No real news out of the Geithner meetings. Schaeuble and Geithner offer up the same vapid phrases but interesting that the Geithner/Draghi meeting in Frankfurt yielded no news and it seems to be a blackout. Geithner and Draghi are two very verbose policymakers but as of yet … nothing. This evening though the S&Ps have regained all of today’s losses, which is very minor as the day was unusually quiet. The month end is tomorrow so fund managers will probably window dress as the S&Ps attempt to hold on to a 2% gain for the month.
The biggest story was that the SPANISH 2/10 curve continued to steepen today and closed the day at 179 BASIS POINTS as the 2-YEAR NOTE FELL ANOTHER 32 BASIS POINTS TO 4.731%. The result of the DRAGHI EFFECT has been to keep downward pressure on the LTRO-involved sovereign paper. The ITALIAN 2/10 curve has remained well bid and steepened out to 228 BASIS POINTS as the ITALIAN 2-YEAR NOTE DROPPED TO 3.71%.
In the minds of the Eurocrats the fire brigade has been able to douse the fire but there are glowing embers all around. Tomorrow night I will examine the possibilities of the FOMC release and as of now I am doubtful that the FED will do anything except to change the language about extending the zero interest rate program out further. Chairman Bernanke will not want to let the politicians off the hook about the fiscal cliff. Senator Schumer claims the FED is the only game in town. Well Senator, GAME ON.