Things I worry about

There is useful info on twitter. Back in Dec, @groditi and I conference called the T market. Since then some interesting convos have bubbled up with bright minds like @interestarb and @michaelsedacca - @fullcarry a given.

Here's what's bugging me - The LSAP program currently running is absorbing a large percentage of the available issues in the buckets. For the Classic Contract the Fed will own over 40% of the deliverable issues and almost 40% of the CTD. In the Dime, and flirting into the 7 year, the Fed has "cornered" the 3 5/8 of 2-15-20. That issue is 2nd behind in the bucket (I believe- I haven't watched as closely as I did in my Carr Futures days). The Fed is a savvy player, (even if we view them as just another big clumsy one), and is careful to avoid current CTD paper. If you understand rolls, time could tighten up on them.

We still get a bit dyspeptic when we dwell on the topic too long. The Fed would never endorse forcing a short squeeze but continued action makes the PD-Fed auction/POMO relationship more delicate. On the other end of the spectrum is our already posted "surprise call" for 2013 that a fixed income flash crash occurs by way of TLT. As we "joked" yesterday, Jack Lew should ramp up FLTRS and consider a 50 yr  now that the Fed has replaced Twist  with Twyla Tharp free form dancing.

Follow all the above mentioned characters if you want to have a greater understanding of the world.


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