For the week, the Dow and S&P500 gained 1.6%. The Transports jumped 2.2%, increasing y-t-d gains to 7.8%. The Utilities rose 1.8% to trade at a record high this week, while increasing 2007 gains to 10.4%. The Morgan Stanley Cyclical index increased 1.4% (up 8.5% y-t-d), and the Morgan Stanley Consumer index gained 1.3% (up 2.3% y-t-d). The broader market rally continued. The small cap Russell 2000 gained 1.6% (up 3.3% y-t-d), and the S&P400 Mid-Cap index rose 1.5% (up 7.1% y-t-d). The Biotechs, surging 3.4%, rose to the highest level since year 2000 (up 4.9% y-t-d). The NASDAQ100 gained 2.2% (up 3.2% y-t-d), and the Morgan Stanley High Tech index jumped 2.9% (up 0.8% y-t-d). The Semiconductors rose 2.1% (up 1.6% y-t-d). The Street.com Internet Index advanced 1.5%, and the NASDAQ Telecommunications index rallied 2.2% (up 3.3% y-t-d). The Broker/Dealers gained 1.9% (down 1.0% y-t-d), while the Banks declined 0.3% (down 3.4% y-t-d). With bullion gaining $11.05, the HUI Gold index jumped 4.7%.

Two-year government yields jumped 14 bps to 4.72%. Five-year yields rose 12 bps to 4.65%, and 10-year Treasury yields gained 9.5bps to 4.74%. Long-bond yields gained 7 bps to 4.92%. The 2yr/10yr spread ended the week at positive 2 bps. The implied yield on 3-month December ’07 Eurodollars surged 19 bps to 5.065%. Benchmark Fannie Mae MBS yields apparently did not trade today. The spread on Fannie’s 5 1/4% 2016 note narrowed 3 to 34, and the spread on Freddie’s 5 1/2% 2016 note narrowed 3 to 34. The 10-year dollar swap spread increased one to 53.75. Corporate bond spreads generally narrowed, with junk spreads compressing about 10bps.

Investment grade issuers included Time Warner Cable $5.0bn, National Rural Utilities $570 million, PPF Funding $500 million, and Monumental Global Funding $230 million.

Junk issuers included Realogy $3.15bn, PTS Acquisition $565 million, Stater Brothers $285 million, Corn Products Intl $300 million, Northwest Pipeline $185 million, Pegasus Solutions $105 million, and Altra Industrial Motion $105 million.

The convert issuance boom this week included General Mills $1.15bn and Chattem $85 million.

International issuers included Brazil $2.025bn and BCP Finance Bank $1.5bn.

Japanese 10-year "JGB" yields were little changed this week at 1.66%. The Nikkei 225 gained 1.1 % (up 1.5% y-t-d). German 10-year bund yields rose 5 bps to 4.10%. Emerging markets posted mostly positive gains. Brazil’s benchmark dollar bond yields declined 4 bps this week to a record low 5.63%. Brazil’s Bovespa equities index gained 1.8% (up 4.9% y-t-d). The Mexican Bolsa jumped 2.1% to another record high (up 11.1% y-t-d). Mexico’s 10-year $ yields dipped one basis point to 5.50%. Russia’s RTS equities index increased 0.6% (up 1.3% y-t-d). India’s Sensex equities index declined 1.0% for the week (down 6.8% y-t-d). China’s Shanghai Composite index surged 4.4% to a fresh record high, increasing 2007 gains to 24.2%.

Freddie Mac posted 30-year fixed mortgage rates added one bp to 6.17% (down 26 bps y-o-y). Fifteen-year fixed rates also gained one bp, to 5.87% (down 23 bps y-o-y). One-year adjustable rates rose one bp to 5.44% (down 13 bps y-o-y). The Mortgage Bankers Association Purchase Applications Index declined 2% this week. Purchase Applications were down 7.8% from one year ago, with dollar volume 5.5% below. Refi applications fell 4.5% for the week, although dollar volume was up 32% from a year earlier. The average new Purchase mortgage declined to $239,800 (up 2.5% y-o-y), while the average ARM fell to $392,800, (up 10.4% y-o-y).

Bank Credit rose $13.1bn (week of 3/28) to $8.346 TN. For the week, Securities Credit gained $9.5bn. Loans & Leases expanded $3.6bn to $6.0 TN. C&I loans declined $4.7bn, while Real Estate loans gained $4.0bn. Consumer loans added $0.8bn, and Securities loans jumped $13.4bn. Other loans declined $9.9bn. On the liability side, (previous M3) Large Time Deposits jumped $17.6bn.

