March 8. Payroll day
–Payroll day expected 170k with rate of 7.8%. Dollar/yen continues to make new highs (95.66) and EUR/JPY nearly at a new high today (125.50). US curve has tended to steepen as the yen weakens, yesterday was no different as tens rose 5 bps to 1.99%. Red/gold euro$ pack spread was up just over 6 bps to 164, nearly overtaking the recent high of 167.5. Stocks have also been correlated with yen weakness, with DJIA at new high (and Nikkei now over 12k).
–Jobless Claims yesterday were lower than expected and Consumer Credit higher than expected, perhaps foreshadowing a strong employment report today. However, the surge in Cons Credit is nearly all non-revolving (student loans and auto financing). The former went from 1928.4b to 1944.4, up 10% annual rate, while revolving went from 850.8 to 850.9, an increase of 1/10 of a percent. Not the picture of a strong consumer – who is substituting cheaper rate gov’t student loan debt for higher private credit card debt. Won’t end well as the gov’t is the lender on the majority of student debt (the Fed will just add it to the portfolio). According to ZH the only bank that didn’t pass the Fed’s Stress Test (results yesterday) was Ally, renamed from the ashes of GMAC, a result of the gov’t takeover of GM. The US gov’t is not a good lending agent, but one heck of a borrower…
–In terms of today’s job data, I would suspect a strong result as fast food restaurants shifted full time workers to part time status to avoid Obamacare, and the new part timers had to get other part time jobs, which now became available at other businesses for the same reason… (and they took student loans to tide them over. Ta-daa….the dynamic US economy!
–In eurodollars the midcurve March 99.625 straddle traded just 2.5 bps (underlying contract EDH4 which was trading 9961.5). Amazing that with one week until expiration, in front of the biggest economic report of the month, that the straddle on a contract one year forward would trade only 2.5!
