Recap 10-18-11

Main Items:

  • US Core PPI was unchanged at 2.5% YoY in Sept vs 2.4% exp
  • NAHB index jumped to 18 vs 14 exp and prev. The improvement was broad based, and was likely helped by low mortgage rates.
  • Citi on its conf call: "our early bucket delinquencies are beginning to increase reflecting re-defaults of previously modified mortgages…we could begin to see increasing delinquencies and net credit losses in the first mortgage portfolio…the pace of improvement in our home equity delinquencies has slowed”.

Overseas:

  • German Zew Survey of Economic Sentiment declined to -48.3 in Oct vs -45 exp and -43.3 prev
  • UK CPI jumped to 5.2% YoY in Sept vs 4.9% exp and 4.5% prev. Core CPI increased to 3.3% YoY in Sept vs 3.2% exp and 3.1% prev
  • Chinese Data:
  1. GDP rose 9.1% YoY in 3Q vs 9.3% exp and 9.5% prev
  2. Fixed Asset Investment growth slowed to 24.9% vs 24.8% exp and 25% prev
  3. IP rose 13.8% YoY in Sept vs 13.4% exp and 13.5% prev
  4. Retail Sales rose 17.7% YoY in Sept vs 17% exp and prev

Commentary:

For people who still have balance sheet, senior unsecured money market paper in the big financials may look attractive. BAC 6.05 8/12 bond is trading at a yield of ~5% with 10 months to maturity. People who think that Buffet is right and BAC won’t default but are afraid banks are value traps may find this appealing.

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