T-Bond trading comment (August 16, 2007)

Today was not interesting from a trading standpoint. We just stupidly followed the stock market as can be seen in the above picture... So if you wanted to trade, just trade stocks...T-bond market was strictly driven by stocks which in turn were driven by credit crunch fears. Today, we heard all kind of rumours... Hedge funds in big problems, bankruptcy of big banks, Fed cutting rates ( actually, at one point this afternoon the eurodollars were up by 25 ticks !!! This means that in one day we priced a whole rate cut.... It came back afterwards) and all kind of other weird panic-striken thoughts...

But in the end, I cannot help but think that we saw some major improvements in the market today. First, the ABCP crisis seems to be resorbing as the major Canadian market players agreed to transform the commercial paper in short term notes to help everybody calm down. Secondly, bad news in the housing market are a bit more positive.... Yes we still have negative news but we also have good news, like Moody's affirming that Countrywide had sufficient liquidity to face prolonged headwinds. After the news, the stoks soared more than 26% from an intraday low. Thirdly, we are starting to hear other news than credit crunch related news. Granted, the non credit crunch related news flow is still low but at least peoples are starting to look at other things. Lastly, did you take a look at how investbanking stocks did today... People might be regainning a bit of confidence...

We are done with big economic news for the time being. Tomorrow we only have University Of Michigan and after that we are on week end.

To resume today's heird panic. The market was as intelligent as the least intelligent participant in the market...