Posted on 10/15/2013 10:26:46 AM PDT by whitedog57
Class: Because of George Mason University’s screwy scheduling (no class today because Monday’s classes are now Tuesday classes because of Columbus Day), we can’t have our discussion of the impending US default.
Here are two curves as of 1pm EST, the US Treasury yield curve and the US credit default swaps curve. The Treasury curve is upward sloping while the CDS curve is downward sloping.
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If we look at 1 month ago, we see an upward sloping CDS curve.
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And if we compare the current curves compared to President Obama’s inauguration date, we see an upward sloping CDS curve as well.
If we look at the US 5 yr CDS, we see that it is not really noticeable.
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BUT if we look at the 1 year CDS, we see a spike, the worst since 2011.
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So, there you have it. A default is showing up in the 1 year CDS, but not the 5 year CDS. But the 1 year CDS still isn't as bad as 2011, when the Republicans last tried to hold the line on government spending.
Is it default or Janet Yellen?
Ping.
People who own/trade T-Bills at this time are nervous about ANY T-Bill whose maturity date is around the widely-hyped (and utterly fallacious) "default" date, i.e. Thursday. When the dirtbags Itchy Mitchy and John the Boner cave -- as they will -- the 'curve' will correct itself, "normalise" if you prefer, with lightning speed.
I've a similar "the bastards are going to cave" trade on at the mo. Long Nov VIX 16 puts, short Oct VIX 16 puts and short a few Nov 15 VIX puts to boot. The Octs go away tomorrow at the mkt open (worthless, thank you!) and VIX might shoot higher for a bit as uncertainty will rule the stock (haha) mkts. However, when Dirtbag#1 and Dirtbag#2 announce their surrender to the Supreme Dirtbag...Thursday AM as a guess, VIX is going to crash, and crash hard.
And yr hmbl srvnt should make a second (I already have one, with the expiration of the Oct puts) tidy little packet.
We shall see. Either I've got this analysed JUST right, or I'm having a slight case of terminal greed.
Stay tuned for more of our exciting tale!
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