Oct 21. Delayed data week. Employment report on Tuesday
–Notable put buying Friday in euro$’s led to modest losses with blue pack (4th yr) the weakest at -3.75. There was a new buyer of both blue Nov and Dec 9775/9762 put strips in size of about 25k each. Delta of around 60 in Nov and 70 in Dec which translates into over 30k futures. Again, with a net change of less than 4 bps, one could say the market absorbed selling pressure fairly easily in front of Tuesday’s delayed release of employment data. (NFP expected 180k). Ten year yield nearly unchanged at 2.587.
–Interesting Lacy Hunt (Hoisington Mgmt/always bullish on fixed income) post on ZH. He notes that the Fed’s forecasts are consistently too optimistic, concluding that their models aren’t working due to too much reliance on the wealth effect, too much faith in impotent LSAP’s and too much US debt. http://www.zerohedge.com/news/2013-10-18/lacy-hunt-warns-federal-reserve-policy-failures-are-mounting Of course, the Fed’s response will likely just be “MORE”, a la Japan.
–JP Morgan settled with US gov’t for $13B, WSJ helpfully points out that banking profits are getting squeezed. Of the $13b, $9b goes to the US gov’t in fines, which covers less than a week of the deficit. BofA next up to bat with proposed $6b settlement.
–Japan posted record high trade deficit of 932 billion yen ($9.5 billion), the 15th consecutive monthly shortfall. (Slightly weaker yen this morning). A scan of other internat’l news is disconcerting. A city in NE China of 11 million, Harbin, which I hadn’t even heard of before has been shut down by heavy smog (RTRS). And from the Telegraph, “…54 per cent of the French believe that taxes – of which there have been 84 new ones in the past two years, rising from 42 per cent of GDP in 2009 to 46.3 per cent this year – now widen social inequalities instead of reducing them. …By 2014, France’s public expenditure will overtake Denmark’s to become the world’s highest: 57 per cent of GDP.” [Note: income of 46% GDP, outlay of 57%. Sustainable?] “Today, one out of four French university graduates wants to emigrate, “and this rises to 80 per cent or 90 per cent in the case of marketable degrees”.
