Lost In The Shuffle…

Posted by on Nov 30, 2011 in Uncategorized | No Comments

Great US data. Much better than expected. Clearly a good sign.

Monti says IMF loan not being considered for Italy.

Juncker says EFSF Capacity may reach 750 billion. Guess he had to come up with some number.

Greek debt is not being renegotiated?

The globally co-ordinated central bank policy moves have started, and more likely to come (ECB rate cut for example), and that is all the market is discussing. We were down over 1% on futures overnight specifically because the EFSF was a failure and banks were downgraded (belatedly) by S&P. No one is talking about EFSF right now. The IMF denial and now the Italian denial is also off the table. Back on the table is “treaty changes”.

We moved 5% basically on the BOC reserve change and the swap line announcement. The swap line announcement is largely symbolic in that changing the rate to 50 bps instead of 100 bps is not a game changer. The hope of more to come and that they are working together is positive, but it isn’t really new, and hasn’t done much when it only addresses liquidity and cost of funds. Asset purchases have worked, lowering funding costs hasn’t done much.

For what its worth, this policy also dovetails nicely into a non-printing solution. This policy is probably even more important if the ECB is going to dealy printing money and buying sovereign debt. It helps even if the ECB prints, but is critical if the ECB holds off awhile longer.

With German bunds well bid, stocks back up to October 27th levels, the pressure to print may be off. Maybe they have already agree to print, but time and again the market has underestimated the willingness of Germany to try and find a solution without creating new money.