BondSquawk Daily

BondMoves would like to thank BondSquawk.com for allowing us to reprint the following information. All copyrights are retained by BondSquawk.

August 3rd, 2012

* Draghi’s Comments Suggests ECB Could Take Big Steps

* Bonds Have a Mixed Day as Draghi Disappoints
* Rally Ahead After Treasury Yields Kiss Resistance?
* Ford’s New Debt: Attractive, But There Are Alternatives
* Seasonal Fluctuations Continue to Affect Jobless Claims
* Spending Accelerated Despite Uncertainty

Draghi’s Comments Suggests ECB Could Take Big Steps

Posted: 02 Aug 2012 09:00 PM PDT

By Bonsdquawk

August 3, 2012

According to Barclays Economics Research, Mr. Draghi’s comments indicated that the ECB is prepared to take major policy actions at its September meeting. Mr. Draghi had suggested that the governments implement the European Stability Mechanism (ESM) or the European Financial Stability Facility (ESFS) to provide financial assistance to the Eurozone members.

In order to create the fundamental conditions for such risk premia to disappear, policymakers in the euro area need to push ahead with fiscal consolidation, structural reform and European institution-building with great determination. As implementation takes time and financial markets often only adjust once success becomes clearly visible, governments must stand ready to activate the EFSF/ESM in the bond market when exceptional financial market circumstances and risks to financial stability exist – with strict and effective conditionality in line with the established guidelines. The adherence of governments to their commitments and the fulfilment by the EFSF/ESM of their role are necessary conditions [for some action on the ECB side].

Draghi’s comments also pointed out that large scale asset purchases could be undertaken to bring down yields in Southern Europe.

The Governing Council, within its mandate to maintain price stability over the medium term and in observance of its independence in determining monetary policy, may undertake outright open market operations of a size adequate to reach its objective. In this context, the concerns of private investors about seniority will be addressed. Furthermore, the Governing Council may consider undertaking further non-standard monetary policy measures according to what is required to repair monetary policy transmission. Over the coming weeks, we will design the appropriate modalities for such policy measures”.

<http://www.bondsquawk.com/wp-content/uploads/2012/08/Capture8.png>

If you have any questions or feedback on anything regarding the economy, markets, and bonds, feel free to Contact Us <http://www.bondsquawk.com/about/> . We would be delighted to respond.

Disclaimer
The above content is provided for educational and informational purposes only, does not constitute a recommendation to enter in any securities transactions or to engage in any of the investment strategies presented in such content, and does not represent the opinions of Bondsquawk or its employees.

<https://feedads.g.doubleclick.net/~a/mFogSCDHGHHGrJ7ApqqAAyAmrY8/ewPn0u2-kQzL0nZmsaEWFoy4jIk/0/pa>
<https://feedads.g.doubleclick.net/~a/mFogSCDHGHHGrJ7ApqqAAyAmrY8/ewPn0u2-kQzL0nZmsaEWFoy4jIk/1/pa>

<http://feeds.feedburner.com/~r/Bondsquawk/~4/oOfKaq4Uz7Y?utm_source=feedburner&utm_medium=email>
Bonds Have a Mixed Day as Draghi Disappoints

Posted: 02 Aug 2012 02:30 PM PDT

By Bondsquawk,

August 2, 2012

Mr. Draghi’s said that open market operations aimed to lower “exceptionally high” borrowing costs would occur only under strict conditions and after the struggling countries, such as Spain and Italy, submit a request for aid. The disappointment led to US treasury yields moving even lower as investors feared that the Euro zone might not be able to handle its ongoing fiscal crisis.

Treasury Yields were lower by 4 basis points and was trading at 1.48%. The Long Bond yield was at 2.55% down 5 basis points. The 5-Yr was down by 3 basis points and ended at 0.61% whereas the 2-Yr was flat at 0.22%.

High-Quality European Sovereign Bonds such as the German and U.K 10 Yr bond yields moving lower by 13 and 7 basis points to 1.237% and 1.438% respectively. On the other hand, Italy and Spain bond yields spiked by 38 basis points each and ended at 6.308% and 7.062%.

Corporate Bonds had a mixed day with financial bonds in the red after Draghi’s comments increased pessimism coupled with the drop in Knight Capital Group stock which was 70% on the day. Citigroup and Morgan Stanley bond yields went up by 7 basis points while Bank of America, Goldman Sachs and Barclays bond yields were higher by 4 basis points. JP Morgan was an exception with its yields decreasing by 2 basis points.

