February 2. Looking for the ballpark
–Rates pushed higher yesterday with tens up nearly 4 bps to 196.4. On the eurodollar strip, reds through golds were down 4 to 5.5 bps as longs pared back. Volume was light, with a stubborn bid in stocks despite a renewed sell off in oil. Economic news was soft, with Mfg ISM at only 48.2, and prices still stuck at last month’s 33.5.
–Fischer was pretty balanced, saying that previous bouts of volatility had “left little permanent imprint on the economy.” But he noted the Fed is closely monitoring global economic and financial developments and assessing their implications…for the balance of risks to the outlook.” On January 6th, he said that four rate hikes in 2016 were in the ballpark. Less than a month later, things are back to being data dependent, and, with EDH16/EDH17 one-year calendar at just 30 bps, the market is leaning towards one or maybe two hikes over the year. So now he barely knows where the ballpark is.
–Item on Reuters says that more than just energy companies are cutting back on capex plans.
http://www.reuters.com/article/us-usa-results-capex-idUSKCN0VB0CZ
–Bloomberg reports that China is allowing home down payments as low as 20% in a bid to spur the real estate market. Conservative, as compared to the US. However, there was another article that said Hong Kong real estate prices had fallen 10% from their peak just four months ago. So maybe 20% isn’t quite as large of a cushion as it seems.
–DB’s Jim Reid raises the possibility of negative rates on european corporate bonds. Capitalism turned completely on its head? It would seem to be a simple admission of no opportunities for growth. By comparison 80 bps for US 2’s seems downright generous.
