It is difficult to recall a previous time that exhibited such uncertainty and hair-trigger responses. There are reasons to support major moves both up and down.

Interesting times but stressful - VHF

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Emerging Market Angst

John Jansen

October 22, 2009

One dealer reports the following:

RUSSIAN BONDS SOFT; HAIR TRIGGER SITUATION. HEAVY ISSUANCE COMING. DEALERS ARE POISED TO DUMP. INDIA ACKNOWLEDGING INFLATION…

Update: I just received that dealers full note:

THERE SEEMS TO BE A TOUCH OF NERVOUSNESS, ESPECIALLY IN EMERGING MARKETS. CHINA WAS URGED TO RAISE RATES IMMEDIATELY BY ONE OF THE HEADS IF ITS SMALLER (6TH LARGEST) BANKS. RUSSIAN BOND MARKET IS ON THE VERGE, WITH DEALERS POISED TO DUMP BONDS IF NO BUYERS SHOW UP. INDIA ACKNOWLEDGE THAT IT HAS TO LIVE WITH HIGHER INFLATION. GOVERNMENT BOND DEALERS ARE STILL WEEPING ABOUT HAVING TO BUY UPCOMING SUPPLY WITH OUT THE FED TAKING THEM OUT OF AUCTION POSITIONS. REUTERS FLOATED ONE OF THEIR PERIODIC WARNINGS ABOUT THE U.S. LOSING ITS “AAA.” PIMCO HAD A BLURB WARNING ABOUT A “DISORDERLY DECLINE” IN THE DOLLAR AND TECHNICIANS ARE WARNING ABOUT “KEY REVERSALS” IN U.S. STOCKS (LOTS OF WARNINGS!) BUT…THE ECB SAID THERE WAS NO INFLATION IN THE SYSTEM, FRENCH CONFIDENCE ROSE AND THERE IS TALK OF ASSET ALLOCATION OUT OF STOCKS INTO BONDS. WE ARE IN AND OUT OF THE FLATTENER GIVEN FRONT END SUPPLY AND WILL LOOK TO TWO STEP THAT INTO STEEPENERS AND OUTRIGHT SHORTS INTO THE NOVEMBER AUCTIONS OF 3′S, 10′S AND BONDS..