Sometimes, it's possible to overthink this business.
Maybe it's the case that this angry missive from Congress to Geithner ... encouraged China to stay away from this week's auctions, which led to this rather ugly auction ... which produced this rather ugly price action:
(Click to enlarge)
Maybe it really is that easy sometimes. Late last year, Macro Man decided to put a little capital on what seemed like an all-too-obvious trade: short govvys of profligate Anglo-Saxons versus long govvys of Calvinistic Teutons.
The chart below shows the yield premium of the "short basket" versus the long Bonds (note that the different maturities reflect the cheapest-to-deliver of the relevant futures market).
(Click to enlarge)
As you can see, the basket's widened some 45 bps in 3 months. Not bad at all for a trade designed around the simple question of "which market is going to see the most new issuance hit the private sector relative to 2009?"
Obviously, the trade was helped yesterday by the poor auction and by A Darling's "I am out of a job anyway so I really can't be arsed, to be honest" budget yesterday.
Sometimes, the best trades really are that simple ...
Disclosure: No positions
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