Many have recently been surprised by the spiking volatility in Treasuries and have queried how best to keep track of these daily swings. As Zero Hedge points out almost daily, the 2s10s chart is much more exciting than the boring flatline that equities have become. A good and simple way to keep track of Treasury vol, is through the Merrill MOVE index. The MOVE definition: “yield curve weighted index of the normalized implied volatility on 1-month Treasury options. It is the weighted average of volatilities on the CT2, CT5, CT10, and CT30.”
I present the 6 month chart of the MOVE index below: obviously the spike in daily Treasury vol has not gone unnoticed: just yesterday MOVE had a 15% one day rise. As traders relish volatility and hate flatlines, is it possible that soon all the intraday action will migrate out of equities and go into treasuries?
An interesting overlay is that of MOVE with the VIX. Curiously while the two have historically correlated with a decently high R, the action over the past 2 weeks is a very distinct outlier. Could there be something more here than simple inflation/China fears? Zero Hedge will inquire further.
VIX – MOVE correlation chart:
Joe Weisenthal and Kamelia Angelova
The government won’t let the Detroit car companies die because they’re part of our history, and it’s a matter of national pride. But we do have successful car manufacturing in this country. As this chart shows, we’re nearly at the point where transplant (Toyota, Honda, Nissan, etc.) American production is surpassing the domestic production of the Detroit Three. They may be called transplants, but they employ American workers, pay US taxes and have plenty of American shareholders. They’re American in everything but the history.
From the NAR: Pending Home Sales Up for Three Months in a Row
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in April, rose 6.7 percent to 90.3 from a reading of 84.6 in March, and is 3.2 percent above April 2008 when it was 87.5.
…
[Lawrence Yun, NAR chief economist] cautions that the reporting sample for pending home sales is smaller than that of existing-home sales, so it is subject to greater variability. “In addition, the relationship between contracts on pending home sales and closings on existing-home sales is taking longer than in the past for several reasons,” he said. “Mortgage processing time has increased, it is taking many months to close on those homes requiring short sales with lender approval, and some sales are falling through at the last moment.”
Joe Weisenthal of Clusterstock
Bank of America (BAC) says it’s raised $33 billion of the $33.9 billion demanded of it by the stress tests. Pretty impressive that just a few months ago seemed like it could be a slip away from out-and-out nationalization.
Here’s how it got there:
- $9.5 billion from preferred stock conversion.
- $13.5 billion from common stock sale
- Gain from the sale of China Construction Bank.
- $2.1 billion tax gain.
- $1.3 billion from dividend savings
- $2 billion from other dispositions.
The announcement, which is colorfully titled “Bank of America to Comfortably Exceed Capital Target” doesn’t explicitly give a timeline for leaving TARP (which may come sooner than any of us could’ve have expected just a couple months ago), but it says the goal is to unbridle itself from the government as soon as possible. It also notes that it’s sold non-FDIC guaranteed debt, a key TARP-removing requirement.
GM is set to announce the sale of Hummer for $100-$200 million at some point today, marking the most anyone paid for one of those since Eliot Spitzer. As Zero Hedge reported, based on GM’s optimistic cash burn projections, this will plug the hole…from 10-15 hours of operation. Regardless, the 3,000 jobs saved by the sale of the too big to fail gas guzzler will be very happy.
Also, in data that will provide more statistical joy for Marla, the Minneapolis Star reporting that GM will increase the number of dealers to close from 1,100 to 2,600. It is yet unclear when all the additional dealers will start seeing their termination notices. The adverse impact on income tax and employment readings for states that house the largest amount of dealers will likely have to be pre-spun by CNBC as yet another support pillar for the rally. Something tells me the 3,000 jobs saved by the Hummer white knight will, as always, be a drop in the bucket, compared to those lost by this, very likely to be litigated, initiative.
Lastly, the U.S. taxpayer will be providing up to $115,000 in incentive and severance payments for tenured GM workers, according to the Kansas City Star.
GM is offering $20,000 cash and a $25,000 car voucher to production workers who decide to retire with their benefits.
