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US Morning Briefing

Thu, Nov 5 2009, 13:06 GMT
by RANsquawk Research Team

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Overnight News

Asia:

The 10-year Japanese government bond yield hit a three-month high as investors shield away from newlyauctioned 10-year bonds due to worries about the size of debt issuance for the rest of the fiscal year and next year. JGBs were trading at 137.67 (-0.29) at 0616 GMT. Nikkei fell 1.3% to its lowest close in a month, with Sony Corp and other exporters slipping as investors locked in profits on caution ahead of US jobs data. Sanyo Electric Co. lost a fifth of its value after Panasonic Corp launched a bid for shares in the world’s largest rechargeable battery maker. Although Panasonic’s offer was unchanged from terms announced a year ago, marker players said there had been some speculation it could revise up its offer price closer to Sanyo’s trading price. (RTRS)

BOJ Oct 13-14 Policy Board minutes said that funding conditions at smaller firms are still severe and there are some concerns over calendar and fiscal year-end funding. It said that there is hesitation on ending corporate assistance as it might spark speculation of more exit moves and most agreed the need to keep policy easy. (RTRS) In other news, BOJ’s latest regional economic report blames government policies for job and wage woes. (Nikkei)

Elsewhere, PBOC’s assistant governor said that the central bank would stick to its “appropriately relaxed” monetary policy stance and ensure an appropriate amount of liquidity in the banking system. (RTRS) In other news, China's 2009 economic growth is assured at 8%, NBS's Yao said, adding that China should avoid "chasing high growth" in Q4. (BBG) Also, NDRC said that China's economy may see several quarters of growth and 2009 GDP growth is to be less than 9%. (BBG)

US:

Commercial real estate values will fall 40%, on average, from their peaks in mid-2007, and up to 50% in some sectors, according to the 2010 edition of Emerging Trends in Real Estate, released on Thursday by the Urban Land Institute and PricewaterhouseCoopers LLP. They do note however that a bottom in commercial real estate will be seen next year. (RTRS)

In other news, Nouriel Roubini said that risk asset rally may end abruptly and the US economy will hurt if crude oil gets to USD100 per barrel. (Reuters)

Ahead of NFP this Friday, the US Monster Employment Index (Oct) came in at 120 M/M vs. Prev. 119. (BBG)


Bonds

European Government Bonds:

EGB’s traded higher this morning as the US curve continued to steepen on the back of the FOMC decision to keep rates low for an extended period of time allied to the general weakness in Asian and European equities. However, heading into the North American open prices are now trading lower dragged down by the BoE decision to extend QE by just GBP 25bln.

  • Eurozone Retail Sales (Sep) M/M -0.7% vs. Exp. 0.2% (Prev. -0.2%, Rev. to -0.1%)

  • Eurozone Retail Sales (Sep) Y/Y -3.6%% vs. Exp. -2.4% (Prev. -2.6%, Rev. to -2.3%) (BBG)

This morning has also seen a considerable amount of European supply:

  • French OAT Tap Auction for EUR 2.49bln, 3.75% 25-Oct-19, Bid/Cover 2.084 vs. Prev. 1.6

  • French OAT Tap Auction for EUR 2.175bln, 4.5% 25-Apr-41, Bid/Cover 1.559 (BBG)

  • Spanish Bond Tap Auction for EUR 3.09bln 3.3% 31-Oct-14, Bid/Cover 1.87 vs. Prev. 1.6 (BBG)

Maturity251030Bund (Dec09)
Level1.3072.5003.3504.110121
Change (bps)0.1794.0173.4282.552-0.25


Gilts:

The Bank of England kept rates unchanged at 0.50%, as expected for November, and increased the QE by GBP 25bln to GBP 200bln, which was below GBP 50bln increase as expected by many economists.

BOE said that inflation is likely to rise sharply to above 2% target in near term, adding that prospect is for slow recovery in economic activity. It further said that considerable stimulus from past easing is still working through the economy and BOE’s asset purchases have helped boost asset prices. (RTRS) Following the announcement Gilts made a sharp move to the downside as the increase was less than expected.

  • UK Industrial Production (Sep) M/M 1.6% vs. Exp. 1.2% (Prev. -2.5%, Rev. to -2.6%), biggest M/M rise since July 2002

  • UK Industrial Production (Sep) Y/Y -10.3% vs. Exp. -10.3% (Prev. -11.2%, Rev. to -11.5%)

  • UK Manufacturing Production (Sep) M/M 1.7% vs. Exp. 1.0% (Prev. -1.9%, Rev. to -2.0%), biggest M/M rise since July 2002

  • UK Manufacturing Production (Sep) Y/Y -9.3% vs. Exp. -9.7% (Prev. -11.3%, Rev. to -11.6%)


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