Interest Rate Roundup

Wednesday, February 14, 2007

Bernanke throws a big, juicy steak into the asset markets

I've updated this post to reflect Bernanke-related fireworks ...

This is an exciting day. We came into today's U.S. trading session with the dollar trading weak. The catalysts: Stronger-than-expected U.K. employment data and a European GDP report showing 0.9% growth in Q4, the fastest in six years. Dollar selling picked up after a report showing U.S. January retail sales were unchanged, and up just 0.3% excluding autos. Consensus estimates were for 0.3% and 0.4% gains, respectively.

Then Fed Chairman Ben Bernanke threw a big, juicy steak into the rink at 10 a.m. -- he failed to sound more hawkish on inflation, in either the "real" economy or the asset economy. This was taken as a green light signal to buy bonds, sell the dollar, and buy stocks. In other words, the same "Money, Money Everywhere" trade I've been talking about for months. Today's close in all the markets will be very, very important as a result: Is this just a near-term reaction or do the gains hold through the whole day.

Latest action:
US Long Bonds up 15/32
Dollar Index down 54 bps (euro up about a cent, pound up about 1.5 cents)
Dow up 48 points
GLD (gold ETF proxy) up 54 cents to new high for the recent move


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