Nov 19. Progress on fiscal cliff

–Hint of progress from Boehner was all it took in an oversold market to pop stocks higher on Friday. Interesting note from Ben White of Politico says the fiscal cliff will certainly be averted as Republicans understand that they will be blamed for higher taxes, and therefore will work out a deal. Selling related to beating capital gains tax increases has been ongoing, and may taper off, easing another source of pressure.
http://www.businessinsider.com/ben-white-the-fiscal-cliff-is-already-over-2012-11
–The mideast situation is the focus of intense cease fire diplomacy and thus far doesn’t seem to be spreading into a devastating regional conflict.
–Several articles note increased estimates of bad loans in Spain, but that info is likely reflected in the markets currently.
–In terms of the US economy (on a longer term macro timeline) this morning’s Wall Street Journal has this negative snippet in a lead article: “U.S. companies are scaling back investment plans at the fastest pace since the recession, signaling more trouble for the economic recovery.” And a piece by the San Fran Fed cites capital spending risks as well: “This pessimism appears to be showing up in orders for nondefense cap goods, which have fallen nearly 10% since their Dec 2011 peak. While this is nowhere near what one would see in a recession, declines of this magnitude are rare at other times. …raise the risk the economy will perform worse than we expect.”
http://www.frbsf.org/publications/economics/fedviews/fv20121108.pdf
–Bernanke speaks tomorrow at Economics Club with Q&A afterwards. Existing Home Sales today.
–The curve was marginally flatter, enough to mark new lows, with 2/10 just above 133 and red/gold pack spread down by 2.25 bps to just above 113. Some of the near one-yr eurodollar calendar spreads also posted new lows, with Dec/Dec, March/March, and June/June all below 10 bps.

Posted on November 19, 2012 at 5:16 am by alexmanzara · Permalink
In: Eurodollar Options

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