Sept 17. FOMC begins today…Summers rally fades.
–An exaggerated rally due to Summers’ withdrawal from the Fed race faded as the day progressed, with the long end especially weak. While tens fell a couple of bps to just above 2.87, the 30 yr bond rose 2.5 bps in yield to 3.87. In euro$s, greens were the strongest with green pack nearly +12, while golds were up 6.125. As the Fed goes into deliberations today, the general tone of the market is that rates will be moving higher, eventually. Official projections will be released after the FOMC statement, and will include guesses for 2016. Never mind that growth projections have all been too optimistic… The target level for FF at the end of 2015 had a mean of 1% and a high of 3% in June. The “longer run” projection was 4%. http://www.federalreserve.gov/monetarypolicy/files/fomcprojtabl20130619.pdf Now we’ll get estimates for 2016, almost sure to cluster around 2.75 to 3.5% because of Fed “reversion” models. The eurodollar curve may seize upon these projections to further steepen from Greens out. But…what if we (here in the US) are just as “exceptional” as the Japanese – with their ten year yield of 71 bps? As Mauldin points out in his last piece, US state and local unfunded liabilities are staggering. There is still a crush of debt weighing on the economy which is deflationary. Illinois is among the worst offenders…to the point where Bill Daley actually dropped out of consideration for the governor’s job. Or maybe he just thought the job is bad luck, since most former govs from this state end up in prison.
–Just a couple of other notes: CNS news notes that this year through August the Federal gov’t has collected a record amount of taxes: “$2,472,542,000,000: Record Taxation Through August; Deficit Still $755B – See more at: http://cnsnews.com/news/article/terence-p-jeffrey/2472542000000-record-taxation-through-august-deficit-still-755b#sthash.4ZQyfhax.dpuf
–Bloomberg reports that “European car sales fell in August, bringing deliveries this year to the lowest since records began in 1990,..Registrations dropped 4.9 percent to 686,957 vehicles from 722,458 cars a year earlier…” I guess that’s supposed to be an indication of how the EU is “pulling out of the recession”. Obama probably mushed himself yesterday by highlighting the strength of the US auto industry during his financial crisis/wealth inequality speech yesterday.
–CPI today expected +0.1 with Core +0.2.
