Author: admin

If yesterday’s price action in the moments following (and preceding) the FOMC announcement was just a little suspicious, with a seemingly endless supply of VIX selling originating as if from nowhere (or perhaps the 9th floor of Liberty 33) the morning after has so far been a snoozer. Perhaps this is to be expected following the third biggest one-day surge in the stock market in the year (1st =  Jan 2nd, 2nd = October 10th), or perhaps the market is finally focusing on Bernanke’s tongue in cheek suggestion that the taper may be lowered by $10 billion per month (we disagree as described previously). Or perhaps the creep higher in 10 Year yields, at 2.915% at last check and just shy of the 3.00% psychological level, is finally being noticed. Or perhaps the fact that China, very surprisingly, is also tapering concurrently is finally being appreciated as is the fact that despite all talk of preparedness, developing economies were hardly left unscathed following yesterday’s development. Whatever the reason, the euphoria this morning has “tapered.”

Here is where we stand currently, thanks to RanSquawk:

Stocks in Europe trade in positive territory after the Nikkei 225 printed a 6 year high following the Fed’s modest taper. Following this spot gold has been put under pressure as it’s demand as an inflation hedge falls and is currently trading just above the USD 1200/oz level, with prices not seen below this level since late June/early July and the YTD low at USD 1180.57/oz.

Elsewhere, following the 3 Month SHIBOR Interest rate fix at 5.4239% vs. Prev. 5.3850% and Chinese overnight 1-year interest rate swaps hitting a record high, the PBOC have injected liquidity via a short-term operation in an attempt to provide credit to banks. This follows concerns from the central bank wishing to avoid the liquidity issues seen in June.

Finally, the Euribor strip has continued to bull flatten as contracts continue to pull away from December lows as traders continue to eye a temporary pause in the ECB LTRO. The Eurodollar curve has bear steepened following yesterday’s decision by the Fed to taper, whilst the Short-Sterling strip has continued to weigh from yesterday’s lower than anticipated unemployment figure from the UK.

Overnight highlights from Ran and Bloomberg:

• The USD 10bln taper (USD 5bln in each of Treasuries and MBS) was largely deemed non-aggressive and priced-in following last week’s sell-off in equities; stocks in Europe trade in positive territory after the Nikkei 225 printed a 6 year high following the Fed’s modest taper.
• The PBOC have injected liquidity via a short-term operation in an attempt to provide credit to banks after the 1-year interest rate swaps hit a record high.
• The Euribor strip has continued to bull flatten as contracts continue to pull away from December lows as traders continue to eye a temporary pause in the ECB LTRO.
• Looking ahead there is the release of US weekly jobless data, Philadelphia Fed Business Outlook, Existing Home sales, 5y TIPS and 7y note auction.
• Treasury yield curves flatten in partial unwind of bear steepening seen after Fed yesterday trimmed pace of QE purchases and said rates would stay exceptionally low until “well past the time” the jobless rate falls below 6.5%.
• Week’s auctions conclude with $16b 5Y TIPS and $298b 7Y notes, yield 2.310% in WI trading; 5Y notes sold yesterday tailed 1pm WI level, with indirects lowest since Dec. 2008
• Global banking regulators scaled back plans to boost capital requirements for banks holding asset-backed securities after lenders warned that an initial blueprint was too harsh and would have curtailed lending
• China added funds to selected banks today after the benchmark money-market rate jumped the most since a record cash crunch in June
• New Zealand’s economic growth accelerated to the fastest pace in almost four years in the 3Q, strengthening the case for the Reserve Bank to start raising interest rates next year
• Brazil’s central bank will prolong its currency intervention program through at least the first half of next year after the real weakened yesterday on the Fed’s tapering announcement
• Russia’s offer of a temporary 33% discount on natural gas prices for Ukraine may be extended for the long term, according to Russian President Vladimir Putin
• North Korea’s execution of Kim Jong Un’s uncle and de facto deputy raises the risk the leader may take military actio against the South to demonstrate his authority after the purge
• Credit Suisse Group AG defrauded investors of more than $1b by misrepresenting the risks of its RMBS, acting New Jersey Attorney General John J. Hoffman said in an interview
• Sovereign yields mixed. EU peripheral spreads narrow. Nikkei gains 1.7% while Shanghai Composite falls ~1%. European stocks gain, U.S. equity index futures decline. WTI crude unchanged, gold and copper fall

FOMC Insights

Following on from the FOMC announcement last night we have compiled a full list of major bank research on the latest thinking and interpretation of the decision and thoughts on where we go from here.

Summary of highlights:

Goldman Sachs – Asset purchases are not on a pre-set course and the Committee’s decisions about their pace will
remain contingent on the Committee’s economic outlook for the labour market and inflation as well as its assessment of
the likely efficacy and costs of such purchases. (More)

UBS – CHF is likely to weaken as Fed tapering encourages investors to unwind safe-haven positions.

Citi – The yuan will gain about 1% against the dollar next year as Fed tapering is likely to restrain capital inflows and may
even cause some outflows.

SocGen – EUR/USD’s knee-jerk reaction to QE tapering may not follow through to the downside unless 2Y Treasury yields
head off to 0.5%.

Nomura – Strong relationship between risk markets and Italian, Spanish spreads should trigger tightening again after
Fed’s decision to taper QE purchases.

Fed watcher Hilsenrath – Notes four take away points in summary – 1: Bond buying trimmed, 2: inflation is the caveat,
3: rates to be low a long time, 4: consistent view on growth. (More)

PIMCO’s El-Erian – This is particularly good news for equity markets in the short-term, building on what already has
been a great performance year. It also contains the disruptions to bonds. (More)

Asian Headlines

Initially during session, the PBoC did not conduct open market operations for the 5th consecutive session today, and were
net flat for the week vs. a CNY 37bln net drain last week. At the same time, money market rates increased with the 3
Month SHIBOR Interest rate fix at 5.4239% vs. Prev. 5.3850%, while the 1-year interest rate swaps hit a record high.
This led the PBOC to extend interbank market trading hours to 5pm. The PBOC then said that they injected an unspecified
amount of CNY 200bln in SLOs cash into interbank market via short-term liquidity operation.

EU & UK Headlines

EU finance ministers agreed on a new system to centralize control of failing Euro-zone len
ders, in the hope that it will stop
expensive banking crises from ruining the finances of entire countries.