Industrial Bonds on the other hand had a good day with most of the bond yields moving lower. Walmart bonds were the biggest gainer with its yields moving 9 basis points lower. Cisco System bond yields decreased by 8 basis points. Google, Intel, Microsoft and Target bonds saw gains as well.

Information Provided by Trade Monster’s Bond Trading Center <https://www.trademonster.com/Products/Bonds.jsp?PC=iTB>

<http://www.bondsquawk.com/wp-content/uploads/2012/08/Capture11.png>

If you have any questions or feedback on anything regarding the economy, markets, and bonds, feel free to Contact Us <http://www.bondsquawk.com/about/> . We would be delighted to respond.

Disclaimer
The above content is provided for educational and informational purposes only, does not constitute a recommendation to enter in any securities transactions or to engage in any of the investment strategies presented in such content, and does not represent the opinions of Bondsquawk or its employees.

<https://feedads.g.doubleclick.net/~a/mFogSCDHGHHGrJ7ApqqAAyAmrY8/RSkWHNP8Tmpdv-S_8ahEQ6d6b6s/0/pa>
<https://feedads.g.doubleclick.net/~a/mFogSCDHGHHGrJ7ApqqAAyAmrY8/RSkWHNP8Tmpdv-S_8ahEQ6d6b6s/1/pa>

<http://feeds.feedburner.com/~r/Bondsquawk/~4/qyVDjAKTHGE?utm_source=feedburner&utm_medium=email>
Rally Ahead After Treasury Yields Kiss Resistance?

Posted: 02 Aug 2012 11:00 AM PDT

By Rom Badilla, CFA

August 2, 2012

With today’s positive action in the bond markets, the yield on the 10-Year U.S. Treasury is currently trading at 1.46% which is down 5 basis points from yesterday’s close. As noted several days ago, this level is a key resistance level and could propel the Treasury market for further gains.

Credit Suisse’s research analysts David Sneddon, Christopher Hine, Pamela McCloskey, and Cilline Bain provided color in their August 2, 2012 U.S. Fixed Income Daily regarding the yield on the 10-Year U.S. Treasury:

A break below 1.46/45% is needed to re-open a test of 1.39/38% – the record yield low and trend resistance. We again look for selling here and only below it would open up a test of the 1.35% Fibonacci barrier.

 

As was the case earlier, their current strategy continues to be in the bullish camp as they have a long position at 1.55% with a 16 basis point target at 1.39%. This equates to about a 1.4% gain in dollar price on the 10-Year which currently has a 8.94 duration (16 basis point x 8.94 duration = 1.4% dollar price gain). In addition, they have a Stop-Loss set at 1.60%.

Support lies at 1.55%/1.60% area which is where they could see buyers emerge since it is the 40-day moving average, the top of the channel which acts as support, and the 61.8% Fibonacci retracement support level. Beyond that, they see bigger support at 1.73% yield peak.

Following suit, the Long Bond is hitting resistance with the yield of the 30-Year at 2.54%. The research team added the following:

Below 2.54/52% would again target channel resistance at 2.45/44%. We would again look for selling here and a bounce in yields. Below 2.445% would get the bull trend back on track for 2.25/20% next.

In addition, they see support at the 40-day moving average which is around the 2.635%/2.65% range. An extension through there could lift the yield to 2.70 to 2.72% range which is the top of the trend-line and the 61.8% Fibonacci retracement level of the June to July rally. 2.78% followed by 2.83-2.855% are significant support levels farther out.

Credit Suisse’s team is currently long at 2.60% with a Stop-Loss at 2.65% with a target of 2.45%. Their target drop of 15 basis point equates to a 2.9% gain in the 30-Year since the duration is at 19.48 years (15 basis points x 19.48 duration = 2.92% dollar price gain).

 

Be sure to check out our popular Bond University <http://www.bondsquawk.com/2012/04/24/how-to-easily-trade-bonds-like-stocks/> if you like this post. In addition, check out this article <http://www.bondsquawk.com/2012/07/16/gain-35-return-by-trading-u-s-treasuries/> posted in the Trading & Investing Strategies section for ways to enhance beyond buy and hold static strategies.

