March 4. Watch out for a BIG payroll number

Employment situation today with NFP expected +180-200k.  However the market appears to be leaning towards a much higher number, perhaps more like 350k.
–Trichet said the ECB might have to raise rates to combat inflationary pressures, and an April hike is possible. Trichet’s comments, along with a sharp drop in Jobless Claims pushed the US ten yr yield up 11 to 3.57.  Also, Atlanta Fed’s Lockhart said he wouldn’t favor ending the QE program before June… “The economic situation makes the subject of whether to cut it short probably more debatable than whether to extend it,”  The curve was only slightly flatter as a near term rate hike in the US is unlikely.
–My own view is that a significant yield back up, if it should occur in reaction to a big payroll number, would provide a buying opportunity.  This feels to me somewhat like late 2007, when oil was screaming higher and stocks began to trade with more volatility before succumbing to the subprime debacle and financial crisis.
–A couple of other minor notes: Geithner said the US could tap its strategic oil reserve if supplies are disrupted.  Also, I saw somewhere that GM is again offering 0 % financing.  The US is addicted to cheap oil and cheap money…can’t always have both.  There was also an interesting piece in the NYT yesterday by Simon Johnson saying that the NY Fed is arguing against increased capital requirements for banks, creating a rift within the Fed and other institutions that find increased capital prudent.  The implication is that the Fed is doing the bidding of TBTF banks…another instance of demand for cheap financing without pain.
http://economix.blogs.nytimes.com/2011/03/03/is-the-new-york-fed-making-a-big-mistake/?partner=rss&emc=rss

Posted on March 4, 2011 at 5:26 am by alexmanzara · Permalink
In: Eurodollar Options

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