July 13. Risk of a sudden drop in funding…

–China’s GDP was reported +7.6%, slowest in three years. Zerohedge has an article with this note: “Take a range of key indicators – from electricity usage, to Shanghai container throughput, to nationwide rail freight ton-miles, to steel output – and you will notice that none of these shows a rate of growth during the second quarter of more than 4% from 2011, and some are as low as 1%.” Bloomberg also has a piece questioning the data. So we can’t completely trust figures from the engine of global growth, can’t trust banks’ interest rate settings, but at least the ratings agencies are on top of things: Moody’s cut Italy. “Italy’s near-term economic outlook has deteriorated, as manifest in both weaker growth and higher unemployment, which creates risk of failure to meet fiscal consolidation targets,” Moody’s said. “Failure to meet fiscal targets in turn could weaken market confidence further, raising the risk of a sudden stop in market funding.”
–The risk of a sudden drop in funding is likely to be a recurring theme globally. In the US, it may have immediate relevance for muni financing, given increased bankruptcy filings, for example I just saw that Oakland, CA is looking to borrow $211 million to cover pensions. And the central banks of the world can’t plug the hole if private lenders retreat without massive money printing.
–US rates continue to edge lower as US treasury auctions sailed through at historic low rates. Today’s news includes PPI expected +0.4 with Core +0.2.

Posted on July 13, 2012 at 3:33 am by alexmanzara · Permalink
In: Eurodollar Options

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