Prices of Treasury coupon securities surged today and, since the inverse relationship between price and yield is intact,yields fell.
The reason for the so called local trade or day trade can be placed at the feet of the stories about the FX market. Non dollar currencies improve and authorities in those venues intervene to stem the slide of the once mighty greenback.
With newly purchased dollars needing a place to park, the flow of funds wends its way to the belly of the Treasury curve and all is well with the world.
The principal rumor today was that the Russians had placed a large order in the belly of the Treasury curve and made dealers who were short for the 10 year,uncomfortably short.
That make some sense for the short strokes but I think that a little thoughtful analysis of some anecdotal evidence tell us that even a year since the world nearly rushed headlong off a cliff and into an abyss there are still numerous problems which need solution.
I rarely watch CNBC but had it on briefly today. They presented an interesting story about Target slashing toy prices to match previously announced cuts from retail behemoth Walmart. Here it is two months in advance of Christmas and these fellows are already jousting for their share of the consumer’s wallet. How bad can it be and how much worse will it get if they are already at it?
To reinforce the penurious mood of the consumer, the Federal Reserve released data today which showed that credit fell by $ 12 billion in August or by an annualized rate of 5.8 percent.
That is the seventh consecutive monthly decline in that metric and represents.I think, the consumers attitude regarding his or her wealth and income prospects. I think that any one expecting a rapid recovery should review the evidence. If you are honest about it it most unlikely.
One last note. I rarely follow T bill rates but I noted today that the three month bill trades at about 6 basis points. That tells me that there is too much money sloshing around seeking safety. Too much money that is not being lent. And probably too much money about to ignite the next bubble (Treasuries) as it flees low yields for higher yields out the curve.
Maybe all this means that we are setting up for a giant duration grab which will leave the curve far flatter than anyone though possible. Investors will delude themselves into thinking that there is no risk in a 10 year Treasury or a 30 year bond.
When everyone is in the pool someone will saunter by and throw a plugged in toaster into the deep end. It will surely end very ugly.
Anyway, I run on.
The yield on the 2 year note declined 5 basis points to 0.86 percent. The yield on the 3 year note dropped 7 basis points to 1.36 percent. The yield on the 5 year tumbled 8 basis points to 2.16 percent. The seven year note was the relative value winner today as its yield dropped 9 basis points to 2.76 percent. The yield on the 10 year note fell 8 basis points to 3.17 percent. The yield on the Long Bond dropped 7 basis points to 3.99 percent.
The belly of the curve continues to roar ahead.The 2year/5 year spread collapsed by 3 basis points (flattened) while the 5year/30 year spread widened a basis point. The butterfly which I chronicle religiously here is 53 basis points.
The 2 year/10 year spread narrowed 3 basis points to 231 basis points to 231 basis points.
The 10 year/30 year spread widened a basis point to 82.
Bloomberg reports that "The SEC today filed a notice of appeal at U.S. District Court in Dallas without indicating what arguments it may make. A judge had dismissed the agency's lawsuit in July, saying Cuban's alleged promise to keep information confidential about Mamma.com Inc. didn't bar him from trading the company's stock."Read | Permalink | Email this | Comments
Filed under: Stocks to Buy
Server/deskstop virtualization software solutions designer Citrix Systems (NASDAQ: CTXS) continues to advance, as expected, which is why I’m Reiterating my Buy rating for the company, first recommended on June 16, 2009 at a price of $33.09.
In June, the argument was made that U.S. information technology spending would not decline by the projected 5-7% in FY2009, and that institutional investors would also look past CTXS’s flatish FY2009 revenue to a near 10% gain in FY2010, and that’s pretty much what has transpired. Shares have risen about 19% since the June Buy recommendation. The First Call FY2009/FY2010 EPS estimates for CTXS are $1.64 to $1.88.
Oracle (ORCL) CEO Larry Ellison said at the company’s annual meeting today that he is “not interested in buying Brocade (BRCD),” MarketWatch reports. The Wall Street Journal earlier this week said Brocade has been shopping for a buyer, and cited Hewlett-Packard (HPQ) and Oracle as possible suitors.
BRCD today is up 20 cents, at $9.10.
MasterCard Advisors (NYSE: MA) service SpendingPulse says luxury and electronics sales headed upward last month, in a pleasant deviation from what became the norm all too long ago. A few other product categories posted gains as well - showing stability, if not a recovery. But, at this stage of the game, we'll take what we can get, right?
Luxury sales, not including jewelry, gained 3.4% year-over-year - that's an increase of $891 million. Last September, luxury goods suffered a 9.4% decline. Yet, this category is still below its September 2005 level of $94 million. Jewelry sales gained 1.2% relative to last year, compared to a year-over-year decline of 5.8% a year ago. Compared to apparel sales, this is a profound turn. In September 2008, the clothing category was off 5.7%, and this September, it was down only 2.9%.Read | Permalink | Email this | Comments
Princeton University economist, author and New York Times columnist Paul Krugman won the Nobel Prize in economics last year for his work on international trade — so the guy knows what hes talking about when it comes to this subject. And hes worried.
|Paul Krugman. (Getty Images)|
First, he offered a few comments about the U.S. economy at the World Business Forum conference in New York:
1 - Based on GDP, the recession is over, were back to a world of growth
2 - But, the jobs picture is continuing to deteriorate. The recession may be over, but the bad times are nowhere near over.