Disclaimer
The above content is provided for educational and informational purposes only, does not constitute a recommendation to enter in any securities transactions or to engage in any of the investment strategies presented in such content, and does not represent the opinions of Bondsquawk or its employees.

<https://feedads.g.doubleclick.net/~a/mFogSCDHGHHGrJ7ApqqAAyAmrY8/lS1X2rykzM-GyXzH8pJVr3TX9zQ/0/pa>
<https://feedads.g.doubleclick.net/~a/mFogSCDHGHHGrJ7ApqqAAyAmrY8/lS1X2rykzM-GyXzH8pJVr3TX9zQ/1/pa>

<http://feeds.feedburner.com/~r/Bondsquawk/~4/g7sjpnR_mSc?utm_source=feedburner&utm_medium=email>
Ford’s New Debt: Attractive, But There Are Alternatives

Posted: 02 Aug 2012 09:00 AM PDT

By Michael Terry – Seeking Alpha <http://seekingalpha.com/author/michael-terry>

August 2, 2012

Ford Motor Credit Company (F <http://seekingalpha.com/symbol/f> ) (“FMCC”) was in the debt market again today, issuing $750 million in 3.5 year debt. The following are the issue details:

Issuer Ford Motor Credit Company LLC
Size $750,000,000
Rating Baa3/BB+/BBB- (Stable/Stable/Stable)
Coupon 2.50%
Issue Px 99.68
Yield 2.598%
Maturity January 15, 2016
Spread +230bps/3yr Treasury
Interest Payment Dates Semi-annually on each January 15 and July 15
Call No par call prior to maturity

Term sheet <http://www.sec.gov/Archives/edgar/data/38009/000110465912052756/a12-17219_2fwp.htm> , Prospectus <http://www.sec.gov/Archives/edgar/data/38009/000104746912007563/a2210423z424b3.htm>

Covenants:

* Limitation on Liens – Should FMCC pledge/lien any property in excess of $5MM (with certain exceptions), debt will be secured equally and ratably. For a financial entity, this does not mean much.
* Merger and Consolidation – No consolidation or merger of Ford Credit, and no sale or conveyance of its property as an entirety, or substantially as an entirety, may be made to another corporation, if, as a result any asset of Ford Credit would become subject to a Mortgage, unless the debt securities shall be equally and ratably secured. Again, no merger if assets become subject to a merger – no real bite for a credit company.

Ford Motor Credit Outstanding:

Issue Size (MM <http://seekingalpha.com/symbol/mm> ) Px Yield
3.875% due 1/15/2015 $1,250 $104.04 2.17%
5.625% due 9/15/2015 $1,000 $109.00 2.60%
2.50% due 1/15/2016 $750 $99.68 2.60%
6.625% due 8/15/2017 $1,250 $114.00 3.56%
5.0% due 5/15/2018 $1,950 $106.83 3.67%

 

Read the Full Article <http://seekingalpha.com/article/770951-ford-s-new-debt-attractive-but-there-are-alternatives#comment-8007601>

If you have any questions or feedback on anything regarding the economy, markets, and bonds, feel free to Contact Us <http://www.bondsquawk.com/about/> . We would be delighted to respond.

Disclaimer
The above content is provided for educational and informational purposes only, does not constitute a recommendation to enter in any securities transactions or to engage in any of the investment strategies presented in such content, and does not represent the opinions of Bondsquawk or its employees.

<https://feedads.g.doubleclick.net/~a/mFogSCDHGHHGrJ7ApqqAAyAmrY8/ZwI67jW0JF-eErE3UusN4Xz3vBI/0/pa>
<https://feedads.g.doubleclick.net/~a/mFogSCDHGHHGrJ7ApqqAAyAmrY8/ZwI67jW0JF-eErE3UusN4Xz3vBI/1/pa>

<http://feeds.feedburner.com/~r/Bondsquawk/~4/DBXu8F6lSRc?utm_source=feedburner&utm_medium=email>
Seasonal Fluctuations Continue to Affect Jobless Claims

Posted: 02 Aug 2012 09:00 AM PDT

By Bondsquawk,

August 2, 2012

According to Deutsche Bank’s Global Markets Research, Initial Jobless Claims increased by 8K to 365K.

This had the effect of lowering the 4-week moving average -3k to 366k-the lowest level since the end of March. The recent volatility in jobless claims is due largely to seasonal issues associated with factory retooling in the auto sector. However, these factors have now passed.

