Posts Tagged ‘asset-backed securities’

Notes From Underground: A Quick Note On Tomorrow’s Unemployment

June 5, 2014

Post-ECB the U.S. employment report will be of minimal importance. The market is expecting a 210,000 increase in nonfarm payrolls (NFP), a modest rise after April’s larger than expected 288,000 increase. The unemployment rate is guesstimated to rise to 6.4% from 6.3%. More importantly, the average hourly earnings is estimated to rise 0.2% after last month’s flat number. The wage gains are now the most important piece of data as the Yellen Fed has more than hinted that stagnant wages have been a perennial drag of consumer demand. It is better for wages to rise than demand to remain tepid. If wages were to outpace inflation it would act to stimulate domestic consumption.


Notes From Underground: CRUNCH TIME! Liquidity Addition Coming Through Strengthening ABS

April 22, 2014

If my radar is right, the coming European Central Bank QE program will be a concoction of asset-backed securities in an effort to remove non-performing loans from bank balance sheets. There have been a multitude of  “conjectures” about how the ECB is going to pump liquidity into a very low growth economy. Previously it seemed that some at the ECB wished to install negative yields on bank reserves. This would be an experiment fraught with danger as it could cause great problems for the money funds that have recently returned to Europe. The problem for money market funds was epitomized in a statement from Bank of New York Mellon’s CFO Todd Gibbons after today’s earnings release and reported in tomorrow’s Financial Times:”If the eurozone were to go to negative rates that would actually present the opportunity for us to charge for deposits and we are giving that very serious consideration.” The idea of  “negative interest rates on reserves” has been bandied about as some members of the ECB board have tried to stem the euro currency’s recent strength. It has been surmised that charging banks for parking excess reserves at the ECB would force European banks to reverse course and put the funds out to lending rather than having to pay a fee for the safety of the ECB.


Notes From Underground: Is It Possible To Win BEN STEIN’S Money? (BEN Bernanke + Jeremy STEIN)

July 7, 2013

The unemployment data from the U.S. and Canada were very much on target. After last month’s robust employment data, there was a small decrease in Canadian jobs and nothing outstanding in terms of manufacturing hiring so nothing to see north of the border. The U.S. nonfarm payrolls were slightly higher than expected but the average hourly earnings, which were more powerful, rose 0.4% (or 10 cents an hour). Increased wages are needed to sustain consumer demand so this was a positive factor in the data. Also, the April and May NFPs were both revised higher, making the markets believe that a September tapering of asset purchases is on the schedule. The U.S. BOND MARKETS were sold aggressively, sending yields on the long-end of the curve soaring.