December 15th, 2010 16:51:48 GMT

Yields drifting up with dollar

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Looks like the dollar is the lead dog this morning and yields are trailing behind. The buck has been firming for the last hour or so, follow-through from yesterday’s failure to hold gains to the 1.3500 level in EUR/USD.

Perhaps those few brave souls willing to take a swing at the pinata in the last few days are heading for the sidelines at long last for the balance of the holiday season.

EUR/USD trades now at 1.3310 while US 10-year notes are up to 3.45% in yield.

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December 15th, 2010 16:25:51 GMT

Portuguese FinMin: Taking additional measures to avoid bailout

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Today’s package of additional measures is designed so that Portugal can avoid being the third member of the EU/IMF bailout sorority.

EUR/USD has weakened to NY session lows on selling from a US investment bank’s London office. Bond yields are steady at 3.41% and equities are essentially unchanged, as is the CRB commodities index.

If EUR/USD gathers downside pace, 1.3285 is next support. We trades at 1.3314.

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December 15th, 2010 16:06:34 GMT

The Lord Giveth and the Lord taketh away

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Traders report Snidley was a seller of EUR/USD in the run up to the 16:00 GMT fixing, knocking it down into the high 1.3320s, not far from where he was buying it an hour or so ago.

With each passing day price action becomes more flow-driven and less logical from a fundamental or technical perspective as bank traders play pass-the-parcel with positions they inherit from customers.

Support, such as it is, is at 1.3315/20 near-term; more is down at 1.3285.

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December 15th, 2010 16:05:03 GMT

Text: Obama Remarks On Tax Cuts, Meeting W/ Business Leaders

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WASHINGTON (MNI) – The following is the text of the statement read
by President Obama to members of the press ahead of his meeting
Wednesday with U.S. business leaders:

Good morning, everybody. Today, the Senate is poised to pass tax
cuts and unemployment insurance, putting the House of Representatives in
the position to send me this critical economic package so I can sign it
into law.

I am absolutely convinced that this tax cut plan, while not
perfect, will help grow our economy and create jobs in the private
sector. It will help lift up middle-class families, who will no longer
need to worry about a New Year’s Day tax hike. It will offer emergency
relief to help tide folks over until they find another job. And it
includes tax cuts to make college more affordable; help parents provide
for their children; and help businesses, large and small, expand and
hire.

I know there are different aspects of this plan to which members of
Congress on both sides of the aisle object. That’s the nature of
compromise. But we worked hard to negotiate an agreement that’s a win
for middle-class families and a win for our economy, and we can’t afford
to let it fall victim to either delay or defeat. So I urge members of
Congress to pass these tax cuts as swiftly as possible.

Getting that done is an essential ingredient in spurring economic
growth over the short run. And spurring economic growth is what I’ll
talk about later this morning when I meet with some of America’s top
business leaders. That includes Jim McNerney of Boeing, who also heads
up my Export Council, and several members of my Economic Recovery
Advisory Board. This is one of many discussions we’ll be having in the
months ahead to find new ways to spur hiring, put Americans back to work
and move our economy forward.

As I said when I was running for President and as I’ve said since,
I believe that the primary engine of America’s economic success is not
government. It’s the ingenuity of America’s entrepreneurs. It’s the
dynamism of our markets. And for me, the most important question about
an economic idea is not whether it’s good short-term politics or meets
somebody’s litmus test. It’s whether it will help spur businesses, jobs
and growth.

That’s why I’ve set a goal of doubling U.S. exports in the next
five years — to create more jobs selling more products abroad. That’s
why I’m so pleased that earlier this month, after intensive
negotiations, we finalized a trade agreement with our ally South Korea
that will boost the annual exports of American goods by $11 billion — a
deal that, all told, will support at least 70,000 American jobs. It’s an
agreement that’s won support from business and labor because it’s good
for the economy.

This morning, I hope to elicit ideas from these business leaders
that will help us not only climb out of recession, but seize the promise
of this moment – ideas about tax reform; ideas about a balanced
approach to regulation that will promote, rather than undermine, growth;
ideas that will help encourage businesses to invest in America and
American jobs at a time when they’re holding nearly $2 trillion on their
books. I want to discuss our shared mission of building a strong
economy for the long run.

We know some of what we need to do to out-compete other countries
in the 21st century. We need to offer our children the best education in
the world. We need to spur innovation and new industries like clean
energy that will create the jobs of tomorrow. We need to upgrade
America’s crumbling infrastructure, its roads and bridges, update
high-speed rail and high-speed Internet to connect every community. And
we need to redouble our commitment to fiscal discipline and address our
long-term deficit challenges.

We know the path that will lead to economic success. The only
question is whether we will take it, whether we have the political will
to do the work. I’m committed to taking that path. I know America’s
business leaders are as well. And I look forward to talking to them this
morning and working with them in the months and years to come to make
sure that we’re adopting the best ideas for growing our economy and
making the 21st century another great American Century.