BoE’s McCafferty commented ‘no sudden rate hike next year’ and said the MPC will only consider lifting interest rates above their historically low level of 0.5% until joblessness drops to at least 7%.

UK Retail Sales Ex Auto (Nov) M/M 0.4% vs. Exp. 0.3% (Prev. -0.6%, Rev. -0.7%)
UK Retail Sales Ex Auto (Nov) Y/Y 2.3% vs. Exp. 2.4% (Prev. 2.3%)
UK Retail Sales Incl. Auto (Nov) M/M 0.3% vs. Exp. 0.3% (Prev. -0.7%, Rev. -0.9%)
UK Retail Sales Incl. Auto (Nov) Y/Y 2.0% vs. Exp. 2.2% (Prev. 1.8%)
UK November mortgage lending M/M GBP 17bln vs. Prev. GBP 17.6bln – gross mortgage lending rises 30% on the year to
November

Eurozone Current Account NSA (Oct) M/M 26.2bln vs Prev. 14.0bln (Rev. 15.2bln)
ECB Current Account SA (Oct) M/M 21.8bln vs Prev. 13.7bln (Rev. 14.9bln)

Fitch affirmed the UK at AA+; outlook stable.

Italian economy to contract 1.8% in 2013, according to Confindustria.

Swiss SECO sees 2014 GDP growth at 2.3% vs 2.3% in September’s forecast.
Swiss Trade Balance (Nov) M/M 2.11bln vs Exp. 2.80bln (Prev. 2.43bln, Rev. 2.28bln)

US Headlines

Goldman Sachs says the Fed may not raise interest rates until unemployment falls as low as 5%.

Moody’s said the wind-down of US Fed’s QE program will likely lead to interest rates increasing globally and added that it sees a move towards normalization of monetary policy in the US, having a relatively finite and temporary impact.

Equities

Equities across the European session have been green across the board following on from positive sentiment in the Asian session as a result of the non-aggressive taper from the Fed which saw the Nikkei 225 print a six-year high. In terms of the outperformers this morning, the IBEX is leading the way being supported by Spanish banks. Whilst G4S are putting pressure on UK stocks after reports that the UK government have referred the Co. to the serious fraud office on ‘concerns’ G4S contracts.

FX

In FX markets, USD gains are relatively modest despite seeing upside following last nights taper decision.
However, overnight USD/JPY struck a five year high at 104.37. Despite the relatively rangebound trade throughout
the session so far, NZD was briefly supported by a better than expected GDP reading, however, this was short lived as
participants took this opportunity to buy the USD against NZD as the countries’ monetary policies begin to converge.
Elsewhere, EUR has been trading relatively flat this morning with little in the way of economic commentary to guide
prices.

Commodities

Energy markets trade broadly flat heading towards the NYMEX pit open with little news-flow to determine price action following the volatility seen after the Fed began tapering their asset purchases at yesterday’s meeting.

Iraq November crude exports rise to 2.38mln bpd according to oil minister.

Iran has resumed pumping crude to Turkey’s Ceyhan Port via an alternative pipeline due to a fault in the main link.

Libya’s Messla oil field will reopen next week along with the Sarir refinery according to a report posted on the Co.’s website.

French Foreign Minister Fabius said has doubts over reaching a final deal with Iran over its nuclear program, citing doubts about the country’s willingness to definitely abandon its nuclear ambitions.

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/K49Lsr_BlK8/story01.htm Tyler Durden

The taper has finally started and equity managers globally will be working (and perhaps re-assessing) about where to put their money to work going into next year. There’s a strong case that the money which has flowed into developed markets this year will start to switch into emerging markets in the short-term. Particularly if stocks start to “melt up”.

The attractiveness of emerging markets, particularly Asia, is obvious enough: 1) easy money is here to stay for a long time, benefiting these markets. 2) they’ve significantly under-performed developed markets over the past 18 months. 3) asset managers are underweight emerging markets, meaning even a small switch could have a major market impact 4) these markets trade at substantial valuation discounts, particularly against the S&P 500.

I think that any short-term bounce in emerging markets though – and the focus here is the largest of these markets, Asia – should be treated with caution. There are increasing, albeit anecdotal, signs of corporate distress in China. These signs point to a gradual unwinding of China’s credit binge and are likely to weigh on growth in the world’s second largest economy. This will hurt key commodity exporters, including Indonesia.

Also, Japan has signaled more QE is on the way there, which will put downward pressure on the yen and continue to negatively impact key Asian exporters, such as South Korea and Singapore. Tepid growth in the West won’t help these exporters either. Finally, other Asian countries are dealing with their own internal issues, such as Thailand (politics) and India (inflation). All of this points to a continued slowdown in economic growth in Asia next year, possibly putting a cap on corporate earnings and stock market performance in the region.

The case for a short-term pop

We won’t go into the details of the taper announcement as you can get plenty of that elsewhere. But the rub is easy money via loose policy is likely to be with us for a very long time. The tapering of US$10 billion per month is peanuts in the the grand scheme of things. And it’s clear the Fed wants to keep interest rates low for a lengthy period. Equity markets have rightly interpreted the moves as favourable to risk assets.

In simplistic terms, there are three ways for stock markets to go from here:

1. You get a melt-up as retail investors, who’ve been dipping their toes back into the market, start to go all in.
2. There’s a short-term correction as markets have a breather after a good run, and over-sold bond markets see some love.
3. There’s a sharper correction, anticipating economic weakness.

It seems to me that the odds favour either 1. or 2., at least in the short run. And under these two scenarios, investors will be asking themselves where to place their equity bets. With the U.S., Europe and Japan having had stellar runs, some will stick with the momentum in these markets. I suspect many others will begin to look for laggard markets to play catch-up. And that’s where emerging markets come into the equation.

There are several other factors in favour of emerging markets besides just under-performance, such as:

• If rates do stay low during the taper, that’ll benefit emerging markets. The worry has been of rising rates impacting the ability of countries with large current account deficits to fund these deficits.
• Global investors are significantly underweight emerging market stocks. A small switch into these stocks could have a large impact.

• Emerging market valuations are at a steep discount to the rest of the world. On a 12-month forward PER basis, emerging markets trade at a 27% discount to global markets.

Why caution is warranted though

There are several reasons to treat any short-term bounce in emerging markets with some skepticism though. One key reason is that serious cracks have started to appear in the world’s second largest economy, China, and few have been paying attention. If these cracks gradually widen, as I suspect, the impact will be first felt in emerging markets and then globally.

