Working For The Weekend

www.mksense.blogspot.com The week is winding down. We can almost taste the weekend, but there is much to do and discuss before our weekly respite. Jobless claims came in higher than expected. Some media outlets tried to portray the initial Jobless Claims number as being positive, but in reality, today's report was the same as last week's initial reading and last week's number was revised higher. Not good news. Continuing Claims was higher than last week's initial number and the upwardly revised number as well as the street consensus. This in spite of both benefit extensions and people falling off of the rolls. The week is winding down. We can almost taste the weekend, but there is much to do and discuss before our weekly respite. Jobless claims cam in higher than expected. Some media outlets tried to portray the initial Jobless Claims number as being positive, but in reality, today's report was the same as last week's initial reading and last week's number was revised higher. Not good news. Continuing Claims was higher than last week's initial number and the upwardly revised number as well as the street consensus. This in spite of both benefit extensions and people falling off of the rolls. The treasury market does not consider today's data to be a positive. The price of the 10-year treasury is up 10/32s to yield 3.53%. The price of the 30-year government bond is up 23/32s to yield 4.44% This in spite of new supply of U.S. treasuries via the 3-year, 10-year and today's 30-year auctions. Yesterday's new supply of 10-year's was well received. Indirect bidders, which includes foreign central banks, made up 41% of the overall buyers. This was in line with the expected 42%. Bid to cover was 2.96 versus a recent average of 3.04, but this was good considering the 10-year priced at 3.54%. The U.S. may not be pretty from debt standpoint, but we are currently the least ugly girl at the dance . The media was batting 1.000 today when it reported that the bond market sold off due to a weaker-than-expected auction. The sell off was so brief if you blinked, you missed it. Prices on the long end of the curve finished the day near the highs for the day. After all, the street may have been expecting a 4.47% long bond, but 4.49% doesn't exactly mean the bond vigilantes are back. Indirect bidders were a bit soft accounting for 32.5% of the auction, down from 36.8% in the prior auction. Primary dealers (banks and investment banks) accounted for 45.7%, up from 37.7% in the prior auction. Things are calming down in Europe. Investors are less worried about an immediate Greek default, but the prevailing opinion is that rather than solving the problems in Greece, the can has been kicked down the road. This is why the euro continues to trend lower versus the dollar. Unlike some on the Street, I am not ready to declare the EU and the euro failed experiments, but the idea that Europe would be a legitimate rival to the U.S. c'est morts. The undertaking by the EU is truly Heraclean. Pandora's box has been opened and all the evils of the world (using debt to pay debt) have been released. More disturbing is that the hoi polloi are becoming desensitized to debt-derived stimulus. This is what got us into this tragedy. Volcker tightened and beat inflation. Then he eased. When inflation began to heat up, he eased again. Rarely did Mr. Volcker or his successor, Mr. Greenspan, ever fully remove the stimulus. when the economy would begin to sputter, along came the Fed (Greenspan Put?) to make leverage cheap. Can't get much easier than now. The problem is that GUM (great unwashed masses) believe that the stimulated economy is normal and that credit checks and lending standards are Draconian. Fed Vice Chairman Kohn stated at a monetary conference in Ottawa that the Fed's policy of keeping rates at a given level should not be unconditional. However, he also said that Fed policy would not become less accommodative. He also said that central banks should not accept higher levels of inflation to have more room to cut during a recession. With the economy slowly recovering it is unlikely that the Fed will move quickly, sharply or very high. Today, I have a financial adviser ask me about floating rate bonds and preferreds. He asked why the big push for floaters when most have coupons which float off of LIBOR when LIBOR is low and probably will not rise very high, very soon? Houston, we have comprehension! Tell your friends. I am looking for more subscribers.