

Risk Returns with a Vengeance

After stabilizing from 5/20 to 5/24 AUDJPY’s decline has returned with a vengeance falling to 72.88 from 74.63 a day prior.  The currency pairs stability over the last few days led some to believe the market could be approaching a bottom.  Other notable risk indicators moving this morning include the TED spread, now up to […]

Near-term Inflation Expectations Fall to Zero

One year inflation expectations, as tracked by the breakeven rate for U.S. Treasury Inflated Protected Securities (TIPS), have fallen to almost 0%, while the more often quoted two year rate plummeted to 0.7% (see chart).  While longer-term inflation expectations have diminished, albeit at a much smaller magnitude, the spread between 2Y and 5Y rates has […]

Risk Aversion the New Norm

Global markets may be converging on a new ‘volatile’ norm as investors revalue risk, as governments begin the painful process of deleveraging to more sustainable debt levels.  Thus far fears of sovereign defaults have remained contained to the usual suspects—fundamentally weak nations—leading investors to flock to the safe-havens of the U.S., Japan, and Germany.  Risk […]

Swiss National Bank Intervention in EURCHF

According to Bloomberg:  SNB Vice Chairman Thomas Jordan said earlier today that the central bank has “countered” pressure on the franc during the financial crisis. “During the financial crisis, there has been much pressure on the Swiss franc which appreciated,” Jordan said in Wettingen, Switzerland. “The SNB has countered that pressure so that until now […]

Political Risk Wearing on Investors

Political risk, typically a relative constant in trading, has investors running for the doors this morning as concerns grow around Germany’s real intentions behind its short-selling ban, along with what regulations might come next.  Uncertainty is being compounded by the financial overhaul debate taking place currently in DC.  One comment that especially caught traders’ attentions […]