Now it must be said that markets are giving mixed signals on whether there are increasing risks of a credit bust in China. A spike in China inter-bank rates and the plummeting Aussie dollar and Indonesian Rupiah suggest cause for concern. On the flip side, China stock markets and key indicators such as copper and iron ore prices have been behaving reasonable well.

But consider some of the key economic indicators released recently:

• The December Flash PMI reading for China slowed to a three-month low, suggesting a softening manufacturing sector.
• CPI growth declined to 3% in November, but more tellingly PPI (producer prices) fell 1.4%. The latter
  is of concern as it indicates excess manufacturing capacity, or dumping excess goods on the rest of the world, in non-economic parlance.
• Credit continues unabated, most of which remains in the murky trust loan space (these have subprime-like structures).

• The flow of credit continues to help the bubbly property market, with residential real estate prices increasing 9.9% in November, the fastest rate of growth for 2013. So much for the government wanting to slow price increases!

More worryingly, there are increasing anecdotal signs of corporate distress in China. The latest story is of Liansheng Resources Group, a coal mining company which has ended up in court owing 30 billion yuan (US$4.9 billion) in debt, much of it from the so-called shadow banking system (trust loans and so forth). It follows news that China Everbright Bank defaulted on a 6.5 billion yuan (US$1 billion) loan in June, though it only disclosed this in a prospectus this week. These are just a few of many stories of corporate distress, much of it in the mining and construction sectors, in recent months.

In sum, you have slowing growth, falling inflation, booming credit outside of the banking system, property prices continuing to climb despite government efforts to tame them, bad debts ticking up and lots of stories of corporate distress.

Are these signs that China is on the verge of a more substantive credit bust? Perhaps. Like many countries today, China has a debt problem. Though that debt isn’t as large as many developed countries (about 220% total debt to GDP), it’s the speed at which it’s increased which is a concern. The majority of the debt is in the corporate sector (125% of GDP), where the distress is starting to be felt.

Much of the corporate debt though has been rolled over, thereby delaying the recognition of bad debts. The upshot is that this recognition may take several years to play out. That could well weigh on economic growth in China for some time to come. And that, in turn, may slow growth in the rest of Asia.

Further risks

There are other risks to economic growth in Asia besides China. Just two weeks ago, Asia Confidential suggested even more QE was on the way in Japan. And sure enough, Japan’s central bank said this week that it sees significant scope for boosting stimulus. That’s code for: it’s coming at any moment now.

This shouldn’t come as a surprise given weakening economic momentum in Japan. The record trade deficit in November further highlights that Abenomics isn’t working. But Japanese policymakers think that if QE hasn’t worked, there needs to be more of it!

The implications of this are that Japan will embark on further extraordinary policies to kick-start its economy. All in an effort to boost inflation by weakening the yen.

A weaker yen will make Japanese exporters more competitive against key rivals. Those rivals in Asia include China, South Korea, Taiwan and Singapore. Until these countries fight back with currency depreciations of their own, their export-oriented economies will suffer.

Finally, there are Asian economies with what may be best termed as idiosyncratic issues. India is dealing with the vicious combination of slowing economic growth with still rising inflation. You shouldn’t expect any significant policy changes until after the general elections in late May.

And there’s also Thailand, where political trouble has again ignited, with early elections called for February next year. The current Shinawatra government has lasted 2.5 years, a lengthy period in Thai terms. Deep political divisions clearly remain and that may mean further sub-par economic performance.

Will slower Asian growth flow through to markets?

The big question is this: will slower economic growth in Asia cap stock market performance in the region? To that question, I don’t have certain answer. Weaker economic growth usually weighs on corporate earnings. Though there are numerous factors which impact earnings, of course. And corporate earnings are one half of the price-to earnings multiple paid for markets.

The other half relates to price and that’s the tricky part. Anticipating what multiple investors will be willing to pay for these earnings. For instance, about 80% of the rise in the S&P 500 this year has come from investors being willing to pay a higher multiple for still meek U.S. corporate earnings.

That may well happen in Asia too. But the odds seem to be against it.

This post was originally published at Asia Confidential:
http://asiaconf.com/2013/12/19/next-rotation-emerging-markets/

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/KYLpDJkU0cM/story01.htm Asia Confidential

 

The Congressional Budget Office is out with its annual review of Social Security. It's a long report – here's all you need to know:

 

 

This result is no surprise. SS's finances deteriorate every year. What I found interesting is the extent of the deterioration. 2013 was the best year since 2008 for the broad economy. We had fairly steady growth in the economy, and the job market improved significantly. But the red ink at SS rose very rapidly.

In 2012 a 'fix' for SS would have required an immediate and permanent tax increase of 1.95%. A year later the cost of the fix has risen to 3.36%. That's a 70% deterioration in twelve months. To right the SS ship a payroll tax increase equal to $180B would be required for 2014, and that higher tax rate would have to be sustained forever. A tax increase of this magnitude would sink the economy into a recession that the country would struggle to get out of.

The deteriorating outlook, and another year of inaction, has brought the blow-up date for SS a bit closer to today. CBO has an interesting time line for when this might happen:

 

In CBO’s simulations, in which most of the key demographic and economic factors in the analysis were varied on the basis of historical patterns, the trust fund ratio falls to zero in 2029

 

2029? One hundred years after the last crash and depression we will face a self imposed crisis. When the Trust Fund ratio falls to zero current law requires that all benefits are cut across-the-board by 25%. As it is set up today, there is a huge cliff that the economy will fall over – and that cliff is now just fifteen years away. A chart of the cliff:

 

 

When the Trust Fund is running dry in 29' SS will be paying out at a rate equal to 6% of GDP. The 25% drop in benefits would translate into an immediate (and permanent) drop in consumption of 1.5% of GDP. That's a pretty steep cliff to go over.

 

So we are fifteen years away from a real problem, and no one is doing anything about it. Nothing will be done in 2014 as it is an election year. I doubt that any real fixes to SS will be made until after Obama is out of the White House. The result of inaction will be that the cost of the fix rises. By 2017 it will be damn near impossible to stabilize the system in the then remaining years before the cliff is hit.

