Archive - Apr 26, 2011

• Fed Sweating the Details of First News Conference (WSJ)
• Ex-Morgan Stanley Economist Berner Tapped as Counselor to Geithner (WSJ)
• China Said to Raise Capital Adequacy Ratios for 5 Biggest Banks (Bloomberg)
• CIC Set for up to $200bn in Fresh Funds (FT)
• Monetary Policy in 3-D (Hussman) or a fancy and long way to say DV01 = $1.5 billion
• Japan Auto View Cut (WSJ)
• Asia Faces ‘Serious Setback’ on Rising Food Costs, ADB Says (Bloomberg)
• Some 500 Arrested in Syria Crackdown (Reuters)

A game of 20 questions with the Fed Chairman...

Wednesday afternoon will mark a watershed in Federal Reserve communications strategy. In addition to the Federal Open Market Committee (FOMC) policy statement, Chairman Bernanke will give his first post-meeting press conference and the FOMC's “central tendency” economic forecasts will be released. The expected timeline of events is as follows...

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 26/04/11

And two more highlights from a floundering Europe once again "validating" the EUR spike to near multi year highs. Eurostat came out earlier and reported that the Greek budget deficit, while declining from 15.4% of GDP in 2009 to 10.5% in 2010, missed expectations by a mile, or over 10%, after consensus was for a deficit print at 9.4% of GDP. And while the second to last PIIGS domino to fall also saw its deficit decline modestly sequentially from 11.1% of GDP to 9.2% in 2010, the country's total debt/GDP rose from 53.3% to 60.1%. With austerity like that, who needs the Teamsters?

This could get ugly, prepare to go 'old school'!

Both Italy and Spain came to market this morning, pricing T-bills for E8.5 billion and nearly E2 billion, respectively. And while there was a divergence in bid to cover trends, yields surged across the board confirming that below the European surface not all is as well as the EURUSD would make most believe. Spain priced EUR 1.163 billion in 3-month T-Bills with a slightly improved bid/cover 4.43 vs. Prev. 4.33 although at a cost of a nearly 50% jump in yield or 1.37% versus 0.899% previously. This is the highest yield since December 2010. Spain also sold EUR 806MM in 6-month Bills at a bid/cover 7.11 vs. Prev. 7.65 with the yield surging as well, this time hitting 1.867% vs. Prev. 1.361%. Italy followed suit issuing EUR 8.5 billion in 6 month Bills, however at a lower bid/cover (reduced interest) of 1.432 vs. Prev. 1.61 despite the yield also jumping to 1.659% from 1.396%. Elsewhere the 3 and 6 month Euribor rate fixings continue to skyrocket, hitting 1.361% and 1.657% respectively. Thank you ECB for hiking rates. All this myopic action has done is to make the cost of short-term debt rolls prohibitively more expensive. Luckily, it will last about 3 months tops before Trichet, just like back in 2008, is forced to loosen once again (and yes, AU priced in EUR will be waiting).

And so the proverbial correction in silver may have well been completed in the span of 24 hours. As the attached chart shows from its Sunday night peaks to its Monday night bottom silver has dropped over 10%, what some call a mini bear market (which takes it to those depressionary lows seen on Thursday of last week). Is the climb now set tp resume, although not so much due to anything else (and there is plenty else) but because the USD pounding is back in full brokeback style. The EURUSD is about to break above the Sunday night heights in the mid 1.46s and while weak hands are vacating gold and silver, everyone is scrambling to load up in CHF. We wonder how long until those same people realize that Hildebrand is just as mortal as any other central banker with a balance sheet behind him, and as recently as 12 months ago underwent a failed campaign to halt the surge of the CHF in the process contaminating his assets with some seriously ugly currency assets (if one may call $220 billion of dollars on the left side of your balance sheet assets and thus implicitly "supporting" the SNB liability - the Swiss Franc) whose eventual unwind will not be too kind on the Swiss currency.

There's a White House over yonder...