Chillin' out till it needs to be funded
November retail sales disappointed some with a 0.2% rise after the discussions on the Black Friday retail weekend, and the FOMC expectations even despite new background noise on the new QE3 for Mr Gross to null his widow maker earlier in the year. (Widowmaker – That trade that does you in, while you think you are ahead of the game..compare with golf, tennis )
Our take was slightly more prudently optimistic as the market gets on with a busy dealmaking week stuffed with a dozen IPOs and the best Blackberry muffins from the Japanese hotdog stall (no deeper meaning intended! and i had a solitary idiappam for breakfast here in desh)
The 3 year auction yesterday, absorbed the $32 bln without the promise of a new POMO from the Fed to absorb it like April 2011. Bid Cover Ratio., that determines how many actually wanted to subscribe improved to a 20 year best at 3.62, keeping the straight line for 2011 pointed up and despite the large size beating all 3 yr auction watchers with massive interest from the banks(PDs) and indirects.
The Spanish auction earlier in the afternoon also went well after the panic peak in yoields of last month safely away from the current market yields in Europe. The day after the Central bank swaps were announced Europe and Japan picked up $55 bln in paper to increase liquidity from $2.3 bln before that in the prior week. The yield looks healthy at 0.352% too
The FOMC announcements come next in a little over 3 hours. The Fed Balance sheet remains steady at $2.8 tln. The retail sales numbers were not that discouraging, if you note that October numbers were revised upward to 0.6% ex auto and incl Auto sales that rose 0.6% in November, the retail sales data would also be healthy.
You should also be able to discount that new job additions were primarily lower end staffing with lower wages and wages would trend down once the jobs start adding back, as well as gasoline sales in the US and the distance travelled by an average US family has firmly trended down since 2008, because tough times make people tough
Also apparently we should have the 10 year auction data today before the FOMC announcement that is unlikely to change anything materially this time. the nervous talk on the ECB and Bundesbank not holding any local assets after all the transfers fromt he Greek and Italian Banks could worry the Euro a little but the strategy on display and the firmness of the action taken Friday is unlikely to change even if Britain exits the EU