March 29. Renewed focus on bank reforms?

Friday saw continued dollar strength, a slight rebound in fixed income prices, and new lows in eurodollar implied vol. Stocks were slightly weaker. Ten year yield declined from nearly 3.90% to 3.85%.   

–Today Personal Income is expected +0.1% with Spending +0.3%.  Payrolls on Friday expected +200k. 

–“Obama Housing Plan Seeks to Reduce Mortgage Debt”…headline from Reuters. This iteration comes as new home sales are at new lows, MBS purchases and tax credits ending.  Recipe for housing mkt strength?

–41 bank failures so far in 2010..”Likely to Accelerate” FDIC says.

–A positive NFP report on Friday will be hailed as proof of an economic turnaround by the administration, and indeed Industrial Prod is indicating a strong rebound (though Capacity is mired at only about 73%).  However, disposable personal income is deteriorating, confidence remains soft, and Obama’s approval rating is also in a downward trend.  As we approach midterm elections, it would seem to be an easy strategic choice to deflect negative attention from healthcare and other issues by drawing focus on reforms for the only group that garners lower public support than congress, namely the banking industry.  Higher treasury rates encourage banks to lend to the gov’t rather than make business loans, so it’s easy to say “Banks are withholding credit!”. Probably won’t be good for bank stocks.

Posted on March 28, 2010 at 5:13 pm by alexmanzara · Permalink
In: Eurodollar Options

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