March 12. US considers selling strategic oil reserves…to China?
–Stronger than expected employment data (NFP 227k and previous revised higher to 284k) sent interest rates higher Friday, though closing losses were modest. Tens ended at 2.04%. Today brings a three year note auction, followed by tens and 30-yr bonds Tuesday and Wednesday. Retail Sales and FOMC announcement tomorrow. Statement is likely to sound the same cautious notes as January’s.
–China posted a trade deficit of $31.48 billion in February after reporting a $27.28 billion surplus in January. February is seasonally weak but exports slumped suggesting weaker growth for China as world demand eases. Oil imports were strong as China builds reserves (while the US considers selling from strategic reserves to mollify voters). The ultimate equation of China selling US bonds back to the Fed who will tuck them into the QE portfolio, so that China can buy oil essentially transferred from US SPR, probably won’t do much for prices at the pump.
–In a reminder that US municipal finances are still shaky, Reuters reports that “Pennsylvania’s distressed capital city, Harrisburg, will skip $5.3 million of debt payments due next week, the first time the city has defaulted on its general obligation bonds, to ensure there is enough cash to fund vital services.”
