I Love My Trim
Snipets from Bloomberg with a sprinkle of Nattering love...
The New York Fed said in a statement it won't re-invest the $5 billion of Treasury bill holdings maturing on Aug. 23 through its System Open Market Account to give it "greater flexibility" to manage reserves.
It is the first time the Fed redeemed the Treasury bills since the 2001 terrorist attacks.
SunTrust Banks, the seventh-largest U.S. bank, said it expects to eliminate 2,400 jobs by the end of next year as part of a plan to cut costs.
Treasury bill yields fell the most since 1983 on speculation the expanding credit crunch will lead the Federal Reserve to cut borrowing costs next month.
The 3 month note lost -133 bps to 2.55% and the 6 month note -47 bps to 3.75%; the 10 year -6bps to 4.62%
More than half of the 21 primary government security dealers that trade with the Fed now expect the central bank to cut its target interest rate by next month from the current level of 5.25%.
The BOJ meets Aug 22-23 and Bank of Japan Governor Toshihiko Fukui may say no to an interest-rate increase. On the other hand...
Japan, the 2nd largest world economy grinding to a halt, Q1 GDP +3.2%; Q2 +0.5%. And are you ready for this?? To be filed under talking out the side of your mouth... Fukui is concerned with:
the danger that leaving borrowing costs abnormally low will fuel risky investments leading to asset bubbles,
He is concerned that, if they stay so low for long, there will be the risk of resource misallocation.
We've Nattered on carry trade haircuts before here & systemic risk and group behaviour here.
We also warned about an October haircut from the BOJ & Fed 06/07/07 and on 07/24/07.
The Nattering One muses... the Fed has told its Asian branch to hold at this meeting. They will.
We now believe, the double yen carry trade haircut could come as early as mid Sept or as previously stated Oct 31st.
We see latency in the housing debacle & economic numbers along with Q3 reporting starting mid Oct;
and at least one of our TRIFECTA failures (mentioned here and here and here) as the final triggers that should produce the double haircut in late Oct.
Questions: will carry traders continue to unwind between now and then in anticipation. Thus driving the market down?
In other words, will the market already have the carry trade "haircut" and Q3 reporting disappointments priced in?
If this "correction" is not priced in, we see the potential Oct haircut as being the final stake in the heart of this "reanimated zombie" or "dead man walking" market.
For the answer: Watch the markets direction and Central bank actions between now and Oct 31st, all shall be revealed.
The New York Fed said in a statement it won't re-invest the $5 billion of Treasury bill holdings maturing on Aug. 23 through its System Open Market Account to give it "greater flexibility" to manage reserves.
It is the first time the Fed redeemed the Treasury bills since the 2001 terrorist attacks.
SunTrust Banks, the seventh-largest U.S. bank, said it expects to eliminate 2,400 jobs by the end of next year as part of a plan to cut costs.
Treasury bill yields fell the most since 1983 on speculation the expanding credit crunch will lead the Federal Reserve to cut borrowing costs next month.
The 3 month note lost -133 bps to 2.55% and the 6 month note -47 bps to 3.75%; the 10 year -6bps to 4.62%
More than half of the 21 primary government security dealers that trade with the Fed now expect the central bank to cut its target interest rate by next month from the current level of 5.25%.
The BOJ meets Aug 22-23 and Bank of Japan Governor Toshihiko Fukui may say no to an interest-rate increase. On the other hand...
Japan, the 2nd largest world economy grinding to a halt, Q1 GDP +3.2%; Q2 +0.5%. And are you ready for this?? To be filed under talking out the side of your mouth... Fukui is concerned with:
the danger that leaving borrowing costs abnormally low will fuel risky investments leading to asset bubbles,
He is concerned that, if they stay so low for long, there will be the risk of resource misallocation.
We've Nattered on carry trade haircuts before here & systemic risk and group behaviour here.
We also warned about an October haircut from the BOJ & Fed 06/07/07 and on 07/24/07.
The Nattering One muses... the Fed has told its Asian branch to hold at this meeting. They will.
We now believe, the double yen carry trade haircut could come as early as mid Sept or as previously stated Oct 31st.
We see latency in the housing debacle & economic numbers along with Q3 reporting starting mid Oct;
and at least one of our TRIFECTA failures (mentioned here and here and here) as the final triggers that should produce the double haircut in late Oct.
Questions: will carry traders continue to unwind between now and then in anticipation. Thus driving the market down?
In other words, will the market already have the carry trade "haircut" and Q3 reporting disappointments priced in?
If this "correction" is not priced in, we see the potential Oct haircut as being the final stake in the heart of this "reanimated zombie" or "dead man walking" market.
For the answer: Watch the markets direction and Central bank actions between now and Oct 31st, all shall be revealed.
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