Some funny business going on with that S&P downgrade of US credit rating.
http://www.marketoracle.co.uk/Article29477.html
Standard and Poor’s Should Not Be Able to Play Kingmaker in the 2012 Election | Firedoglake
http://www.marketoracle.co.uk/Article29477.html
Jack Barnes writes : Someone dropped a bomb on the bond market Thursday - a $1 billion Armageddon trade betting the United States will lose its AAA credit rating. In one moment, an invisible trader placed a single trade that moved the most liquid debt market in the world. The massive trade wasn't placed in bonds themselves; it was placed in the futures market.
The trade was for block trades of 5,370 10-year Treasury futures executed at 124-03 and 3,100 Treasury bond futures executed at 125-01. The value of the trade was about $850 million dollars. In simple terms, if that was a direct bond buy, no one would be talking about it.
However, with the use of futures, you have to have margin capacity behind the trade. That means with a single push of a button someone was willing to commit more than $1 billion of real capital to this trade with expectations of a 10-to-1 return ratio. You only do this if you see an edge.
This means someone is confident that the United States is either going to default or is going to lose its AAA rating. That someone is willing to bet the proverbial farm that U.S. interest rates will be going up. I believe what happened is a debt-ceiling deal was done in Washington and leaked to a major proprietary trader. Everyone knows the debt negotiations in Washington have been an extreme game of brinksmanship between political parties, but now someone knows how that game played out.
This had the hallmarks of one of the largest bond shops in the world knowing something the rest of the market didn't. The number of shops or even central banks that can take on this level of market risk is extremely small. Some that come to mind are hedge fund manager John Paulson, Bill Gross's PIMCO, and the U.S. and Chinese central banks. Paulson already scored big - about $6 billion big - on a similar trade years ago when he bet against subprime mortgages, the investments that helped bring down Lehman Bros. and many other investors. Whoever was behind it wanted a trade on ASAP, and didn't care about the ripples they would cause.
That and this:The trade was for block trades of 5,370 10-year Treasury futures executed at 124-03 and 3,100 Treasury bond futures executed at 125-01. The value of the trade was about $850 million dollars. In simple terms, if that was a direct bond buy, no one would be talking about it.
However, with the use of futures, you have to have margin capacity behind the trade. That means with a single push of a button someone was willing to commit more than $1 billion of real capital to this trade with expectations of a 10-to-1 return ratio. You only do this if you see an edge.
This means someone is confident that the United States is either going to default or is going to lose its AAA rating. That someone is willing to bet the proverbial farm that U.S. interest rates will be going up. I believe what happened is a debt-ceiling deal was done in Washington and leaked to a major proprietary trader. Everyone knows the debt negotiations in Washington have been an extreme game of brinksmanship between political parties, but now someone knows how that game played out.
This had the hallmarks of one of the largest bond shops in the world knowing something the rest of the market didn't. The number of shops or even central banks that can take on this level of market risk is extremely small. Some that come to mind are hedge fund manager John Paulson, Bill Gross's PIMCO, and the U.S. and Chinese central banks. Paulson already scored big - about $6 billion big - on a similar trade years ago when he bet against subprime mortgages, the investments that helped bring down Lehman Bros. and many other investors. Whoever was behind it wanted a trade on ASAP, and didn't care about the ripples they would cause.
Standard and Poor’s Should Not Be Able to Play Kingmaker in the 2012 Election | Firedoglake
Standard and Poors is evidently meeting with high-stakes gamblers and letting them know where to place their bets as they manipulate the global economy. But they are also playing a much more sinister game. Like a cat toying with a mouse, they are also inserting themselves in the political process and setting themselves up to be kingmaker in the 2012 election. An item in Politico’s Morning Money caught my eye:
If these reports are correct, S&P is meeting privately with big investors and giving them information that they are not giving the public about about what their research says, what position they will take, and what they intend to do with regard to a potential credit downgrade of US debt. This appears to be “selective disclosure” to big investors on the part of Standard and Poor’s. And while putting a $4 trillion number on a deficit reduction package might be in violation of the IOSCO code of conduct, “selective disclosure” is in violation of SEC rules.
Looks like more Wall Street shenanigans.BEHIND THE MUSIC – S&P’s John Chambers has met with a number of big investors include Pimco’s Mohammed El-Erian. Apparently he is telling them he prefers Reid’s plan.
CNN’s Erin Burnett also tweets that the “source who met with Standard and Poors says SIZE of Boehner plan is the problem.MIGHT not be enough to avert downgrade,needs to be closer to $3TR all at once.”
If these reports are correct, S&P is meeting privately with big investors and giving them information that they are not giving the public about about what their research says, what position they will take, and what they intend to do with regard to a potential credit downgrade of US debt. This appears to be “selective disclosure” to big investors on the part of Standard and Poor’s. And while putting a $4 trillion number on a deficit reduction package might be in violation of the IOSCO code of conduct, “selective disclosure” is in violation of SEC rules.
