All Things in Moderation

Vital Statistics:

S&P 500 down 35 points
Eurostoxx down 125 points
Oil down 2.50 to 90.67
10 year bond yield down to 2%
US dollar up 1%

Last week’s rally faded as investors began to have doubts over whether the rescue package would be enough to solve the crisis. In addition, Greek Prime Minister George Papandreou has decided to put the bailout to a vote. If voters fail to approve the austerity measures that are a condition to loan packages, it puts a disorderly default back on the table. The French banks are getting hit hard, with BNP down 4 1/2 euros to 28.33 and SocGen down 3.6 euros to 17.50. European LIBOR/OIS is at 86 basis points, approaching the peak of 90 in late September. I had mentioned previously that the fact that LIBOR/OIS wasn’t tightening was a warning sign.

MF Global (ex NJ governor Jon Corzine’s firm) has filed for bankruptcy after a large proprietary bet on Euro sovereign debt went wrong. This will certainly provide ammunition to the argument that the Volcker rule is a necessary safeguard to protect investors. While the death of MF Global is a hit to investor confidence, it does not appear to pose any systemic risk issues.

Edit:

Watch Jeffries (JEF). The stock is down 10% today on rumors of exposure to MF Global.

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