Macro Man is scuffling to put out a few fires in his portfolio today, courtesy of a painful expiration goolie-squeeze and the sort of correlation breakdown that was discussed in the comments section of yesterday’s 20 Questions.
While yesterday’s macro data was better, encouraging a bump in stocks and a drift lower in bonds, the real carnage was caused by the abrupt sell-off in the eurodollar strip, apparently courtesy of a broadening of the composition of the panel.
Perhaps Macro Man is a simpleton, but he struggles a bit to see why this should cause much a change to the existing LIBOR fixes. After all, the ICAP New York three month rate has been virtually identical to LIBOR all year after occasionally printing quite a bit higher last year.
Like many other market developments these days, perhaps it’s a function of positioning. Over the year’s, Macro Man has found that positioning can often explain the abrupt correlation shifts that are the bete noir of his management style. Speaking of which, once more unto the breach, dear friends….
Originally published at Macro Man and reproduced here with the author’s permission.