FOMC leaves rates unchanged, pares another $10B

Financials: Dec. Bonds are currently 13 higher at 136’04, 10 Yr. Notes 5 higher at 123’28.5 and 5 Yr. Notes 1 higher at 117’28. Wed. pronouncements by the FOMC left rates unchanged for the foreseeable future, but language in the minutes indicated a projected rise in rates sometime next year raising the forecast for funds to 1.375% from earlier estimates of 1.125. That being said I want to note the Mar. 2016 Eurodollar futures are already priced at 1.360%. The Fed also continued their monthly paring of Bond and MBS by $10 billion dollars to $15B coming close to the end of quantitative easing. The immediate reaction was a rally then a break to new recent lows and a recovery from those lows putting the Bonds back to levels seen just prior to the release of the minutes. Equities rallied on the prospect of continued low rates. For the moment I feel that the interest rate vehicles are fairly priced and see no “edge” for making a trade. I will now look to go long Sept.2015/short Sept. 2017 Eurodollar spreads on a set back in the spread (the market will need to rally) to 186 premium the Sept. 2015 (the spread is currently at 200).

Grains: Dec. Corn is currently 1’6 lower at 336’4, Nov. Beans 6’4 lower at 965’0 and Dec. Wheat 5’2 lower at 483’2. We tried the long side fo Beans only to be stopped out with a 10 cent loss. We are also trying the long side of Dec. Corn with a protective sell stop at 331’4 for a short term trade.

Cattle: Oct. LC are currently17 higher at 155.82 after closing sharply lower yesterday. We remain long the Oct. LC 148 put, currently at 30 points and will look to take profits above 60 points.

Silver: Dec. Silver is currently 3 cents lower at 18.49, finding support just below the 18.30 level over the past few sessions. We remain long.

S&P's: Dec. S&P’s are currently 5.00 higher at 2009.50. We were stopped out fo a recent short position above the 1998.00 even level. The market has continued to rally on the prospect of continued low rates. Many market pundits (myself included) are looking at the market in wonderment trying to rationalize the long term implications of a market that shows profit because of cheap money and what will happen when this comes to an end. Monthly Fed bond and mortgage security purchases will soon be coming to an end and I feel that there will be a price to pay. I WILL note that I have already paid a price for this market opinion by being short basically from the 1920.00 level. I’m not a quant and can’t quote you what will happen to the bottom line of the avrage DJ or S&P company if over a 1-2 year period their cost of money should rise by 2-3%. Feel free to e-mail me if you have an opinion about this.

Currencies: I am currently on the sidelines.