Weekend Update:
· Washington: 1) Derivatives: The WSJ discusses how the fight over Dodd/Frank is just getting started, w/several industry players lobbying the SEC, Fed, and CFTC over how the rules get implemented. [WSJ] 2) “Small investors flee stock market”: Individuals have pulled $33B+ from domestic equity MFs in the first 7 months of this year. [NYT]
· International: 1) Australia’s elections: With 78% of votes counted, a hung parliament was most likely; it appears as if a government led by Abbott has the best chance of prevailing in terms of seat count (which would wind up being a pos. for the mining industry). [Reuters/Bloomberg] 2) China eco growth + commodities: The head of Rio Tinto says China’s economic growth will slow to 6-7% in the coming years, which could drive commodity prices down to their ’08 lows. [Sydney Morning Herald] 3) China’s property bank stress tests: Said to find risks - the tests reveal that overall bank capital quality would remain pretty healthy even under adverse stress scenarios [Reuters]
· Treasuries: Treasuries aren’t in a bubble: Government bond yields around the globe are collapsing; yields are 90% correlated to Fed policy – w/QE-lite back on (w/the prospect of even more actual QE), policy will remain very accommodative for very long. The average spread between the Fed Funds and the 30yr is 200bp, the 30yr has a lot to rise to get there. [Barron’s]
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