Duck and Cover

The Central Bank FX swap lines opened last Thursday will provide dollar liquidity but the situation is heating up. Sept. 20 could become a quick date for managed default in Greece. More meetings are scheduled and Papendreau returned to Athens but domestic unrest is moving from simmer to boil. We received several notes Thursday and Friday that showed little understanding of Swap line operations or risks. This bares watching as political opposition and Fed      bashing could increase under distorted facts.

Eurodollars expired today with a 35Bp LIBOR settle. 15Bp of roll down is evident into the new Dec front month. TIC data showed a 34B reduction in short term securities, so players are loosening up for Operation Twist. We are moving to a 50's style of defense called Duck and Cover. Covering is an important aspect because tape bombs of  new programs and Kumbiya moments will litter the rest of the week.

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