Thursday, December 09, 2010

Initial Jobless Claims: Survey 425k Actual 421 Prior 436 Revised 438

The spike in ten year yields is the biggest story in the market over the past few days. – JPM

Yields have moved 89 basis points (.89%) off the lows, the majority of which has taken place in the last
month. At least three things could be driving this move in higher yields: improving economic is driving up
growth estimates, eurozone fears are abating, longer term fears over the deficit and inflation. I’m sure
there are some other drivers. My best guess as to what has been the driver over just the past week or so
is that growth estimates have been raised on the back of improved data and clarity on tax cut
extensions. If that is correct then rates are rising for the ‘right’ reasons (higher growth expectations) as
opposed to the ‘wrong’ reasons (higher deficits, out of control inflation, etc.).

Yen and Won Purchases: Is China Diversifying its FX Reserves? – China bought a net 262.5 billion
yen (US$3.1 billion) in Japanese bonds in October—following sales of 2.79 trillion yen (US$34.3 billion) in
Japanese bonds in August and September—and a net 556 billion won (US$490 million) in Korean
Treasury bonds in November, more than tripling its South Korean debt holdings so far in 2010. – Roubini
Global Economics
WSJ warns that investors should beware the end of the global savings glut – in the coming years,
emerging market countries are going to be ramping up their domestic investments while at the same
time those countries will start to save less. This will mean a reversal of the global savings glut and an
end to the abundance of cheap capital. – WSJ
The tax plan is said to be gaining momentum in the Congress towards passage. Sen Majority
Leader Reid late in trading on Wed said he would like to bring the bill to the floor for debate/vote by Fri.
In the House, Politico says that Dems have resigned themselves towards the measure passing and
certain pockets of the party have “quietly” signaled their intent to vote in favor. – Politico
More than half of Americans want Fed reined in or abolished – Bloomberg