Oct 8. Weaker dollar causing cracks…
The loss of government census jobs is expected to cancel out growth in private payrolls leaving NFP estimated at -10k to 0. Private payrolls expected +80k.
–Outside day in gold. Possible reversals…
–New lows in near eurodollar calendar spreads. There was a good size seller of about 15k EDH1/EDZ1 spreads down to 23, settled 23.5. EDU11/EDU12 only 50.
–Headline on BBG: German exports fell as euro rose. So I guess the US strategy of depreciating the dollar isn’t working so well for other countries.
–NJ’s governor is scrapping a big public works project, a tunnel under the Hudson River, saying the state can’t afford the price tag. States are forced to become a lot more stingy with their budgets, cancelling out a large amount of the stimulus by the federal government. Raises the stakes in the relationship between states and fed’l gov’t.
–No end in sight on foreclosure debacle.
–The US Federal Reserve is now the biggest holder of US treasuries…even before QE2. Interestingly, the long bond rose a few bps in yield yesterday. The spread between tens and bonds is making new highs (I marked yesterday at 132). The long end is beginning to sniff out detrimental effects of a weak dollar. If the market ever does force US financing rates higher, it will be game over as interest rate expense will overwhelm the budget. Ten year TIP to Treasury note is 192 bps, near upper end of range. The policy of raising inflation may be starting to work, but without the hoped for economic growth.