The report also said that if the 4-week moving average on initial jobless claims goes lower over the coming weeks then it will be a great sign for the labor market.

At present, we anticipate +75k for nonfarm payrolls (+80k private) and the unemployment rate should remain unchanged at 8.2%.

<http://www.bondsquawk.com/wp-content/uploads/2012/08/Capture7.png>

If you have any questions or feedback on anything regarding the economy, markets, and bonds, feel free to Contact Us <http://www.bondsquawk.com/about/> . We would be delighted to respond.

Disclaimer
The above content is provided for educational and informational purposes only, does not constitute a recommendation to enter in any securities transactions or to engage in any of the investment strategies presented in such content, and does not represent the opinions of Bondsquawk or its employees.

<https://feedads.g.doubleclick.net/~a/mFogSCDHGHHGrJ7ApqqAAyAmrY8/WjSnM1lGKA-95zMD0Bl0NQ3i79M/0/pa>
<https://feedads.g.doubleclick.net/~a/mFogSCDHGHHGrJ7ApqqAAyAmrY8/WjSnM1lGKA-95zMD0Bl0NQ3i79M/1/pa>

<http://feeds.feedburner.com/~r/Bondsquawk/~4/6qM1R2zEBSk?utm_source=feedburner&utm_medium=email>
Spending Accelerated Despite Uncertainty

Posted: 02 Aug 2012 07:00 AM PDT

By Bondsquawk

August 2, 2012

A research conducted by J.P. Morgan suggests that increased uncertainty arising from slowing global growth and the fiscal cliff is not significantly hurting economic growth contrary to wide held beliefs.

While uncertainties (or perceived risks) have dampened spending levels for long-lived assets, these worries do not seem to be the dominant explanation for disappointing growth in recent years. If they were, growth in demand for these longlived assets would be lagging growth of the overall economy. In fact, the opposite has been the case. Real spending on longlived assets has accelerated to 11.6% growth over the past year, while the rest of real GDP increased only 1.1%. If uncertainty were the dominant influence, the data would be sending us a message that the economy is being kept afloat by a massive reduction in risk. Of course, this is not the case. The recovery in real auto sales (7.2% oya), housing (10.7%), business spending on equipment ex. high tech (15.8%), and business investment in structures (11.3%) is being driven by a variety of other influences.

<http://www.bondsquawk.com/wp-content/uploads/2012/07/Capture56.png>

<http://www.bondsquawk.com/wp-content/uploads/2012/07/Capture219.png>

The article suggests that a fall in consumer confidence came as a result of the slowdown and not vice versa.

Confidence measures we do have suggest that the economy slowed first and the slowdown led the slide in business and consumer confidence. Consumer confidence surveys similarly show that confidence started to slip after the April slowdown in hiring and spending rather than before. For example, the Michigan consumer confidence index, and the key expectations component, peaked in May of this year and did not begin to turn down until June. This suggests that the slowdown in hiring and weakening in economic indicators was more a cause of consumer pessimism, rather than the other way around.

<http://www.bondsquawk.com/wp-content/uploads/2012/07/Capture315.png>

Business surveys similarly were a lagging indicator as well and hence did not add to the slowdown until much later.

Business leaders in March and April could not have helped but notice the recession in Europe and slowdown in China, the deepening Euro area debt crisis, and the dysfunction in the US government with regard to key fiscal issues. But it is difficult to find evidence that these worries sparked the slowdown in growth.

<http://www.bondsquawk.com/wp-content/uploads/2012/07/Capture411.png>

<http://www.bondsquawk.com/wp-content/uploads/2012/07/Capture57.png>

If you have any questions or feedback on anything regarding the economy, markets, and bonds, feel free to Contact Us <http://www.bondsquawk.com/about/> . We would be delighted to respond.

Disclaimer
The above content is provided for educational and informational purposes only, does not constitute a recommendation to enter in any securities transactions or to engage in any of the investment strategies presented in such content, and does not represent the opinions of Bondsquawk or its employees.

 

Leave a Reply

Your email address will not be published.

You may use these HTML tags and attributes: <a href="" title=""> <abbr title=""> <acronym title=""> <b> <blockquote cite=""> <cite> <code> <del datetime=""> <em> <i> <q cite=""> <strike> <strong>

© Bond Market News Built for Bond Trading | BondMoves.com
CyberChimps