Treasury Stuff: Waiting for Godot

The Treasury market is locked in a narrow trading range as participants wait for Godot. Traders are biding their time watching the tape for news on the progress of discussions on the rescue bill. I watched President Bush earlier. As I watched him speak (and I mean no disrespect, sincerely) I was reminded of a line from a Beatles song which went, “I imagine that she is a very nice girl but she hasn’t got a lot to say”. He just does not have much to say and in this event, sadly he is not in control; events are.

Subsequently, Harry Reid and Chris Dodd found a podium and some press and began their locutions. They do not strike me as people with gravitas. They seemed more interested in bashing John McCain than in serious discussions about the problems which confront us as a nation.

As the day progresses and it becomes more apparent that a deal will not result, I expect bond prices to race higher, stock prices to sag and spread product to lag.

In the Treasury market I spoke with a Treasury Bond trader who described the illiquidity in his sector. He said that it reminded him of how bad the off the run bond market was following the collapse of Long Term Capital. He noted that the 2021through 2023 sector of the Treasury curve had become very cheap versus 2024 through 2025 paper. In the last couple of sessions the 2021 through 2023 paper has cheapened by about 5 basis points versus the longer dated paper. In his opinion this has resulted from deleveraging which has trading firms unloading securities which they once intended to warehouse.

Comments

[buyitcheap:]

Wouldn't prices have to fall somewhat to move that inventory? I wouldn't want to buy a 100 bond for 120 either...

2008 Sep 26 01:43 PM

[js_mcknz:]

Speaking of no gravitas, how about that John McCain? If I were Dodd or Reid, who have been in negotiations since the beginning, I'd be bashing McCain too -- he comes flying in pretending to suspend his campaign, sticks around long enough to see a potential deal fall apart, then goes flying out to Mississippi because Obama called his bluff.... Now *that* is severe lack of gravitas.

2008 Sep 26 02:27 PM

[Steven Hansen:]

i am no fan of senator reid (he is my senator in congress). but actually i was impressed by him during the press conference you referenced. i do not know the full story about senator mccain's visit to washington, but on the surface he seemed very disruptive to the process. i agree with js_mcknz above that the negative comments about mccain seemed to be an overflow of frustration from the destruction of all the work they had done rather than a partisan attack.

John, i want you to know i had to look up the meaning of the word "gravitas".

2008 Sep 27 05:22 AM