3 - This could be bad. Financial crises tend to produce prolonged hits to growth and this is the mother of all synchronized financial crises so we almost certainly have a long, long slog before were fully recovered.
Then, he turned to the topic of world trade. And the picture he painted was not a pretty one.
When it comes to international trade, actually its not the Great Depression, its worse, he said, presenting charts showing the decline in global trade activity falling much more steeply in the current downturn than during the Depression.
The scale of the collapse of world trade has been so large that it has produced a degree of international linkage that surpasses what even the pessimists imagined, he said. World trade acted as a transmission mechanism, spreading economic distress even to those countries that had relatively healthy financial systems, such as Germany.
We really are one world economy in a way that has never been true before, he said.
Despite the collapse in trade, Krugman downplayed concerns about protectionism.
The Obama administrations move last month to impose tariffs on certain imports of Chinese tires raised much concern that nations are leaning towards protectionism — a move some economists say worsened and prolonged the Great Depression.
But Krugman isn’t convinced. First, he said, protectionism was an effect – not a cause — of the Great Depression — a frequent misconception among economists, he said. And despite incidents it hasnt really been a factor in the current downturn.
He added that as for the tire tariffs, they arent really a big deal, because they are part of the rules under world trade agreements and are temporary — rather than permanent — in nature.
AT&T (T) will begin selling a Dell (DELL) touch-screen smart phone based on the Google Android operating system as soon as early 2010, the Wall Street Journal reports this afternoon, citing “people briefed on the plans.”
The WSJ story follows a CrunchGear post this morning which said that Dell will soon be selling in the U.S. a version of the Mini 3i phone it has begun selling in China. That story did not specify which carrier would carry the phone.
The Journal concurs that the phone is similar to the China phone, but reports that it has some different features.
The piece said Dell is also talking to other carriers about offering the phone.
In the wake of COST's report, analyst Brian Sozzi of Wall Street Strategies reiterated his Buy rating and $66 price target on the equity. "In our view, 4Q09 will go a long way in supporting a higher valuation for Costco," wrote Sozzi in a research note this morning. "The company has managed to control costs, drive traffic to its warehouses consistently throughout the economic downturn, paid $300 million in annual dividends in FY09 (payout ratio of 26.0% second to only Wal-Mart in the sector), and has catalysts on the horizon to showcase earnings power above currently modeled for consensus EPS."Permalink | Email this | Comments
Consumer Credit outstanding on a seasonally adjusted basis in August fell by $12b, $2b more than expected but July didn’t fall as much as initially reported by $2.6b. It’s the 10th month in the past 11 that has seen declines. Revolving credit (mostly credit cards) fell by $9.9b and nonrevolving fell by $2.1b, a sharp improvement from the $16.6b drop in July and $10.6b in June but that is mostly due to the clunker program. The total amount outstanding at $2.46t is the lowest since July ‘07. A thriftier consumer, debt paydown, cut credit lines and rising unemployment are all combining to reduce the use of consumer credit to purchase things.
BRUSSELS/NEW YORK (Reuters) - Blackstone Group LP (BX.N) plans to buy Anheuser-Busch InBev’s (ABI.BR) U.S. theme parks for up to $2.7 billion, the companies said on Wednesday, expanding the private equity firm’s entertainment portfolio.
The sale by AB InBev was widely expected as the company focuses on paying off $45 billion in loans from the $52 billion merger last year that made it the world’s biggest beer maker.
After Belgium’s InBev took over U.S. rival Anheuser-Busch, it set a target to raise $7 billion from divestments.
The theme park deal, one of the largest private equity transactions this year, would push it to within about $500 million of that target.
Blackstone will acquire Busch Entertainment Corp (BEC), which the brewer said was the second-largest theme park operator in the United States.
That will add 10 parks — including three SeaWorlds and two Busch Gardens — to Blackstone’s existing amusement assets such as the Madame Tussauds wax museums, Legoland and the London Eye Ferris wheel.
Blackstone will pay $2.3 billion on closing and a right to participate in its return on initial investment capped at $400 million, the companies said in a statement.
Private equity firms have been largely unable to strike deals of scale since the credit crisis virtually shut off access to financing for leveraged deals, but have of late been able to access limited amounts of debt for deals.
Blackstone will use senior secured credit facilities and mezzanine debt to finance its purchase. The senior credit facilities are being provided by BofA Merrill Lynch, Barclays Capital, Deutsche Bank Securities, Goldman Sachs Loan Partners and Mizuho Corporate Bank.
AB InBev said it expected the deal to close in the first half of 2010.
Rival theme park operators, which have been hit in the recession as families curb spending, include Walt Disney Co (DIS.N), General Electric Co’s (GE.N) Universal Studios, Six Flags Inc and Cedar Fair LP (FUN.N).
The brewer of Budweiser, Stella Artois and Beck’s may still sell 11 breweries in seven countries in central and eastern Europe. Private equity firm CVC Capital Partners has submitted the only bid, of around $2 billion, sources say.
AB InBev has not made any comment on this possible sale. (Reporting by Philip Blenkinsop in Brussels and Martinne Geller and Megan Davies in New York; editing by Elaine Hardcastle and Gunna Dickson)