Friday – October 29th, 2010

Goldman Sachs Says Fed Asset Purchases May Include 30-Year Bonds: Bloomy

(call or write if you’d like MORE details OF Goldilocks note)

Given that market moves trump thought-process ALL THE TIME, we’ll hit send as the market moves ‘over there’ in the PIIGS interrupted what we thought was going to be logic and common sense of USTs trading in advance of GDP and next week’s risk-events. As we fired UP the Bloomy this morning, the UST market had a slight bid (ahead of slow growth, thinking NO inflation leading to QE, and a few days withOUT coup supply) and we noticed PIIGS spread was wider by about 15bps. This was apparently enough to bring IN the ECB and shortly thereafter, news that Portugal was near a budget deal sent legions of buyers TO peripheral EU (??) and spreads are ONLY wider by about 8bps. A victory of sorts and this buying of RISK (aka PIIGS) gave us our password today. OTHERWISE, we’d have been very easily able to talk about a more balance UST market with some shorts on verge of being (profit) stopped. With data out in about an hour, we’ll have something to add as all the dust settles. Technicals highlight of the day gives the ball back to the CitiFX guys – updating their technamental landscape diggin deeper than MOST. PLS READ. ALSO IN AS FAR AS StreetStuff highlight of the day – PLS READ NOTE FROM GOLDILOCKS – BLOOMY PICKED UP ON IT WITH H’LINE, “GS SAYS FED ASSET PURCHASES MAY INCLUDE 30yr BONDS”. The note goes on to say that avg duration will be 5yrs BUT !!! “… To the extent that this is not entirely discounted, it could result in a flattening in the 10/30s portion of the yield curve after the FOMC announcement.” ARE WE/THEY CLEAR HERE?? Finally, we would suggest BAMLS pension (under)funding update. As we round the turn later on today into what is a mediocre month-end index extension we found BAMLs note particularly interesting. Finally, along with all the ‘usual suspects’ from the press (without a Fed plant from Hilsenrath) we’d mention Economist story on how Ben cannot do it alone. Next week matters. Whoever said, ” . may you live in interesting times” certainly was a wise person. Have a great start to the end of the week.  Best, Saul/Steve

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