Daily Archives: August 16, 2013 @ 11:37 am (Friday)

Michigan survey and a small rant

Posted on by

Funny how sentiment follows stocks…

And how housing has gone flat all year is dismissed.

Not to forget jobless claims are about people losing their jobs and not about anyone getting a job. Yes, claims have correlated to new jobs, but that’s a different matter. For example, ‘at the limit’, you could have 0 claims as no one loses their job, but also no new jobs.

And how about the Fed not pushing back on the higher rates that have slowed mortgage purchase applications? No more ‘doing what it takes’ to error on the side of ‘ease’, because new jobs have been holding at close to a measly 200,000, just enough to keep the participation rate at 30+ year lows? Feels a lot to me like ‘outside pressure’ as discussed? Hard to believe the chairman wants his legacy to be ‘just when things finally looked to be turning he allowed rates to spike and quash it all’???

All in the context of ‘austerity didn’t work in the euro zone or the UK, and now the US is ‘proving’ the same, as private sector credit expansion fails to step up to plate as the public sector deficit is proactively cut and auto stabilizers and demand leakages continue aggressively.

US consumer sentiment much lighter than expected in August

August 15 (CNBC) — U.S. consumers, bracing for higher interest rates and slightly slower economic growth, were a bit less optimistic in August as sentiment retreated from last month’s six-year high, a survey released on Friday showed.

The Thomson Reuters/University of Michigan’s preliminary reading on the overall index on consumer sentiment slipped to 80.0 from 85.1 in July, the highest since July 2007.

August’s result was well below the 85.5 reading expected by economists.

Consumers’ view of current economic conditions showed the biggest decline, and most expected the pace of growth to ease slightly. However, these changes were not large enough to upend “the prevailing view that the economic expansion will continue,” survey director Richard Curtin said in a statement.

Share

China’s Treasury Holdings Fall 21 Bln Amid Fed Talk on Taper Timing

Posted on by

I’d guess most of that was runoff of short term bills so wouldn’t alter the longer term rates but it also might be the case that China told the fed they wouldn’t buy any more secs unless they ceased QE.

The Fed doesn’t realize that we don’t need China or anyone else to keep interest rates on tsy’s anywhere we want them, so it’s likely intimidated by that kind of threat that China perhaps has already begun carrying out to make the point, as it did in 2011 when it let its entire bill portfolio run off and only started buying again after Bernanke’s ‘strong dollar’ speech and twist instead of QE, etc.

China’s Treasury Holdings Fall Amid Fed Talk on Taper

By Daniel Kruger

August 15 (Bloomberg) — Holdings of Treasuries in China, the largest foreign lender to the U.S., fell in June for the first time in five months amid discussion by Federal Reserve officials about slowing the pace their bond purchases.

China’s stake dropped by $21.5 billion in June, or 1.7 percent, to $1.276 trillion, according to Treasury Department data released yesterday. Yields climbed after June 19 when Fed Chairman Ben S. Bernanke said policy makers might reduce the size of their $85 billion a month in purchases of Treasuries and mortgage securities in coming months.

The pullback by China comes as overseas holdings of Treasuries have grown $26.8 billion, or 0.5 percent this year, the slowest pace since a 2.8 percent decline in the first six months of 2006. Treasuries have lost 3.1 percent this year, according to Bank of America Merrill Lynch indexes, headed for the worst performance since 2009.

“What you saw was a knee-jerk reaction” from China, said Adrian Miller, director of fixed-income strategies at GMP Securities LLC in New York. The drop wasn’t “any kind of a message as to a concerted effort to wind down excess exposure because of some duration risk given the Fed’s tapering goals,” he said.

Treasury Selloff

China’s holdings in May were $1.297 trillion, less than the $1.316 trillion reported by the Treasury last month. The Treasury revises the data on a monthly basis based on the nationality of the beneficial holder of the debt, while the initial figure is derived from the location of the purchase.

The benchmark 10-year Treasury yield rose 36 basis points or 0.36 percentage point, to 2.49 percent in June. It touched 2.82 percent yesterday, the highest since Aug. 1, 2011.

The decline in China’s stake “does help explain why the Treasury market sold off in June,” said Michael Pond, head of global inflation-linked research at Barclays Plc, one of 21 primary dealers that trade with the Fed.

Currency reserves have risen 5.6 percent through June to $3.5 trillion, according to data from the People’s Bank of China. Reserve growth in 2012 was 4.1 percent, the slowest pace since 1998, the data show. Reserves had grown at a double-digit pace for 11 consecutive years.

China’s Treasury position has risen $55.4 billion or 4.5 percent so far this year after a 5.9 percent increase in 2012. The holdings declined 0.7 percent to $1.152 trillion in 2011, the first annual decline on record going back to 2001.

Investors in China held 11.1 percent of the $11.4 trillion of marketable U.S. debt in June compared with a record 14 percent in June 2009.

All foreign investors owned 49.1 percent of the marketable debt, the least since May 2011, the data, known as Treasury International Capital, show.

Demand for the debt from overseas investors fell by $56.5 billion, or 1 percent in June to $5.6 trillion. It was the first three-month decline in overseas holdings since 2001.

Share