A breakout move in sex scandals has pushed the debt problem off the front page. We expect PIIGS and debt ceiling news to re-take the headlines at any time. The strong move in rates product that began in April has yet to experience a meaningful test. We get the feeling that test is coming soon.
The extreme volatility in currencies and commodities will slosh back toward the term structure, eventually. The elasticity of the market to the activity will be key. Quietly, we feel the low rate environment is helping stabilize the Q1 pullback. A flurry of PUT activity in the 2012 and 2013 structures has kicked up. We like a little exposure to the concept of money rates other than 0.
Tom Petty had it wrong. This is the easy part. The fun is about to start.