 

Social Security has morphed into an interesting economic stimulus that I don't believe anyone has focused on. For 2013 the amount of the hidden stimulus is $87B (0.5% of GDP) but the size of the annual boost is going to grow very quickly over the remainder of this decade. In the final year before the blow-up it grows to $550B (1.4% of GDP)

 

In 2013 SS will collect $727B in payroll taxes and pay out $816B in benefits (~$90B difference). Both the taxes and the benefits have a 1-1 consequence on consumer spending. The fact that SS is no longer pay-go on a cash basis means that it has to dip into the Trust Fund to fund the difference. When the TF redeems its IOUs, it forces the Treasury to issue more Debt to the Public (dollar for dollar increase). But Total Debt remains the same, and there is no consequence of this form of deficit spending on the Budget (intergovernmental transfers are not included in the deficit calculation).

A few charts on the Take-or-Pay based on numbers from the 2013 Social Security report to congress:

 

 

 

These are big numbers. If there are no adjustments to SS this hidden stimulus will have a significant consequence. In the years just prior to the 2029 crash the stimulus will be a substantial portion of the YoY GDP grow. But then the music just stops – from one year to the next there will be a huge contraction as the stealth deficit spending ends and benefits are cut by 25%.

 

Yes, all of these things are still far into the future. And yes, the thought of eliminating the hiding stimulus anytime soon is not politically (or economically) feasible. But the reality is that the SS Cliff is surely going to be realized in the now foreseeable future. D.C. knows that the future is now on a glide path into the side of a mountain, but it 'feels so good' to do nothing, that nothing will be done. The history books will not look kindly on this neglect.

 

 

 

 

Note: Elizabeth Warren (D -Mass) has been leading a liberal/progressive debate on expanding SS. She wants to increase payouts (a step that would move 2029 to 2025). When the history books do write about this, they will point to the likes of Warren, and say that she led the charge to a disaster. I don't think these people have a clue what SS is doing, and what will surely happen in the relatively near future.

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/hT379Q4YND8/story01.htm Bruce Krasting

 

The Congressional Budget Office is out with its annual review of Social Security. It's a long report – here's all you need to know:

 

 

This result is no surprise. SS's finances deteriorate every year. What I found interesting is the extent of the deterioration. 2013 was the best year since 2008 for the broad economy. We had fairly steady growth in the economy, and the job market improved significantly. But the red ink at SS rose very rapidly.

In 2012 a 'fix' for SS would have required an immediate and permanent tax increase of 1.95%. A year later the cost of the fix has risen to 3.36%. That's a 70% deterioration in twelve months. To right the SS ship a payroll tax increase equal to $180B would be required for 2014, and that higher tax rate would have to be sustained forever. A tax increase of this magnitude would sink the economy into a recession that the country would struggle to get out of.

The deteriorating outlook, and another year of inaction, has brought the blow-up date for SS a bit closer to today. CBO has an interesting time line for when this might happen:

 

In CBO’s simulations, in which most of the key demographic and economic factors in the analysis were varied on the basis of historical patterns, the trust fund ratio falls to zero in 2029

 

2029? One hundred years after the last crash and depression we will face a self imposed crisis. When the Trust Fund ratio falls to zero current law requires that all benefits are cut across-the-board by 25%. As it is set up today, there is a huge cliff that the economy will fall over – and that cliff is now just fifteen years away. A chart of the cliff:

 

 

When the Trust Fund is running dry in 29' SS will be paying out at a rate equal to 6% of GDP. The 25% drop in benefits would translate into an immediate (and permanent) drop in consumption of 1.5% of GDP. That's a pretty steep cliff to go over.

 

So we are fifteen years away from a real problem, and no one is doing anything about it. Nothing will be done in 2014 as it is an election year. I doubt that any real fixes to SS will be made until after Obama is out of the White House. The result of inaction will be that the cost of the fix rises. By 2017 it will be damn near impossible to stabilize the system in the then remaining years before the cliff is hit.

 

Social Security has morphed into an interesting economic stimulus that I don't believe anyone has focused on. For 2013 the amount of the hidden stimulus is $87B (0.5% of GDP) but the size of the annual boost is going to grow very quickly over the remainder of this decade. In the final year before the blow-up it grows to $550B (1.4% of GDP)

 

In 2013 SS will collect $727B in payroll taxes and pay out $816B in benefits (~$90B difference). Both the taxes and the benefits have a 1-1 consequence on consumer spending. The fact that SS is no longer pay-go on a cash basis means that it has to dip into the Trust Fund to fund the difference. When the TF redeems its IOUs, it forces the Treasury to issue more Debt to the Public (dollar for dollar increase). But Total Debt remains the same, and there is no consequence of this form of deficit spending on the Budget (intergovernmental transfers are not included in the deficit calculation).

A few charts on the Take-or-Pay based on numbers from the 2013 Social Security report to congress:

 

 

 

These are big numbers. If there are no adjustments to SS this hidden stimulus will have a significant consequence. In the years just prior to the 2029 crash the stimulus will be a substantial portion of the YoY GDP grow. But then the music just stops – from one year to the next there will be a huge contraction as the stealth deficit spending ends and benefits are cut by 25%.

 

Yes, all of these things are still far into the future. And yes, the thought of eliminating the hiding stimulus anytime soon is not politically (or economically) feasible. But the reality is that the SS Cliff is surely going to be realized in the now foreseeable future. D.C. knows that the future is now on a glide path into the side of a mountain, but it 'feels so good' to do nothing, that nothing will be done. The history books will not look kindly on this neglect.

 

 

 

 

Note: Elizabeth Warren (D -Mass) has been leading a liberal/progressive debate on expanding SS. She wants to increase payouts (a step that would move 2029 to 2025). When the history books do write about this, they will point to the likes of Warren, and say that she led the charge to a disaster. I don't think these people have a clue what SS is doing, and what will surely happen in the relatively near future.

 

 

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/hT379Q4YND8/story01.htm Bruce Krasting

• Traders Seek an Edge With High-Tech Snooping (WSJ)
• Gold Drops Below $1,200 an Ounce for First Time Since June (Bloomberg)
• SAC Manager Guilty as Insider Focus Turns to Martoma (Bloomberg)
• Why Ukraine spurned the EU and embraced Russia (Reuters)
• Target confirms major card data theft during Thanksgiving (Reuters)
• Zuckerberg is no suckerberg: Company to Sell 27 Million Class A Shares While CEO Will Offer 41.4 Million (WSJ)
• Facebook, Zuckerberg, banks must face IPO lawsuit (Reuters)
• Swiss Christmas Trees Feel Chill as Franc Helps Rivals (BBG)
• Iran, six powers to resume nuclear talks after snag (Reuters)
• Dolphins Suffering From Lung Disease Due to Gulf Oil Spill, Study Says (WSJ)
• White House review panel proposes curbs on some NSA programs (Reuters) – the self-supervision program?
• TEPCO decides permanent shutdown of 2 surviving Fukushima reactors (Kyodo)

 

Fly On The Wall 7:00 AM Market Snapshot

WSJ

* Ben Bernanke gave the U.S. economy a nod of approval just a month before he leaves the Federal Reserve, moving the central bank to begin winding down a bond buying program meant to boost growth with the recovery on firmer footing.

