Recap 12-20-13: Happy Holidays!


There will be no updates for the next 2 weeks. Happy Holidays everyone – and thanks for reading!


  • BoJ kept policy unchanged as expected
  • German GfK Consumer Confidence ticked higher to 7.6 vs 7.4 exp and prev
  • EU Consumer Confidence
  • US 3Q GDP was revised higher to 4.1% vs 3.6% exp and prev. Personal Consumption was a large driver, rising to 2.0% vs 1.4% exp and prev.
  • Canada CPI rose to 0.9% YoY vs 1.0% exp and 0.7% prev. The Core measure ticked lower to 1.1% vs 1.3% exp and 1.2% prev
  • Canada Retail Sales ex Autos rose 0.4% MoM vs 0.0% exp and prev
  • China equities were down 2%, 9th consecutive close lower, down 7% over that time on continued liquidity concerns. Repo rate opened at 4.98% after closing at 7.1% post yesterdays liquidity injections but traded up to close to 10%. Post close Fri, PBOC did another liquidity injection. h/t Nam
  • according to a Bloomberg survey, economists expect the Fed will taper by $10B increments over the next 7 meetings before ending the program in Dec
  • The Fed purchased ~90% of new, eligible MBS issuance in Nov and even w/tapering will be a massive player going forward. This is one of the big reasons the Fed was almost forced into tapering (they are running out of stuff to buy). Asset Portfolio passes 4T mark. WSJ
  • the BOJ is on its way to becoming the largest owner of JGBs; right now insurers own ~19.9% of the total vs. 17.4% for the BOJ – Nikkei

Upcoming Data:

  • Mon: CanadaGDP, US Personal Income, U Michigan Confidence,
  • Tue: US Durable Goods, New Home Sales
  • Wed: X-mas, Japan PMI
  • Thu: US Jobless Claims, Japan Unemplo0yment CPI

6 thoughts on “Recap 12-20-13: Happy Holidays!

  1. Enjoy the break; thanks for a great blog. Any parting thoughts on 5s – 30s? (somewhat overlaps with the Gross discussion of yesterday…)

    1. Hah, well I get out of a 7s30s flattener today. Things look kinda stretched short term and I’m going on holiday, so it was a no brainer. I can see some further steepening though, but more due to momentum and/or positioning I think. The general level doesn’t look too mispriced to me assuming the Fed is on hold for at least a year, maybe two, and a Fed leader that has talked openly about optimal control. What do you think?

      1. Good shout on the flattener; it’s clear (in retrospect, at least) that the steepener was far too consensus. On the other hand, there’s now been a big concession, and the fundamentals still seem supportive, so I’ve been nibbling at the steepener since late last week. Solid economy vs dovish Fed, fwd guidance vs LSAPs both argue for the steepener, and carry is now quite attractive…not profound, but given the shake-out we’ve seen, not unattractive.

        My only concern would be how much wood was actually chopped in the thin holiday-addled markets, vs how much was simply repriced, ie whether the technical balance has improved as much as price action would suggest…

        1. This is a bit late, but nice call on the steepeners. Agreed that generalized steepening could occur. Given the trend in the data, and the Fed on hold, the distribution of outcomes seems decidedly skewed higher over the intermediate term…

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