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Thursday, March 28, 2024

One Minute Macro Update

Courtesy of Tyler Durden

US:  Global markets trading lower this AM on China growth story that indicates further tightening is imminent in the region.  Yesterday’s mortgage/housing data montage was mixed to slightly positive as weather was no doubt a factor.  Today features weekly jobs data as well as the Philly Fed, both of which will be watched closely to see if jobs data returns to its prior dour trend and if the 4Q10 upswing in activity is sustainable.  In corporate land, the calendar appears to still be full and growing on a forward basis.  From an issuer’s perspective, the still-low all in coupon rates combined with the risks of waiting to issue are quite attractive.
 
Europe:  Speculation on UK rate hikes is growing on inflation expectations.  Within the EMU, the chatter on whether or not a Greek bailout discussion was had or is ongoing remains a significant headline.  The constant back and forth is a reminder of how fragmented the region is politically versus how closely tied together the region is financially.  FT headline warning that Portugal may be on the brink of a downgrade from Moody’s.  WSJ reporting that Spain will seek to recapitalize banks/cajas.  Given the desire from the market to have further and more stringent stress tests, the banking sector will become a focus in the upcoming months.  Further, if a Eurobond issuance is to be successful and end the debt discussion, all non-treasury (OBS) liabilities for the various periphery countries will become more of a headline in 2011.  Recent spread moves in the EMU suggest a growing belief that the core countries will support the periphery, with core country spreads widening as the periphery moves tighter.  With over 82% debt/GDP (as of 2Q10) at the treasury level alone for the entire region, the coalition itself is not a pillar of strength either.  For now, the risk premia should be higher in the periphery as the machinations to reach coalition (fiscal unity) will certainly involve more volatility. 
 
Asia:  China 4Q10 GDP 9.8% v 9.4E, CPI 4.6% v 4.6%E, PPI 5.9% v 5.7%E.  All point to further tightening of policy over the upcoming weeks/months.  We note that as tightening began in the 2H10, loan growth, which bottomed at 18.2% in June, has risen back to 19.9% in December.  This is well off the peak of 34.4% reached in mid-2009 during China’s loan led stimulus program, but still above the average of 17.2% since tracking began in 1999.  Risk spreads rising on JGBs via CDS.  AUD Jan consumer inflation expectation 4.6% v 2.8% prior.  

From Brian Yelvington of Knight Capital

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