MY ELECTION SONG....
Well, I don't know why I came here tonight
I got the feeling that something ain't right
I'm so scared, in case I fall off my chair
And I'm wondering how I'll get down the stairs
Clowns to the left of me, jokers to the right
Here I am, stuck in the middle with you
Yes, I'm stuck in the middle with you
And I'm wondering what it is I should do
It's so hard to keep this smile from my face
Losing control, yeah, I'm all over the place
Clowns to the left of me, jokers to the right
Here I am, stuck in the middle with you
Well, you started off with nothing
And you're proud that you're a self-made man
And your friends, they all come crawlin'
Slap you on the back and say, 'Pleeeeeeeeeeeeeeease, pleeeeeeeeeeeeease'
Comedy Central re-ran the "Vote or Die" South Park episode last night, it was hilarious, again. Even the commercials were funny. After months and months of running nasty, pandering political ads, candidates finally turned to saying nice things about themselves on the night before the election. Seriously, I don't watch much TV, but before last night I can't remember one political advertisement that wasn't geared toward tearing the opposite party a new rectum (damn near killed 'em). In the end I'm not sure who to vote for, all the choices seem to have terrible pasts. My strategy this year: write in all the winners of American Idol.
I'm no political analyst so don't expect much out of me re: elections. I can say this though...
The yield curve would like a little more balance in the House as a few more GOP'rs would increase the volume of spending discretion feedback in DC...either that or it'll just create more gridlock. Not that it's going to matter, QEII should trump all. Ugh. I loathe politics and have no idea why one would ever want to expose oneself to that life. Unfortunately....
“Those who are too smart to engage in politics are punished by being governed by those who are dumber.” -Plato
Moving on....
A strong start to the week went south yesterday as sellers who were looking to do a little pre-FOMC/election position squaring were unable to pair off with a willing buyer (well offered). The market lacked liquidity and it was obvious as dealers were forced to drop asking prices just to stabilize flows, which never really happened thanks to an uptick in originator hedging in the afternoon hours. Don't view this as pre-FOMC panic selling or a reason to believe the market is having second thoughs on QEII...it's coming.
Rate sheet influential MBS are coming off their price lows this AM but spreads are moving wider on the spot (vs. 5pm). Some desks might have spreads tighter but that would be flow related. The FNCL 3.5 is +0-06 at 100-05 and the FNCL 4.0 is +0-05 at 102-20. This is a key inflection point...
Treasury trading was uninspired in the overnight session even though the Royal Bank of Australia decided to ward off medium term inflationary risks by raising their cash rate by 25 basis points to 4.75 per cent. Other than mid-terms and the QEII there isn't much to talk about today. Trading volume is below average and flows are slow. Folks are in a holding pattern ahead of 2:15pm tomorrow afternoon.
The 10yr note is +0-11 at 100-10 yielding 2.588%. 2.60% was my pre-FOMC target and still is....
BEWARE: a quiet trading environment means the potential for chopatility is high.
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