Jan 27. FOMC ignoring inflationary signals
The Fed remains fairly downbeat on the economy, and insists on maintaining that inflation measures continue to trend lower. In some parts of the world, for example North Africa, it appears as if food and energy prices actually mean something. And when deposed leaders flee, they do so with gold. But here in the US, our displeasure is registered by steepening the yield curve. New highs in red/blue and red/gold euro$ pack spreads. Red/gold nearing 300 bps, and there is not much on the horizon suggesting it will stop. 2/30 treasury spread remains close to 400 bps. Ten year yield rose 10 bps to 3.42%. Talk out of Washington suggesting budget cuts and freezes isn’t convincing to the bond market.
–S&P cut ratings on Japan, weakening the yen. New recent high in EUR/JPY.
–New Home Sales jumped, though this measure is taken when a contract is signed, not when the contract actually closes. Data was for December. Higher rates threaten to slow both existing and new home sales. Chart below makes the big picture look a bit more sobering than one month’s data release.
–Today’s new includes Jobless Claims 405k, and Durable Goods +1.5%. Seven Year note auction.
