Monday, November 10, 2008

Money Supply Drop on the Last Week of Oct

According to bloomberg, the M2 supply was recorded as -48.2billion at the last week of October, 2008.

Meanwhile, the secondary market 13wk (3month) T-bill yield at the same week were as follows:
Oct 27 - 31: 0.84, 0.76, 0.61, 0.40, 0.44

Despite the fact that the target rate was dropped from 1.5% to 1.0% at the same week, the drop on yield is still significant. We may compare with the same data for one week earlier.
Oct 20 - 24: 1.24, 1.09, 1.03, 0.96, 0.86
M2: 54.3b

It may be a coincedence. However, if US government becomes competitive with the bank on taking deposit, the efforts of US government on money injection to the banking system will go in vain.

Long-term AAA banking and finance rate premium over target rate maintains high:
5 year: 542pts;
10 year: 687pts

So are mortgage rates:
30 year fixed: 503pts;
15 year fixed: 470pts;
5/1 year ARM: 495pts;
1 year ARM: 469pts

Both corporate and property loan markets signal winter. Government bonds are welcomed despite its low yield rate (and even lowering coupon rate). Particularly under the expectation on further reduction on FED target rate will bring up the government bills, notes, and bonds prices. Goverment's abilities on fund raising is also weakened due to lack of creditibility in spite of the announced result of presidential election. Currency of USD will be expected to drop against EURO this week, neutral against JPY, and rise against AUD, NZD, etc.

China's 10 economic stimuli may have some encouargement on AUD rate. Yet, the declining economy plus the sliding interest rate will offset the favorable factors and further turn AUD downward.

This week USA equity market may also experience another slide (with fluctuation), with the knowledge that money is looking for shelter from volatility and grimmy hope. The rebound within this week may prove technical only.

No comments: