NEW YORK (MNI) – The following is the summary of the weekly Ried
Thunberg ICAP Fixed Income Money Manager Sentiment Index, published
Monday:

Last week was a one of crosscurrents. Unfortunately none was
resolved. Indeed, things may have gotten worse. The North-South Korea
situation is an accident waiting to happen. The European sovereign debt
crisis is spreading to other peripherals. Greece already has had to be
rescued. Ireland is in the process of being rescued. 95% of investment
managers surveyed by RT-ICAP last week expect Portugal to come under
attack once Ireland’s rescue package is negotiated. To some degree it
already has. Spain is in hedge funds’ sights. Italy will be next.
Meanwhile, the U.S. economic data continue to improve. This is not good
for FRB Chr. Ben Bernanke and other Fed officials trying to defend QE2.
Criticism was only subdued last week because Congress was in recess. The
House Domestic Policy Subcommittee holds a hearing on QE2 on Tuesday at
14:00 EST. No Fed official is scheduled to appear but undoubtedly some
Fed staff will be in attendance.

This week sees a slew of significant economic data, highlighted by
the October labor market report on Friday. Prior to that the
Case-Shiller survey of existing home prices in September is due. Prices
are estimated for have fallen for a third consecutive month after rising
three months in a row albeit the latter was aided by expiration of the
home buyer’s tax credit in April. House prices are down an average of
29% from their peak in 2006. Several regional PMIs for November are due.
So far this month the regionals have been mixed but all will be captured
by the national ISM manufacturing and services indices for.

The manufacturing index is estimated to have slipped some in
November, while the services index is estimated to have risen slightly.
Auto sales are estimated to have slowed slightly in November from
October but at a 12.0 mln annual rate such would still be the second
best rate in over two years. Chain store sales for November are due to
be reported by ICSC. Such will be noteworthy because many retailers
moved forward (earlier) their holiday sales promotions this year. Hence,
we estimate year over year sales growth over doubled to 3.5% from 1.6%
in October. The weekly surveys on chain store sales will also be
noteworthy because this survey week includes Thanksgiving when on-line
sales were reported to have been spectacular but Black Friday in-store
sales poor. Ditto for the weekly surveys of jobless claims. Such would
normally be overshadowed by the monthly labor market report, but because
the weekly surveys since the national surveys were taken have suggested
improving labor market conditions, interest will be on whether the
weekly improvement is being sustained.

As for the October labor market report per se, we estimate nonfarm
private employment (private employment to eliminate the distortion of
the hiring and firing of census workers involved with the decennial
census this year) rose 185,000. That would be the largest increase since
May and just prior to the start of the so-called “soft patch.” The
October-November gain would also be the best since March-April which in
turn was the best back-to-back gain since the start of the Great
Recession. Unfortunately the gains will not be large enough to lower the
unemployment rate. Last but not least this week, it will be interesting
to see if the Conference Board survey of consumer confidence reflects
the improvement in the economy.

Given the messy situation, there was a lot of action but no
definition in the Treasury market last week. Volume was greater than
average (except for Friday) and intra-day price ranges were wider than
average. But price changes netted to little change and $-flows were
mixed and netted to virtually no change. Assuming no resolution to the
crosscurrents, this week could be more of the same.

RT-ICAP Money Manager General Market Sentiment

— 95% of respondents expect the sovereign debt of Portugal to come
under intensified pressure after the Irish situation is negotiated. 5%
do not.

— 82% of respondents expect the Bush tax cuts to be extended to
all. 18% think such will be extended to just the middle class.

Money Manager Responses – FOMC Policy

— 91% vs 90% last week expect no change in Fed policy at the Dec
14 FOMC mtg. 9% vs 10% expect the Fed to add to QE. 0% vs 0% expect
tightening..

— 91% vs 90% last week expect no change in Fed policy at the Jan
25-26 ’11 FOMC mtg. 9% vs 10% expect the Fed to add to QE. 0% vs 0%
expect tightening.

— 82% vs 90% last week expect no change in Fed policy at the Mar
15’11 FOMC mtg. 14% vs 10% expect the Fed to add to QE. 4% vs 0% expect
tightening.

** Market News International New York Newsroom: 212-669-6430 **

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