Aug 22. Bond carnage continues; India Rupee plunging
–Selling pressure continued Wednesday in US fixed income after FOMC minutes as members were comfortable with Bernanke’s tapering plan. Just before the release, tens were at the highs of the session, but made new lows into the afternoon with further losses this morning as China’s PMI surprised to the upside at 50.1. Tens went above 2.92 this morning. Blue eurodollars fell 20 bps from just before FOMC to last night’s low. Eurozone data was also positive with PMI data the highest in two years.
–However, other Asian news is negative with the India Rupee continuing its dive to new lows. Indonesian rupiah also plunging, reminiscent of 1998. While one commentator noted that the positive employment report and last Jobless Claims were unknown at the time of the last Fed meeting (making the tapering case that much stronger), the Fed also didn’t know of subsequent EM dislocations. So while China and the EU may be stabilizing (may be…) other parts of the world are seeing increased stress that the Fed is sensitive to, so adjustment of bond buys is likely to be quite gradual.
–In any event, treasuries remain weak, with big jumps in open interest yesterday and firming of implied vol. Red/gold up over 6.5 to new high of 297. While there’s no question that higher mortgage rates will become a big headwind for housing, the steepness of the curve probably helps in some areas, and enhanced income could ultimately benefit underfunded pensions.
–News today includes Job Claims expected 329k from 320, PMI Mfg 53.5 and Leading Indicators expected +0.5. Jackson Hole confernece also starts, but there is little press about it as Bernanke isn’t attending.
–Interesting note from Breitbart.com, “Outside of the federal government’s Bureau of Labor statistics, the Gallup polling organization also tracks the nation’s unemployment rate. While the BLS and Gallup findings might not always perfectly align, the trends almost always do and the small statistical differences just haven’t been worthy of note. But now Gallup is showing a sizable 30 day jump in the unemployment rate, from 7.7% on July 21 to 8.9% today. ”
http://www.breitbart.com/Big-Government/2013/08/21/Gallup-Unemployment-jumped-from-77-to-89