** Market News International Washington Bureau: 202-371-2121 **

[TOPICS: M$U$$$,MGU$$$,MFU$$$]

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December 15th, 2010 15:38:12 GMT

Spanish spreads narrowing

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Despite news that Moody’s may downgrade Spanish sovereign debt and the banking system may need another EUR 90 bln in capital. spreads between German and Spanish debt are contracting today.

When I sat down, we we’re about 250 bps. Now we are trading around 240 bp.

My guess is the ECB is buying more debt of the peripheral euro zone nations but I have no confirmation as such. Another HAG (hairy-assed guess) on my part.

Narrowing spreads tend to be euro supportive.

EUR/USD has settled into a quiet range, awaiting the outcome of the Irish vote on the EU package. Narrow passage is expected. A failure to approve the package would undoubtedly hit the euro near-term.

UPDATE: Ireland approved the package by 6 votes.

11 Comments

December 15th, 2010 15:35:32 GMT

US DATA: 10-Dec wk EIA Oil Stocks: “U.S. commercial..

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US DATA: 10-Dec wk EIA Oil Stocks: “U.S. commercial crude oil
inventories (excluding those in the Strategic Petroleum Reserve)
decreased by 9.9 million barrels from the previous week. At 346.0
million barrels, U.S. crude oil inventories are above the upper limit of
the average range for this time of year. Total motor gasoline
inventories increased by 0.8 million barrels last week and are in the
upper half of the average range. Finished gasoline inventories decreased
while blending components inventories increased last week. Distillate
fuel inventories increased by 1.1 million barrels and are just above the
upper limit of the average range for this time of year.
Propane/propylene inventories decreased by 1.9 million barrels last week
and are in the lower half of the average range. Total commercial
petroleum inventories decreased by 15.6 million barrels last week.

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December 15th, 2010 15:25:32 GMT

US Sen.Reid:Senate to Pass Tax Cut Bill ‘Next Couple of Hours’

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–Expects House to Take Up Tax Cut Bill ‘Quickly’
–Senate Sets Votes on Three Amendments Before Final Passage

By John Shaw

WASHINGTON (MNI) – Senate Majority Leader Harry Reid said Wednesday
morning the Senate is poised to pass a sweeping tax cut and spending
bill within “the next couple of hours.”

In remarks on the Senate floor, Reid said the Senate will hold one
more hour of debate Wednesday morning on the $858 billion tax cut and
spending package that was negotiated by President Barack Obama and
congressional Republican leaders.

Reid said he expects the Senate to pass the bill and then the House
will take up the bill “quickly.”

The last hour of debate will be between 11:00 a.m. and noon. Reid
said the Senate will begin voting at noon and is likely to have
completed its votes by around 2:00 p.m.

Before moving to final passage, the Senate will vote on three
motions that are likely to fail: a motion by Republican Sen. Tom Coburn
to require that the unemployment benefits be offset with other spending
cuts; a motion by Republican Sen. Jim Demint that would permanently
extend the Bush era tax cuts and the underlying bill’s estate tax and
AMT provisions; and a motion by independent Sen. Bernie Sanders to only
extend middle class tax cuts.

After these three votes, the Senate will move to final passage on
the bill.

The Senate bill is based on the agreement President Obama reached
with Republican leaders last week. It extends all of the Bush era tax
cuts for two years and extends unemployment insurance benefits for 13
months. It includes the extension of a host of expiring or expired tax
credits, including business tax expensing provisions that are designed
to spur growth.

The agreement also provides for a two percentage point reduction in
the employee share of payroll taxes in 2011, and sets the estate tax at
35% above a $5 million per person threshold.

If the Senate passes the bill Wednesday, the measure will be sent
to the House.

House Majority Leader Steny Hoyer said Tuesday there is an
“urgency” in completing work on the tax legislation this week. Hoyer
said there are provisions that Democrats don’t like, but appeared to
signal that there will not be a vigorous effort to rewrite the bill.

Congress still must pass a measure to fund the government by the
end of the week. The current stop-gap spending bill, which is funding
the government, expires Saturday.

Senate Democrats have drafted a $1.1 trillion omnibus spending bill
that includes all 12 of the regular spending bills for FY11.

But Senate Minority Leader Mitch McConnell said Wednesday
Republicans object to this bill and want Congress to pass a bare bones
spending bill that funds the government until early next year, rather
than a year-long bill.

Such a vote, McConnell said, would “keep the lights on” until the
next Congress convenes in early January to take up the spending bill.

** Market News International Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

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December 15th, 2010 15:05:07 GMT

US DATA: Dec NAHB/Wells Fargo Housing Market Index…

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US DATA: Dec NAHB/Wells Fargo Housing Market Index unch at 16 as
builders brace for slow holiday season. Current sales conditions (16)
and 6m sales expectations (25) were unch. Traffic of prospective buyers
fell a single point, to 11. Regionally, HMI scores declined four points
in the Midwest and West, to 13 and 11, respectively, and one point in
the South, to 17. The Northeast, which can display greater
month-to-month volatility due to its smaller survey sample, posted a
12-point gain to 24 in December.

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