Financials: Sept. Bonds are currently 20 higher at 125'31. It is my feeling that the Bonds are higher this morning because of the G-20 meeting in Toronto over the weekend. Growth a priority, but action is needed on controlling deficits. Advanced countries have committed to plans that will at least halve deficits by 2013 and stabilize or reduce government debt-to-GDP ratios by 2016, G-20 leaders said in a communique following the 2 day summit.
How will this be accomplished? The first thing that comes to my mind is printing money, raising taxes and keeping short term debt at near record yields. This makes me think that over the long term the yield curve will widen with long term interest rates (5 yr., 10 yr., 30 yr.) heading higher and short term rates (t-bills, Eurodollars, 2 Yr. Notes) staying relatively stable. We remain short Sept. Bonds and short the Sept. Bond 122'00 put. On Friday we bought back our short 120'00 and replaced it with a sale of the 122'00 put.
Grains: On Friday Nov. Beans closed unchanged, Dec. Corn 4 cents lower and Dec. Wheat 6 lower. Over night Beans were 1 higher, Corn 3 lower and Wheat 2 lower. Good weather/excellent crop conditions continue to keep a lid on prices. We remain on the sidelines as far futures are concerned and continue to hold out of the money call spreads in Nov. Beans.
Cattle: On Friday Live and Feeder Cattle were slightly to moderately higher with Feeder Cattle out pacing Live Cattle to the upside. We continue to remain on the sidelines awaiting a break in Aug. Cattle below the 87.50 level to re-instate a long position. Producers should continue to hold out of the money put positions and consider adding to their positions by selling out of the money calls on any further sharp rallies from present levels.
Silver: Sept. Silver (July is deliverable at the end of the week) is currently 1 cent higher at 19.18. My only recommendations remains the combination of long the Dec. Silver 20/22 call spread and short a mini silver futures contract.
S&P's: Sept. S&P's are currently 5.00 lower at 1069.75. Near term support is currently the 1065.00 level with longer term support in the 1040.00-1050.00 area. I am currently on the sidelines but leaning toward the long side of the market for short term trades on sharp breaks.
Currencies: As of this writing the Sept. Euro is 55 lwoer at 1.2388, the Swiss 89 higher at .9244, the Yen 34 higher at 1.1234 and the Pound 39 higher at 1.5077. We remain short the Sept. Euro 1.28 call. I will also be looking to the short side of the market in the Sept. Yen above the 1.1250 area.