M2 (narrow) "money" surged $38.9bn to a record $7.203 TN (week of 3/26). Narrow "money" has expanded $159bn y-t-d, or 9.1% annualized, and $436bn, or 6.4%, over the past year. For the week, Currency added $0.9 billion, and Demand & Checkable Deposits increased $7.0bn. Savings Deposits jumped $26.1bn, and Small Denominated Deposits gained $2.3bn. Retail Money Fund assets rose $2.7bn.

Total Money Market Fund Assets (from Invest. Co Inst) rose $18.2bn last week to a record $2.451 TN. Money Fund Assets have increased $163bn over the past 20 weeks (18.9% annualized) and $390 billion over 52 weeks, or 18.9%.

Asset-backed Securities (ABS) issuance slowed to $6.0bn. Year-to-date total ABS issuance of $192bn (tallied by JPMorgan) is now running about in line with comparable 2006. At $100bn, y-t-d Home Equity ABS issuance is about one-third below last year’s pace. Year-to-date US CDO issuance of $90 billion is running 24% ahead of comparable 2006.

Fed Foreign Holdings of Treasury, Agency Debt jumped $13.0bn last week (ended 4/4) to a record $1.893 TN, with a y-t-d gain of $141bn (29.8% annualized). "Custody" holdings expanded $299bn during the past year, or 18.8%. Federal Reserve Credit last week added $123 million to $852.2bn (unchanged y-t-d). Fed Credit was up $31.8bn y-o-y, or 3.9%.

International reserve assets (excluding gold) - as accumulated by Bloomberg’s Alex Tanzi – were up $271bn y-t-d (21% annualized) and $812bn y-o-y (19.0%) to a record $5.082 TN.

April 3 – Bloomberg (Seyoon Kim): "South Korea’s foreign-exchange reserves, the world’s fifth-largest, rose for a ninth month… The reserves climbed by $1.1 billion from February to $243.9 billion… Asian nations make up for four of the world’s top five foreign currency reserve holders…"

J. Duarte weist in seiner Analyse nochmals auf zwei Dinge hin, nämlich die Anfeuerung einer weiteren Rally, welche bedingt durch abgezogenes Geld aus den Bond – Märkten entstehen kann, und den aus der Vergangenheit resultierenden guten Lauf der Börsen in dem Vorwahljahr bzw. Wahljahr zur Präsidentschaft. Es ist sicherlich gut, von daher nicht zwingend agressiv auf fallende Kurse zu spekulieren.

"More than anything, it will be important to see if money coming out of the bond market will fuel a bigger rally in stocks.

From a longer term stand point, based on historical trends, this should be a positive year for stocks, given the fact that it's the third year of the Presidential Cycle, which calls for rallies in the third and fourth years of a presidency."

Asia Has Money to Burn; Where Are the Assets ?

By Andy Mukherjee

April 9 (Bloomberg) –

Is the U.S. current account deficit getting easy financing because of a lack of Asian debt issuances?

It's an important question.

Fitch Ratings estimates that China held $350 billion worth of U.S. Treasury securities at the end of 2006; it had an additional $230 billion in U.S. agency bonds.

Large Asian holdings of U.S. debt are usually attributed to the region's penchant for undervalued home currencies, which lead to chronic trade surpluses and a buildup of foreign reserves.

Is Asian mercantilism the dominant force behind the easy financing of the U.S. current account deficit, or is financial underdevelopment in Asia also playing a part?

If the perceived Asian ``savings glut'' -- as U.S. Federal Reserve Chairman Ben Bernanke termed it -- stems from a shortage of Asian bonds, then it explains why doomsday scenarios for the U.S. currency may not materialize.

``There are simply not enough Asia-outside-Japan bonds for the Asia-outside-Japan investors to purchase,'' says Stephen Jen, Morgan Stanley's global head of currency research.

Current Account

Last year, when he was still the chief economist at the International Monetary Fund, University of Chicago Professor Raghuram Rajan said that a scarce supply of new assets worldwide was leading to frothy valuations of existing ones.

Everything from real-estate and high-risk credit to art and commodities, he said, was getting pricey.

Jen has now given the global asset-shortage hypothesis a geographical twist to explain the counterintuitive flow of money from labor-surplus Asia, where it may earn a higher reward, to the developed world, where the returns are more sedate.

Along with petrodollars, Asia's official reserves have been a cheap source for financing U.S. consumption.