For skilled-trades workers, the cash portion of the retirement package is $45,000 with the same car voucher.
For those not eligible to retire, GM also is offering more cash to walk away and sever all ties with the company, along with the $25,000 car voucher.
Employees with less than 10 years could get $45,000. Those with at least 10 years but less than 20 are being offered $80,000. For those with 20 years or more, it’s $115,000.
Those with 28 or 29 years at GM are being offered a bridge to retirement, with the company providing a monthly gross wage of $2,850 or $2,900 until qualifying for retirement.
So much for those massive sacrifices undertaken by the UAW to make GM such a modern, streamlined company.
# Gold gains to three-month high as weaker dollar boosts demand
# UK stocks fell as Barclays Plc’s Abu Dhabi investors sell $6.8 billion of the lender’s shares.
# U.S. consumer spending declines 0.1%; incomes unexpectedly Increase 0.5%
# Bank of America wins in $1 billion-plus California lawsuit
# Fed: Banks must raise capital in share sales before repaying TARP aid.
# Chrysler moves closer to exiting bankruptcy protection
# Citigroup Inc (CN) told about five former top executives that they will not be paid tens of millions of dollars in promised severance payouts
# Citigroup’s 45% treasury stake helped prompt its ejection from Dow Index.
# EMC makes $1.8B Data Domain offer, setting up NetApp bidding war.
# GM files for bankruptcy in bid to regain profits with $50B US aid.
# GM to announce tentative Hummer sale for an undisclosed sum to an unnamed buyer.
# GM, Citigroup will be replaced in DJIA by Cisco, Travelers.
# Goldman Sachs Group Inc. (GS) raised US$1.9B from selling shares in Industrial & Commercial Bank of China Ltd.
# Obama: GM won’t be permanent ward of state.
Keep a close eye on how the JPM’s $5 Billion Capital raise will effect these triple leveraged players. It seems that the Direxion Daily Financial Bull 3X Shares (NYSE: FAS) and Direxion Daily Financial Bear 3X Shares (NYSE: FAZ) will have to deal with the swings of one more large offering as JPMorgan looks to be the largest component of these two Triple-Leverage ETF’s.
As Jon OGG of 24/7 Wallst points out “Day traders and ETF investors need to pay attention here. If JPMorgan’s common stock swings too far in either direction, be sure to look for how this can exaggerate a move in the FAS/FAZ triple-leverage ETF’s. JPMorgan looks to be a significantly higher portion of the base index the ETF follows, which is the Russell 1000 Financial Services Index”
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Strong Uptrend
Direxion Daily Financial Bull 3X Shares (NYSE:FAS)
Smart Scan Chart Analysis confirms that a strong uptrend is in place
JPMorgan Chase & Co. announced today that it intends to raise $5 billion in common equity to satisfy a supervisory condition that the largest bank holding companies redeeming TARP (Troubled Asset Relief Program) preferred capital demonstrate access to the equity capital markets. While approval has not been granted, the company believes that upon completion of this capital raise it will have satisfied the criteria for fully redeeming the TARP preferred capital and expects to do so before the end of June.
FREE Trend analysis for JPM Here
JPMorgan Chase expects to have Tier One Capital of approximately $118 billion or 9.3% and Tier One Common of approximately $93 billion or 7.3% at the end of the second quarter, after the capital raise and the TARP preferred capital redemption. The company also expects to maintain its extremely strong capital ratios, even in the event of a more highly stressed environment over the next two years.
Cell Therapeutics announces Pixantrone “significantly increases” complete remissions, overall response rates, frequency of durable remissions and progression free survival (CTIC) 1.58 +0.15 : Co announces at the 2009 ASCO Annual Meeting for the first time since the top-line data were released, complete pivotal phase III results of CTI’s EXTEND clinical trial of pixantrone in relapsed or refractory aggressive non-Hodgkin’s lymphoma were presented by Principal Investigator, Ruth Pettengell, M.D. of St. George’s Hospital, University of London.
FREE Trend analysis for CTIC Here
