T-Bond trading comment (August 17, 2007)

The fed cut the rates today!!!! No don't get too excited it is only the discount rate not the real one.... At 8h17 the Fed came out on the tape saying they were reducing the discount rate by 50bps to 5.75%. The initial impact was a slight bid in the market, but pretty fast the market changed way and we encountered a black hole where every bid was just sucked down.
We lost about a buck in an hour but mainly we lost 70% of it in 10 minutes.

After that, the market caught a bid for almost a buck as the stock market after initially climbing started to give back a bit of money. By eleven o'clock the books were closed and peoples were thinking about that fresh beer waiting for them at the nearest bar. After a week like the one we just had, a think several beers will be looking pretty nice.

We are still in the summer days with very poor liquidity. In normal times, we commonly have 13 000 on each side of the market, right now there barely is more than 5 000 on each sides and even that seems generous. Otherwise than that, we are still hugging the 110-00 line and there is no major economic news next week, but we do have option expiration on Friday...