Feb 3. Strong employment report (NFP +243k with 8.3% rate)
–Bernanke was generally downbeat in comments to Congress yesterday, noting that fiscal trends were unsustainable and warning about health care costs.
–US rates were little changed in front of today’s payroll report, expected 130-150k with rate of 8.5%. There was quite a bit of protective buying in blue midcurve put spreads after the recent rally, for example 40k 3EH 9875/9850ps (3.5s) and 10k 3EZ 9800/9750ps (9.0s). Non mfg ISM expected 53.3. [Actual NFP +243k…ten year note jumped from 1.83% yesterday close to 1.93% as of 10:00 CST]
–Gold is now around 1760, having started the year at 1600, a 10% jump. Easy money policies have juiced commodities and emerging market equities. Brazil ETF up about 13%. From BBG: “…futures contracts on 24 commodities from oil to copper rose 9.3 percent last month, the most since January 2006 …Gold and silver had the best start to a year since 1983, orange juice posted its biggest rally in more than three decades, the LMEX gauge of six industrial metals rose the most since 2006, and cattle futures advanced to a record.”
–Two Fed presidents at opposite ends of the spectrum commented on QE3 yesterday, Chgo’s Evans open to more accommodation and Dallas’ Fisher against. Even though against, ZH noted that Fisher is appropriately hedged: long over $1m GLD etf!
–From Mish Shedlock: “American Airlines needs $18.5 billion to cover its pension promises but it has only set aside $8.3 billion. That is a shortfall of $10.2 billion on $18.5 billion. In other words, a haircut of 55% on pension benefits will fix the problem.” The question is whether taxpayers should be on the hook (thru PBGC) for AAR’s pensions. The bankruptcy court is thus far saying no, but it seems that in the realm of public employees the answer is always Yes. Highlights the pension problems confronting many govt agencies…
