May 22. Bernanke testimony before JEC

–The Bernank appears before Congress today and FOMC releases minutes of its last meeting.
–The BoJ “affirmed a plan to double the monetary base, pledging to adjust policy as needed after a jump in bond yields threatened to undermine stimulus… BOJ Governor Haruhiko Kuroda told reporters in Tokyo that the central bank will conduct its debt purchases in a flexible manner, and that the recent volatility in government securities isn’t yet affecting the economy” from BBG.  JGB yield still around 88 bps.
–Yesterday morning yields were slightly higher in the US, but slipped back after Bullard endorsed QE as a policy choice. While economic data in the US is mixed to soft, equities are on a tear and housing is buoyant. The catalyst for a shift to higher US rates is the (Fed’s) realization that QE policies can sow the seeds of future risks.  I think several officials have taken that position, even Yellen recently mentioned risks.  In Japan these risks have become apparent as JGB yield doubled from the low and some companies have pulled bond offerings. This is probably a good opportunity for Bernanke to signal a move to greater flexibility (specifically QE reduction). He can set the stage for incremental changes at the June meeting, which includes a press conference, and gradually pave the way for a new Fed chief to take over next year with a somewhat more normalized policy.  Recall he will not be at Jackson Hole in August, and the FOMC in July does not have a press conference.  The next FOMC with press is Sept 18.

–An interesting political comment out of Citadel’s chief, Ken Griffin, in the Chicago Tribune: “Griffin said he recently spoke with a top Illinois official who told him school reform was politically “really tough.”
“Every alderman in our city is a Democrat. Our mayor is a Democrat. Our governor is a Democrat. Our (state) house is a super-majority of Democrats. Our (state) senate is a majority of Democrats. And the President of the United States is a Democrat. What is so politically hard when you control the entire political process from front to back?” Griffin asked. “What is politically hard is that the Democratic Party is captive to the unions. They’re not captive to the children.”

Posted on May 22, 2013 at 5:45 am by alexmanzara · Permalink
In: Eurodollar Options

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