Monday Morning Miscellany

December 30th, 2013 10:13 am | by John Jansen |

The Treasury market is grinding higher in a very quiet almost year end session. Dealers with whom I have conversed attribute the up trade to some year end needs by clients and some position squaring in the dealer community.

Mortgages are a tad better versus Treasuries. One dealer I read took off some long the basis but was just booking profit. He thinks that month end extensions and lack of supply will keep spreads tightening into year end. He noted that if a fast money seller emerged and widened spreads he would look to reload.

I think that the focus will shift soon to the New Year. The main even there will be the labor report and how that report will change perceptions of the near term course of monetary policy.Several participants with whom I have spoken have expressed concern about the unemployment rate and how much it will drop when those jobless whose benefits expired drop out of the work force. That will be a participation rate event but since the FOMC did not tamper with threshold some are concerned about a big drop in the rate.

Finally, earnings season will begin pretty quickly after the calendar reads 2014. I wonder if equities are not in for an adjustment given the extent of the gains. If there are even weak or mild surprises that might spell near term trouble for stocks.

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