Across the Curve

Opening Comments January 14 2008

Prices of Treasury coupon securities remain ensconced safely in their recent range and retreated modestly in overseas trading. Economic data released overnight once again provide evidence of an enfeebled and enervated economy. I suspect that the catalyst for the modest price declines is supply. Bloomberg reports that Japan and Italy and German issued debt overnight and that issuance probably caused a little financial dyspepsia.The yield on the 2 year note climbed 3 basis points to 0.77 percent. The yield on the 3 year note edged higher by 2 basis points to 1.09 percent. The yield on the 5 year note increased 2 basis points to 1.46 percent. Likewise, the yield on the 10 year note climbed 2 basis points to 2.31 percent and the yield on the Long Bond rose 3 basis points to 3.03 percent.

The 2year/10 year spread narrowed a basis point to 154 basis points.

In Australia home loan approvals rose for the second consecutive month increasing 1.3 percent and provided evidence that the effect of previous rates cuts is percolating through the economy.

Bloomberg reports that in 2007 the Chinese economy surpassed the German economy as the world’s third largest.

Morgan Stanley, in a research report, suggested that HSBC will need to raise a cool crisp $30 billion of capital.

Deutsche Bank reported a $6.3 billion loss in Q4.

Barclays plans to slash 2000 jobs this year.

In France the steep decline in oil prices pushed inflation to its lowest level in 18months as inflation fell to 1.2 percent YOY in December from 1.9 percent in November.

Industrial Production in Italy slumped 2.3 percent in November after falling 2 percent in October. The series has dropped 9.7 percent YOY.

In the US the market will focus on the retail sales report which is expected to show a less than festive holiday result.