* A growing industry uses surveillance and data crunching technology to supply traders with non-public information about oil supplies, electric power production, retail traffic and crop yields.

* A jury found a senior employee of SAC Capital Advisors LP guilty of insider trading, a verdict that deals another blow to the giant hedge fund and its billionaire founder, Steven A. Cohen.

* Target was hit by an extensive theft of its customers’ credit-card data over the Black Friday weekend in what appears to be a breach of a major retailer’s information security. The Secret Service is investigating.

* Bristol-Myers Squibb is nearing a deal to sell its stake in a diabetes partnership with AstraZeneca for more than $3 billion.

* Tokyo Governor Naoki Inose said he will resign following calls for him to step down over a loan he received from a scandal-hit hospital-chain operator.

* U.S. banking regulators are considering issuing guidance to address concerns about the Volcker rule’s impact on some small and midsize banks, according to people familiar with the matter.

* U.S. commodity regulators are stumbling at one of their primary goals: bringing transparency to the multitrillion-dollar swaps market.

* The value of one bitcoin plunged as much as 38 percent against the dollar Wednesday, highlighting the risks for investors in the virtual currency and merchants who accept it as payment.

* General Electric Co Chief Executive Jeff Immelt pledged to cut costs and boost sales at the conglomerate’s industrial businesses, as the company tries to improve profits despite a smaller contribution from its giant lending arm.

 

FT

Michael Steinberg, a former top portfolio manager at hedge fund SAC Capital, was found guilty on Wednesday of insider trading, the latest victory for federal prosecutors in New York in their four-year crackdown on Wall Street.

Brazil awarded Sweden’s Saab a $4.5 billion contract to supply its next generation fighter jet, handing the small Scandinavian defence company one of the country’s biggest defence deals in the wake of revelations about U.S. spying on Brazilians.

General Electric expects the strengthening U.S. economy to boost revenue growth next year, as the manufacturing and financial conglomerate forecast double-digit earnings growth from its industrial units.

Former BP engineer Kurt Mix faces a maximum prison sentence of 20 years after being found guilty on one count of obstruction of justice, based on his deletion of a text exchange with his BP supervisor. Mix is the first person from the energy company to be convicted for an offence related to the 2010 Deepwater Horizon disaster.

Citigroup has agreed to a multibillion-dollar distribution deal with the AIA Group, that will allow the Asian life insurer’s products to be sold through the U.S. bank’s network across the region, sources said.

 

NYT

* Insurance companies, worried about potential chaos next month as people begin seeking coverage under the federal health care law without completing the necessary paperwork, have agreed to give consumers an extra 10 days to pay their first-month premiums, according to a statement from the companies’ trade group.

* In a disappointment for Boeing, Brazilian defense officials said on Wednesday that they had picked the aircraft maker Saab for a $4.5 billion contract to build 36 fighter jets over the next 10 years.

* European Union finance officials agreed late Wednesday on a system for winding down failed banks, an important step toward introducing a banking union.

* Nearly four years after the Gulf of Mexico oil rig explosion that left 11 dead, a former low-level engineer, Kurt Mix, at BP was found guilty on Wednesday of obstruction of justice for deleting messages during a federal investigation into how much oil leaked.

* Target is investigating a security breach involving stolen credit card and debit card information for millions of its customers, according to one person involved in the investigation.

* Together, Whole Foods and Chobani have become two of the biggest success stories in the food business in the last decade, but now they are parting ways. Whole Foods said on Wednesday that as of early next year its stores would no longer stock Chobani, primarily because the explosion of Greek yogurt brands has made it more selective in how it allocates its prized refrigerated shelf space.

* The Federal Communications Commission on Wednesday proposed repealing its blackout rule, which for decades has been the bane of sports fans whose ability to watch their favorite team’s home games on television has depended on whether enough of their fellow fans bought tickets to see it in person.

* To promote its Galaxy mobile devices, Samsung Electronics is taking, fittingly, a galactic approach, with an international marketing campaign that blends science fiction with soccer fandom. Central to the campaign is a series of videos, shot in a moody, otherworldly style reminiscent of “The Matrix.”

 

Canada

THE GLOBE AND MAIL

* Canada Post’s
top executive says ending home delivery and shifting millions of Canadians to community mailboxes offers at least one unintended upside – more exercise for seniors.

* Quebec Liberal leader Philippe Couillard is proposing “concrete actions” against religious fundamentalists and extremists, saying “they are not welcome in Quebec.”

Reports in the business section:

* China Investment Corp has no plans to close its Toronto office, people close to the fund said, despite reports the giant investment fund is considering moving its North American headquarters to New York.

* The federal government has quietly closed a loophole that had allowed Pizza Pizza Ltd and other restaurant chains to import growing quantities of low-cost U.S. mozzarella, skirting the high tariff wall that shields Canada’s dairy industry.

* BlackBerry Ltd said on Wednesday that it hired two more senior executives who previously worked with its new Chief Executive John Chen, bolstering a newly assembled team charged with putting the stumbling smartphone maker back in stride.

NATIONAL POST

* The Ontario Court of Appeal has upheld the conviction and 18-month prison sentence handed to a refugee judge, Stevan Ellis, who was caught on videotape offering to approve a 25-year-old South Korean woman’s asylum claim if she became his girlfriend.

* Toronto politicians took a key step on Wednesday toward building the city’s first gay-focused sports and recreation center. Only two members of council – Mayor Rob Ford and Councillor James Pasternak – voted against the proposed development by the 519 Church Street Community Center, expected to cost about $100 million, one-third of which would be funded by the three levels of government.

FINANCIAL POST

* Megan Vickell is a new brand of condominium owner that people predicting a market crash may have forgotten to factor in. A report from Canada Mortgage and Housing Corp shows women are a growing powerhouse in the Canadian condominium market. Among people who live alone, women made up 65 percent of owner occupants in 2011.

