One Minute Macro Update
US: Markets in positive territory in the early going as Friday’s mixed-message job data continues to be debated. We believe that it will be another month at least before the data is confirmed/denied, but the changes to the denominator do not give us a lot of faith despite the headline. The week’s light calendar will put focus on geopolitical issues including Egypt and Euro sovereigns. 10s and 30s are scheduled for issuance later in the week after long dated purchases on Tuesday. This should test the selloff observed last week. Implied Fed Funds point to an opportunity in the front end, though we are still a bit off of the hike expectations that were priced in mid December. Bernanke testimony to the House Budget Committee on Wednesday will generate sound bites ahead of the debt ceiling debate.
Europe: Friday’s EU summit did not generate the happy news many were hoping for and SOVXWE is bouncing off of 170bp resistance. Eurozone wide austerity and budgetary measures are a long way off given the headlines that referenced heated debate in the meetings. The core continues to stick to competitiveness/austerity/budget measures as a prerequisite for expansion of the EFSF and the periphery continues to resist. The communication output from the meetings references “necessary effectiveness” rather than greater flexibility, an important differential in our view. German December Factory Orders MoM -3.4% v -2.0%E, YoY 19.7% v 20.5%E. German 6M bill auction €4.93B average yield 0.7628% v 0.4823% prior, b/c 1.3x 2.3x prior.
Asia: HK Press reporting that PBOC will raise rates 1x after the New Year and again in April or May according to central bank watcher. Japan MOF increasing IMF lending for Ireland assistance. BOJ Shirakawa indicates more asset purchases may be necessary if economy worsens.
From Brian Yelvington of Knight Capital
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