Wednesday, December 8, 2010
Ten Year Demand is Weaker, Yields Rising
From Bloomberg/Econoday: Results for the $21 billion 10-year note auction (a reopening of the
2.625 percent November issue) are no better than average. Coverage of
2.92 is up slightly from the prior auction yet is still the second
lowest since the February auction. Buyside participation is right at
averages with the group taking down 56 percent of the auction. At 3.340
percent, the auction stopped out right at the 1:00 p.m. ET deadline.
Tomorrow the Treasury auctions $13 billion of 30-year bonds. Treasury
prices moved slightly higher following the results.
Monday, December 6, 2010
One Eye on The Fed: Now An Ally?
Bernanke has gotten a lot of resistance about the latest round of quantitative easing (QE2) since it was formalized on November 3. This weekend he has talked about the FOMC commitment to their strategy. Here are some statements attributed to the Fed Chairman from the transcript of his appearance on "60 Minutes". On the current condition of the mandated concerns of the Fed he said U.S. unemployment may take five years to fall to a
normal level and that Fed purchases of Treasury securities
beyond the $600 billion announced last month are possible (emphasis added).
We knew that unemployment has grown to be such a deep problem that it will be several years to recover to more normal levels. What is a more enlightening message is that the Fed does not have a ceiling on the amount of the current QE program. In other words, there is no backing away from, or hesitation to use as much new currency as is necessary to reflate the economy.
“Because the Fed is acting, I would say the risk is pretty low” of deflation, Bernanke said. “But if the Fed did not act, then given how much inflation has come down since the beginning of the recession, I think it would be a more serious concern.”
Bernanke said he is “100 percent” confident that, when necessary, the central bank can control inflation and reverse its accommodative monetary policy.
“We’ve been very, very clear that we will not allow inflation to rise above 2 percent,” he said.
“We could raise interest rates in 15 minutes if we have to,” he said. “So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time.”
“That time is not now,” he said.
We knew that unemployment has grown to be such a deep problem that it will be several years to recover to more normal levels. What is a more enlightening message is that the Fed does not have a ceiling on the amount of the current QE program. In other words, there is no backing away from, or hesitation to use as much new currency as is necessary to reflate the economy.
“Because the Fed is acting, I would say the risk is pretty low” of deflation, Bernanke said. “But if the Fed did not act, then given how much inflation has come down since the beginning of the recession, I think it would be a more serious concern.”
Bernanke said he is “100 percent” confident that, when necessary, the central bank can control inflation and reverse its accommodative monetary policy.
“We’ve been very, very clear that we will not allow inflation to rise above 2 percent,” he said.
“We could raise interest rates in 15 minutes if we have to,” he said. “So, there really is no problem with raising rates, tightening monetary policy, slowing the economy, reducing inflation, at the appropriate time.”
“That time is not now,” he said.
Market Data: Week Ending Dec. 3, 2010
| Market Index | 2009 Close | 12/3 Close | Week Change | Simple YTD % |
| Dow Industrials Avg | 10428.05 | 11,382.11 | 2.62% | 9.15% |
| S&P 500 | 1115.1 | 1,224.71 | 2.97% | 8.95% |
| Fed Funds Rate | 0.25% | 0.20% | 0.00% | 0% |
| 10 yr T-note Yld | 3.85% | 3.01% | 0.14% | -0.84% |
| 5 yr T-note Yld | 1.61% | 0.08% | ||
| 5 yr TIPS - 'Real' Yld | -0.15% | 0.06% | ||
| Implied 5 yr Inflation % | 1.76% | 0.02% | ||
| 2 yr T-note Yld | 1.14% | 0.47% | -0.04% | -0.67% |
| 2-10 Yr Slope | 2.70% | 2.54% | 0.18% | -0.16% |
| 90 day T-bill Yld | 0.13% | -0.02% | ||
| Gold ($/oz) | $1,096.95 | $1,406.20 | 2.98% | 28.19% |
| WTI Oil ($/brl) | $79.36 | $89.19 | 6.48% | 12.39% |
| VIX "Worry Index" | 21.68 | 18.01 | -18.95% | -16.93% |
| Credit Spreads | 12/3 Close | Week Change | ||
| Inv Grade Credit Idx | 4.68% | 0.04% | ||
| Low Grade Credit Idx | 8.23% | -0.21% | ||
| Markit CDX Inv Grd Idx | 92 | -1.08% | ||
| Markit CDX Mid Grd Idx | 147 | 0.68% |
Saturday, December 4, 2010
The Gold Express
Today's chart
(provided by Chart of the Day) provides some long-term perspective in regards to the gold market. As
today's chart illustrates, gold has been in a strong bull market since
2001. The pace of that upward trend increased beginning in mid-2005.
Following the financial crisis of late 2008, gold surged back up to
resistance of its accelerated uptrend (see red line) -- a 100% gain in
just over two years. After having tested the upper bounds of its
accelerated uptrend, gold has pulled back -- another failed test of
resistance. Over the past week, however, gold has resumed its upward
trend and is once again approaching/testing resistance.
Wednesday, December 1, 2010
Open Thread Comments
Barry Ritholtz posted an invitaion to readers today. The invitation asked for comments about the advance of stock indexes today. He attracted some comments that I find informative and worthy of capturing for my future reference. He posted a chart like this one and then got some great comments.
Here are the comments referred to:
Here are the comments referred to:
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