* While Canada’s telecommunications regulator ramps up its investigation into domestic roaming rates, the federal government said on Wednesday that it too was planning measures to crack down on practices it said were impeding competition in the cellphone industry.

* Unifor, Canada’s largest private sector union, will hold an organization vote at Toyota Motor Manufacturing Canada Inc early in 2014, President Jerry Dias said on Wednesday.

The unionization drive at the Japanese automaker for more than 7,000 employees in Canada has become the priority for the recently amalgamated Unifor.

 

China

CHINA SECURITIES JOURNAL

– Due to tight liquidity in the banking system, yields on bank wealth management products (WMP) with maturities extending across the Chinese New Year are surpassing 6 percent and approaching 7 percent, according to an investigation by the paper.

XINHUA NEWS AGENCY

– China has set stricter standards for petrol in an effort to reduce car pollution, China’s Standardization Administration said on Wednesday. The new standard, to come into effect from Jan. 1, reduces the sulphur content for gasoline to 10 parts per million (ppm), from 50 ppm.

SHANGHAI SECURITIES NEWS

– China plans to implement a number of major engineering projects designed to protect the environment, the State Council announced in a Wednesday meeting. Projects include an ecological reserve in the northwestern province of Qinghai, covering three rivers and the construction of a pilot protected area in Gansu province, also in the country’s northwest.

– The China Banking Regulatory Commission plans to issue new rules regulating banks’ off-balance-sheet business and to further expand credit asset securitisation, among other priorities for 2014, deputy head of the commission’s policy research bureau, Zhang Xiaopu, told the paper in an interview.

CHINA DAILY

– The true purpose of China’s urbanization drive is to better integrate rural workers into the cities in which they work, not to fuel urban construction, said Xiao Jincheng, a director at a think-tank affiliated with the National Development and Reform Commission, in an op-ed.

PEOPLE’S DAILY

– China should stick to scientific development of the economy, so that the country can develop in an efficient, fair and sustainable way, said a commentary in the paper that acts as the party’s mouthpiece.

 

Britain

The Telegraph

HMRC ACCUSED OF BEING SOFT ON BIG BUSINESS

Britain’s HM Revenue and Customs has been accused of failing to collect enough tax from big business and not using the powers at its disposal to do so by an influential committee of MPs.

INVESCO-BACKED MANUFACTURER EYES £278 MLN FLOTATION

A manufacturing company whose board members include former Diageo chief Paul Walsh and ex-Marks & Spencer boss Stuart Rose, has unveiled plans for a 278 million pound ($455.7 million) stock market listing, topping the biggest AIM market flotation this year.

The Guardian

BP MAKES FIRST MAJOR GULF OF MEXICO OIL DISCOVERY SINCE DEEPWATER HORIZON

BP has reported a “significant oil discovery” in the Gulf of Mexico, its first major find since the deadly rig explosion that triggered the worst environmental disaster in U.S. history.

EU MINISTERS SEAL BANKING AGREEMENT ON EVE OF BRUSSELS SUMMIT

EU finance ministers announced late on Wednesday night that they had reached agreement on a new system for dealing with eurozone banks, under intense pressure to seal the accord on their new flagship policy in advance of a two-day Brussels summit opening on Thursday.

The Times

BUPA BUYS STAKE IN AMERICAN TRAVEL INSURER HIGHWAY TO HEALTH

Bupa has bought a minority stake in American travel insurance specialist Highway to Health in a rare step across the Atlantic for the private healthcare network.

EU TOBACCO DEAL COULD INCLUDE BAN ON REFILLABLE E-CIGARETTES

Despite intensive lobbying from the burgeoning e-cigarette industry, an EU-wide ban could be imposed if at least three member states prohibit refillable e-cigarettes.

The Independent

UK UNEMPLOYMENT DROPS TO 7.4 PCT, LOWEST SINCE 2009

Britain’s unemployment rate fell to its lowest in four-and-a-half years in the three months to October, the Office for National Statistics said.

PLASTIC BANKNOTES: BANK OF ENGLAND SWITCHES TO PLASTIC WITH NEW WINSTON CHURCHILL NOTE

The Bank of England is set to issue plastic banknotes for the first time featuring Sir Winston Churchill in a five-pound note starting 2016.

 

Fly On The Wall 7:00 AM Market Snapshot

ANALYST RESEARCH
Upgrades

BNC Bancorp (BNCN) upgraded to Outperform from Market Perform at Keefe Bruyette
CGG SA (CGG) upgraded to Neutral from Sell at Goldman
Callaway Golf (ELY) upgraded to Strong Buy from Outperform at Raymond James
Cubic (CUB) upgraded to Overweight from Neutral at JPMorgan
Forest Labs (FRX) upgraded to Overweight from Neutral at Piper Jaffray
LinnCo (LNCO) upgraded to Strong Buy from Outperform at Raymond James
Omnicom (OMC) upgraded to Buy from Neutral at Goldman
Puma Biotechnology (PBYI) upgraded to Buy from Hold at Stifel
Thomson Reuters (TRI) upgraded to Outperform from Neutral at Credit Suisse
Valassis (VCI) upgraded to Market Perform from Underperform at BMO Capital

Downgrades

AbbVie (ABBV) downgraded to Equal Weight from Overweight at Morgan Stanley
Canon (CAJ) downgraded to Neutral from Buy at Citigroup
JPMorgan (JPM) downgraded to Neutral from Buy at SunTrust
QEP Midstream Partners (QEPM) downgraded to Neutral from Overweight at JPMorgan
Semtech (SMTC) downgraded to Perform from Ou
tperform at Oppenheimer