Starting in the first quarter of 2004, the U.S. current- account gap has remained at more than 5 percent of gross domestic product, soaring to a record 7 percent in the final three months of 2005. For all of last year, the shortfall was 6.5 percent.

A gradual deepening of Asian debt markets may reduce the region's savings-investment gap and, by implication, narrow the U.S. current-account deficit. On the other hand, the impetus for bigger Asian bond markets may remain absent as long as the region continues to save more than it can invest at home.

Securitized Debt

At $830 billion, the Asian sovereign bond market is less than a 10th the size of its U.S. and Japanese counterparts. The European market is 12 times as large, according to Jen.

If Asia wanted to invest its cumulative current-account surplus within the region, it would need annual issuances that are 2 1/2 times the current size of the tiny pool of outstanding Asian government securities.

There is ample evidence that Asia's current-account surplus -- or excess savings -- is keeping the region's debt markets shallow.

Consider, for example, securitized debt.

In Hong Kong, India and South Korea, only 1 percent of housing loans are securitized, while in Japan and Malaysia, the ratio is between 5 percent and 6 percent, according to a study by the Bank for International Settlements.

That compares with 68 percent in the U.S. in 2005.

Bond Markets

Apart from the U.S. having a longer history of securitization, what else could be causing this wide gap?

``Asian savings sit in savings accounts, creating vast pools of liquidity that enable banks to offer mortgages and loans at rates with which the originators of securitized loans can't compete,'' Standard & Poor's analyst Betty Tan said in a report last year.

The corporate-bond market in China meets only 1.4 percent of the financial needs of companies in the fast-growing economy.

This is too low, says Galina Hale, an economist at the Federal Reserve Bank of San Francisco, although if cash-rich banks are willing to throw money at companies without much of a credit analysis, where is the incentive for companies to go to a larger set of bond investors?

``Until firms develop some reputation -- either good or bad -- they are not likely to find it profitable to raise money in the bond market,'' Hale notes in a study published last month.

Liquidity Glut

As for the underdeveloped market in sovereign debt, the culprit may be government savings.

``Asian countries' strong fiscal balances, while admirable on other grounds, have not been conducive to the growth of government bond markets,'' Barry Eichengreen, an economist at the University of California, Berkeley, noted in a 2004 study titled ``Why Doesn't Asia Have Bigger Bond Markets?''

It appears that a liquidity glut is militating against Asia's capacity to generate an adequate supply of financial assets that will allow it to keep its savings at home.

Of course, that may well be the outcome that Asia prefers. It wants to continue giving money to the rest of the world, especially the U.S., so the latter keeps buying Asian-made goods.

That's the ``Revised Bretton Woods'' hypothesis put forward by Michael Dooley of the University of California at Santa Cruz, David Folkerts-Landau, Deutsche Bank AG's head of global markets research, and Peter Garber, the bank's strategist.

And in their view, too, the dollar is safe.

(Andy Mukherjee is a Bloomberg News columnist. The opinions expressed are his own.)

11.04.2007 - 08:45

Laut einer von Bloomberg und der Los Angeles Times Anfang April erhobenen Umfrage unter 1.373 US-Bürgern rechnet die Mehrheit innerhalb eines Jahres mit einem Abgleiten der US-Wirtschaft in die Rezession. Trotz des Verharrens der Arbeitslosenrate auf einem Fünf-Jahrestief missbilligt ein großer Teil der Befragten den wirtschaftspolitischen Kurs von Präsident George Bush.

Demnach gehen 6 von 10 Befragten von einer Rezession aus. Jene Rate gleiche sich einer im Dezember 2000 getätigten Umfrage. Damals begann die Wirtschaft drei Monate später zu schrumpfen. 57 Prozent der Befragten weisen den wirtschaftspolitischen Kurs von US-Präsident George Bush zurück. Gleichwohl sehen 57 Prozent die Wirtschaft in aktueller guter Verfassung, was 11 Prozent unter der Umfrage von Januar liegt.

Die Mehrheit der Befragten verbleibt optimistisch zu den Hauspreisen. Mehr als die Hälfte sieht die gute Chance, dass die Hauspreise über die kommenden sechs Monate ihren aktuellen Wert behalten. Doppelt so viele Befragten gehen im Bereich der Hauspreise eher von einem Anstieg als von einer rückläufigen Entwicklung aus. Eine Mehrheit sieht die US-Wirtschaft durch den schwachen Häusermarkt belastet.