April 13. QE…it’s not about bonds, it’s about stocks
April 13. Crude oil slid another $4 bbl yesterday on long liquidation and other ‘risk assets’ also weakened. Five year note fell 9 bps to 2.22. Tens are back to 3.50%, down 7 bps.
–Bernanke is quick to point to higher stock prices as evidence of QE success. On the other hand, he disowns the negative impact of higher commodity prices. In any case, the correlation in prices hasn’t been lost on the market, and as GS has advised lightening up on oil, etc and MS has cut Q1 growth estimates, it appears that the big guys equate the end of QE not with higher RATES, but with lower commodity and stock prices. In turn, bond prices may rally…it’s been an ironic fact that the price of the asset the Fed has ‘targeted’ has gone the opposite direction from stated intentions. It is the impact on tangential assets that matters.
–The IMF says the US lacks credibility on debt on the eve of Obama’s speech (today) to reveal deficit reduction plans. Detroit is facing cuts or collapse, and may have to be taken over by Michigan, (which in turn will be bailed out by the US). KC Fed’s Hoenig stated the obvious: big banks are gov’t sponsored enterprises, and (gasp) actually wants to restrict their activities. http://ca.news.yahoo.com/big-banks-government-backed-feds-hoenig-20110412-112137-434.html
–Today’s news includes Retail Sales expected +0.5%, 10 yr note auction, and Beige Book.
–From a zerohedge article:
Gallup’s conclusion is absolutely spot on: ‘Global events, continued political battles about the budget in the nation’s capital, and a weak, if modestly improving job market add to consumer uncertainties. As a result, it is not surprising that consumer confidence plummets even as Wall Street continues to do well. However, if consumers continue to lack confidence and spending doesn’t increase, it is hard to see how the U.S. economy can continue its modest improvement. In turn, it would seem Wall Street and Main Street will have to align at some point going forward. Either Wall Street will prove right and economic conditions on Main Street will improve or the reverse will prove to be the case.”