Initiations

Alaska Air (ALK) initiated with a Buy at UBS
American Airlines (AAL) initiated with a Neutral at UBS
American Express (AXP) initiated with a Buy at SunTrust
American Tower (AMT) initiated with a Buy at Jefferies
Barracuda Networks (CUDA) initiated with an Outperform at BMO Capital
Calumet Specialty Products (CLMT) initiated with a Neutral at Goldman
Check Point (CHKP) initiated with a Market Perform at BMO Capital
Crown Castle (CCI) initiated with a Buy at Jefferies
Delta Air Lines (DAL) initiated with a Buy at UBS
Demandware (DWRE) initiated with an Overweight at Barclays
Diamondback Energy (FANG) initiated with a Buy at Roth Capital
Discover (DFS) initiated with a Neutral at SunTrust
Dorman Products (DORM) initiated with an Outperform at William Blair
GameStop (GME) initiated with a Hold at Benchmark Co.
IMAX (IMAX) initiated with a Buy at Roth Capital
Imperva (IMPV) initiated with an Outperform at BMO Capital
Monotype Imaging (TYPE) initiated with a Buy at B. Riley
Monro Muffler (MNRO) initiated with a Buy at KeyBanc
Navigators (NAVG) initiated with an Outperform at William Blair
PVH Corp. (PVH) initiated with a Buy at Janney Capital
Pacific Premier (PPBI) initiated with an Outperform at Keefe Bruyette
QTS Realty Trust (QTS) initiated with an Overweight at Morgan Stanley
Qualys (QLYS) initiated with a Market Perform at BMO Capital
Ralph Lauren (RL) initiated with a Buy at Janney Capital
SBA Communications (SBAC) initiated with a Buy at Jefferies
Southwest (LUV) initiated with a Buy at UBS
Symantec (SYMC) initiated with a Market Perform at BMO Capital
Synergy Resources (SYRG) initiated with a Buy at Roth Capital
Tableau Software (DATA) initiated with a Buy at Cantor
United Continental (UAL) initiated with a Neutral at UBS

HOT STOCKS

Bristol-Myers (BMY) to sell global diabetes business to AstraZeneca (AZN) for $2.7B
Target (TGT) confirmed unauthorized access to payment card data in U.S. stores
Bayer (BAYRY) to acquire Norwegian pharmaceutical company Algeta
UBS (UBS) to sell CEFS International business to Montagu Private Equity
MasterCard (MA), eServGlobal and BICS created remittance joint venture
Two Harbors (TWO) to acquire mortgage servicing rights from Flagstar Bancorp (FBC)
Duke Energy (DUK) CEO Good told Bloomberg TV that coal has been ‘under attack’
Patriot Coal (PCXCQ) emerged from Chapter 11 bankruptcy
Peabody (BTU) confirmed settlement effective after Patriot Coal (PCXCQ) emerged from bankruptcy
AutoZone (AZO) authorized additional $750M share repurchase plan
Hershey (HSY) to acquire majority share of Shanghai Golden Monkey

EARNINGS

Companies that beat consensus earnings expectations last night and today include:
Biodel (BIOD), Oracle (ORCL), Herman Miller (MLHR), Paychex (PAYX)

Companies that missed consensus earnings expectations include:
Pier 1 Imports (PIR), Apogee Enterprises (APOG)

NEWSPAPERS/WEBSITES

• LaserShip, OnTrac or Eastern Connection Operating and other small regional shippers are expanding their networks across the U.S., creating a “super regional” threat to UPS (UPS) and FedEx (FDX), which are under pressure to build their own ground-delivery businesses in the face of weak demand for express air delivery, the Wall Street Journal reports
• Cloud application vendor NetSuite (N) is accelerating its construction of data centers in Europe as a result of the NSA’s eavesdropping activities, as prospective customers have grown more concerned about whether the U.S. government could access proprietary information stored in data centers around the world, the Wall Street Journal reports
• Machinists rallied near Boeing’s (BA) main aircraft factory in Everett, WA, demanding the chance to vote on a labor contract that union leaders rejected last week. The rally and counter-protest illustrates the sharp rift that divides the union over the contract, which pits job security against the company pension, Reuters reports
• Carlyle Group (CG) hired Credit Suisse (CS) to explore a sale of specialty chemical company PQ Corp., which it is hoping to sell for as much as $3B, sources say, Reuters reports
• U.S. banking industry groups are pressing regulators to clarify accounting for certain securities under the Volcker Rule after lenders complained the Dodd-Frank Act measure may force them to take writedowns, Bloomberg reports
• Toyota Motor’s (TM) Camry, the best-selling car in the U.S., returned to Consumer Reports’ recommended list after showing improvement on an insurance-industry crash test, Bloomberg reports

SYNDICATE

CEL-SCI (CVM) files automatic common stock, warrant offering
Carlyle Group (CG) files to sell 2.19M common units representing limited partners
Facebook (FB) files to sell 70M Class A common stock, Zuckerberg selling 41.35M
GigOptix (GIG) files automatic common stock offering
Lee Enterprises (LEE) files $750M mixed securities shelf
SuperCom (SPCB) 3M share Secondary priced at $4.00

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/xTxX9Jgo7Ao/story01.htm Tyler Durden

Strategists were largely wrong about the yes taper in September, and then they were just as largely wrong about the no taper in December, and yet their opinion is just as largely gospel and people continue to listen to them (what else is there to be distracted by in a still very much centrally-planned market and economy). Which is why the below summary by Bloomberg of what global financial strategists and investors, also known as “they”, are saying about how to trade assets in the post-taper world, should probably be taken with a big grain of salt.

Pimco:

• Fed taper leaves USD unattractive within G-10; USD isn’t expected to appreciate in 2014, Thomas Kressin, head of European foreign exchange at Pimco, says in interview
• EUR, GBP and Scandinavian currencies to remain strong vs USD in next 3 to 6 months
• Fed balance sheet will keep growing next year while ECB balance-sheet has been tightening so far

BlackRock:

• Fed taper won’t be big shock for bonds as still plenty of easy money in global financial system, Rick Rieder, chief investment officer of fundamental fixed income at BlackRock, says in e-mailed note
• Doesn’t mean rates won’t rise over time; 10Y UST yield may inch up to 3.25% by mid-2014
• Spread sectors such as high yield, commercial mortgages, other asset-backed bonds and longer-dated municipal bonds are still better bets than USTs

HSBC:

• Fed taper isn’t a game-changer
• Look for EUR/USD, GBP/USD or AUD/NZD decline to reverse, writes Robert Lynch, currency strategist at HSBC
• Key is extent to which Fed’s new dovish forward guidance remains credible

UBS:

• CHF is likely to weaken as Fed tapering encourages investors to unwind safe-haven positions, Beat Siegenthaler, a currency strategist at UBS, says in interview
• Main point for market was Fed’s dovish overall message on interest rates

Morgan Stanley:

• USD/JPY may hit 105 before year-end on Fed tapering, as risk appetite is well-supported, Morgan Stanley analysts led by Hans Redeker write in note to clients
• Dovish statement and enhanced verbal guidance offset modest tapering

SocGen:

• EUR/USD unlikely extend losses on Fed taper unless 2Y UST yield rises to 0.5%, Kit Juckes, strategist at SocGen, writes in e-mailed comments
• Look for levels to long USD vs CAD, AUD and JPY

Credit Agricole:

• USD to firm against yield-sensitive currencies after Fed starts tapering, Credit Agricole strategists including Mark McCormick say in client note
• USD positions aren’t stretched; favors USD vs JPY, AUD and NZD

BNP Paribas

• Fed decision bodes well for USD into early 2014 and should lead market participants to rebuild USD longs that were unwound after Fed failed to taper in September, BNP Paribas strategists led by Steven Saywell write in note to clients
• Maintains short EUR/USD trade recommendation
• Potential for further USD/JPY gains on positive reaction in equities
• Rates: Fed decision will have major implications for euro govt bonds; no decoupling from USTs and core govt bonds
• Credit: Spread compression regime for European spreads remain in place after Fed taper; short end of rates curve anchored by forward guidance and potential orderly advance of yields at long end, Gregory Venizelos, a strategist at BNP, writes in e-mailed comments

Standard Bank:

• USD/JPY may extend rally after Fed tapering as stock of assets held by Fed is still rising, Steven Barrow, head of G-10 strategy at Standard Bank, writes in note to clients
•     Fed decision doesn’t change the equation too materially for major currencies USD/JPY targets 120 in 1-2 years; EUR/USD to push to low 1.40s while GBP/USD may trade into 1.65-1.70 range

Nomura:

• ‘Risk-on’ Fed taper may spur tightening periphery
• Strong relationship between risk markets and Italian, Spanish spreads

RBS:

• Fed taper favors steeper curves and 5Y periphery as bond market largely discounted Fed’s actions amid stable UST yields
• Investors should be buying USTs at 3%
• Gilt underperformance can be driven by U.K. economic outperformance; short 5Y/5Y GBP vs USD

Commerzbank:

• Near-term relief in USTs would be selling opportunity as 10Y yields should clear 3% amid curve steepening
• Reiterate 10Y UST/bund widener as spread should stay above 100bps and edge higher

Source: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/aoL4jKPmZ40/story01.htm Tyler Durden

Strategists were largely wrong about the yes taper in September, and then they were just as largely wrong about the no taper in December, and yet their opinion is just as largely gospel and people continue to listen to them (what else is there to be distracted by in a still very much centrally-planned market and economy). Which is why the below summary by Bloomberg of what global financial strategists and investors, also known as “they”, are saying about how to trade assets in the post-taper world, should probably be taken with a big grain of salt.

Pimco:

• Fed taper leaves USD unattractive within G-10; USD isn’t expected to appreciate in 2014, Thomas Kressin, head of European foreign exchange at Pimco, says in interview
• EUR, GBP and Scandinavian currencies to remain strong vs USD in next 3 to 6 months
• Fed balance sheet will keep growing next year while ECB balance-sheet has been tightening so far

BlackRock:

• Fed taper won’t be big shock for bonds as still plenty of easy money in global financial system, Rick Rieder, chief investment officer of fundamental fixed income at BlackRock, says in e-mailed note
• Doesn’t mean rates won’t rise over time; 10Y UST yield may inch up to 3.25% by mid-2014
• Spread sectors such as high yield, commercial mortgages, other asset-backed bonds and longer-dated municipal bonds are still better bets than USTs

HSBC:

• Fed taper isn’t a game-changer
• Look for EUR/USD, GBP/USD or AUD/NZD decline to reverse, writes Robert Lynch, currency strategist at HSBC
• Key is extent to which Fed’s new dovish forward guidance remains credible

UBS:

• CHF is likely to weaken as Fed tapering encourages investors to unwind safe-haven positions, Beat Siegenthaler, a currency strategist at UBS, says in interview
• Main point for market was Fed’s dovish overall message on interest rates

Morgan Stanley:

• USD/JPY may hit 105 before year-end on Fed tapering, as risk appetite is well-supported, Morgan Stanley analysts led by Hans Redeker write in note to clients
• Dovish statement and enhanced verbal guidance offset modest tapering

SocGen:

• EUR/USD unlikely extend losses on Fed taper unless 2Y UST yield rises to 0.5%, Kit Juckes, strategist at SocGen, writes in e-mailed comments
• Look for levels to long USD vs CAD, AUD and JPY

Credit Agricole:

• USD to firm against yield-sensitive currencies after Fed starts tapering, Credit Agricole strategists including Mark McCormick say in client note
• USD positions aren’t stretched; favors USD vs JPY, AUD and NZD

BNP Paribas

• Fed decision bodes well for USD into early 2014 and should lead market participants to rebuild USD longs that were unwound after Fed failed to taper in September, BNP Paribas strategists led by Steven Saywell write in note to clients
• Maintains short EUR/USD trade recommendation
• Potential for further USD/JPY gains on positive reaction in equities
• Rates: Fed decision will have major implications for euro govt bonds; no decoupling from USTs and core govt bonds
• Credit: Spread compression regime for European spreads remain in place after Fed taper; short end of rates curve anchored by forward guidance and potential orderly advance of yields at long end, Gregory Venizelos, a strategist at BNP, writes in e-mailed comments

Standard Bank:

• USD/JPY may extend rally after Fed tapering as stock of assets held by Fed is still rising, Steven Barrow, head of G-10 strategy at Standard Bank, writes in note to clients
•     Fed decision doesn’t change the equation too materially for major currencies USD/JPY targets 120 in 1-2 years; EUR/USD to push to low 1.40s while GBP/USD may trade into 1.65-1.70 range

Nomura:

• ‘Risk-on’ Fed taper may spur tightening periphery
• Strong relationship between risk markets and Italian, Spanish spreads

RBS:

• Fed taper favors steeper curves and 5Y periphery as bond market largely discounted Fed’s actions amid stable UST yields
• Investors should be buying USTs at 3%
• Gilt underperformance can be driven by U.K. economic outperformance; short 5Y/5Y GBP vs USD

Commerzbank:

• Near-term relief in USTs would be selling opportunity as 10Y yields should clear 3% amid curve steepening
• Reiterate 10Y UST/bund widener as spread should stay above 100bps and edge higher

Source: Bloomberg

via Zero Hedge http://feedproxy.google.com/~r/zerohedge/feed/~3/aoL4jKPmZ40/story01.htm Tyler Durden