T-Bond trading comment (August 09, 2007)

People looking for volatility should have had their fill with today. We arrived at our desk this morning with the BNP booboo putting a bid in the market, altough when we arrivd the move was already done. After that, the T-bond traded in an 8 point range until another rumour fired up the market. This time it was a large UK bank having to report huge trading losses. Since it was only a rumour, the market hedged lower afterwards with the market bracing itself for the auction. After yesterday's auction, today was not looking good especially as the last long bond auction was not good.

In the end, the auction was a disaster... Looks like peoples don't want to touch T-bonds even with a pole... Indirect bidding was a paltry 7.8% where as normally it is around 30-60%. When the results got out the market went crashing down almost half a buck, but a big bid entered the market at 108-26 and said enough we are going higher. From that point on, the market hedged slowly but surely toward pre-auction level while stocks started to get seriously hammered. Tomorrow, we only have import prices at 8h30.

The market seems very hedgy right now, as a constant flow of rumours hit the market. In the past 24 hours, we've had Goldman's profit warning, Goldman's Alpha fund unwinding, Goldman's hedge fund trading losses, Citadel liquidity issues and UK bank trading losses. In addition to these, we've had several verified facts among these, BNP, Bear Stearns, and JP morgan's hedge fund loosing 11% in August alone.