On this final day of September and final day of the 3rd quarter, after a busy overnight session in which Ireland’s finance minister declared his country had hit “rock bottom”, interest rates are rallying off of yesterday's yield highs and stock futures are moderately weaker.
Ireland’s budget deficit is about 32% of GDP, “by far the highest in Europe,” according to economists at BMO Capital Markets, who summed up the busy overnight session as follows:
“Ireland increased the estimated cost of its bank rescue to as much as €50 billion, Moody’s downgraded Spain a notch (that puts their rating in line with the other ratings agencies), while economic data in U.K. and Japan were soft and Germany continues to outperform. . . .
“Elsewhere, the Chinese yuan weakened for the first time in about three weeks, perhaps in response to the recent bill passed by the U.S. House of Representatives calling for action on the yuan and other undervalued currencies.”
S&P 500 futures are 2.00 points lower at 1,138.75 and Dow futures are off 4 points at 10,776. For the third quarter, the S&P 500 has gained 9.94% and the Dow has risen 9.78%.
The 2-year Treasury note is +0-00+ at 99-28 yielding 0.434%(-0.04bps) and the 10-year Treasury note is +0-08 art 101-10+ yielding 2.474% (-2.7bps)
Light crude oil is up 0.099% at $78.63 per barrel and gold prices are +0.33% at $1,313.15
The US dollar index, which has been falling in eight of the past nine days according to BMO, is again lower at 78.51.
Key Events Today:
8:30 ― The second or “final” revision to second-quarter GDP report is expected to remain unchanged at +1.6%, after being downgraded from +2.6% in the prior revision. Estimates from economists range from +1.3% to +1.7%. Construction spending is expected to be trimmed in the quarter, but inventory build-up and consumer spending on services was larger than earlier estimates. At this point, however, economists are more concerned with third-quarter growth, which is expected to be in a similar range.
“Based on the latest data, in 2Q10 personal consumption expenditure (PCE) increased by 2.0% which is the highest growth rate since 1Q07,” said economists at BBVA. “However, we keep our baseline scenario of low PCE growth due to ongoing household deleveraging process, increased uncertainty in the economy and high unemployment rates. The market will be waiting for the BEA’s preliminary estimate for 3Q10 which will be released on October 29.”
8:30 ― Initial Jobless Claims continue to come in higher than predictions. Weekly claims have averaged 458k so far in September, or 8k above the level indicating labor growth in the economy. In August, weekly claims averaged 487k. Last weeks survey saw claims rise 12k, and for the week ending Sept. 25 economists only expect a slight dtip to 459k.
“We expect claims to remain around the 460,000 level for the next few weeks,” said economists at Nomura.
9:45 ― The Chicago PMI, or Business Barometer, is an index covering services and manufacturing activity in the Midwest. The index has been reporting well above the break-even 50-point in recent months, though in August it fell to 56.7 from 62.3. This month the index is anticipated to continue decelerating to 56.0.
“With overwhelming evidence that the economy has slowed, we believe this indicator will also be moving lower,” said economists at Nomura. “However, the Chicago NAPM saw a sizable decline in August, and we therefore think the move lower in the September report will be more modest. We forecast the index will fall to 56.0 from 56.7 previously.”
10:00 ― Fed Chairman Ben Bernanke testifies before the Senate Banking Committee on implementing the financial reform law. His prepared remarks were are available HERE.
ISSUANCE
* 11:00 Treasury announces 3- and 6-month bills
* Aviation Cap Group, $300m 10-year; Citi/JPM
* Sydney Airport, $500m 10.5-year [guidance T+275(+/-12.5bps)]; BAML/JPM/RBS
* Dubai, USD deal expected; DB/HSBC/SCB
* Votorantim, $500m+ perp NC5 [talk 7.5%]; BAML/HSBC/Itau/MS; TBP later this week
* Interbank, $400m 10-year [talk T+low-mid 300s]; BAML/JPM
* BancoEstado, 10-year expected this week [talk T+175]; DB/JPM
* BBVA Continental, $200m Tier 1 30NC10 [guidance 7.5%]; CS/BBVA
* AWAS, $600m 6-year; GS/MS/DB
* Continental Trustees, $200m 30-year; CS/BBVA
* Lancer Fin, $275m 6-year rumored
* CBA, benchmark bond rumored; JPM
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