Daily Clueless Musings 6/9

This breathless rally finally paused for a day with the help of rumors about Greek austerity plan and a worse than expected 30 year auction. Initial claims edged up to 427k. After a large swing in the data late in April that was caused in part by some temporary distorting factors, claims have stabilized around 425k, signaling some deterioration in the labor market relative to earlier in the year. Unlike Bernanke's burying your head in the sand strategy to inflation, upside inflation risks prompted "strong vigilance" from the ECB, setting the stage for a July rate increase, which also add pressure on Eurodollar futures. The release of Q1 Fund of flow showed some interesting factors. Debt of the domestic nonfinancial sectors inched forward at only a 2.3% annual pace last quarter, the third slowest quarter in over half a century. Nonfinancial corporations bought back shares at a $332 billion annual rate. As the debt owed by state and local governments contracted at a 2.9% rate, the fastest pace of decline since 1996, there is a lack of balance sheet expansion to absorb fresh savings in the private sector, which can partially explain the negative real rates environment. Vols were firm as futures traded lower. Front whites were under selling pressure. Paper bought green u call spread in the morning.