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Monday, October 26, 2009


Asian stocks rise amid positive economic data from South Korea
Asian stocks were mostly higher on Monday after South Korea's government said the economy had seen strong growth in the third quarter. Japan's Nikkei 225 Index was 0.7% higher, South Korea's Kospi Composite Index was up 1.1% and Taiwan's Taiex improved 0.8%. But the Shanghai Composite Index was little changed, and Australia's S&P/ASX 200 Index was off 0.4%. Exchanges in New Zealand and Hong Kong were closed for holidays. The Wall Street Journal (26 Oct.)

*it still means we will always bail them out and why are we letting Barney boy take the ball here when he dropped it back in 2007, when he could have done something?
White House, Congress to confront institutions seen as "too big to fail"
The Obama administration and Congress will soon come face-to-face with the one great issue forced into the spotlight by the financial crisis: What to do about institutions so huge and essential to the economy that the government has no alternative to bailing them out when they get into deep trouble. A bill that seeks to confront the "too big to fail" problem, drafted in consultation with Treasury Department officials, reportedly will be introduced by U.S. Rep. Barney Frank, D-Mass., chairman of the House Financial Services Committee, possibly as soon as this week. The proposal would give the government new powers to take direct control of financial institutions on the verge of collapse, replace management, eliminate the shareholders' interests and modify the terms of loans they own. The New York Times (25 Oct.)

*this means no healthcare for us citizens
Wheeling and dealing is next step in health care overhaul
As lawmakers increasingly conclude that Democrats will come up with enough votes to get some kind of health care overhaul through Congress, the debate is turning to shaping the final outlines of the measure. Lawmakers, lobbyists and industry executives say this is the moment at which those with stakes in the outcome of the debate can exert the greatest influence. The bargaining ranges from narrow provisions that might affect only a single company or institution to changes in the tax code that could have momentous consequences for decades. "We're entering the final stage, and everyone is maneuvering to get the best possible deal," said Drew Altman, president of the nonpartisan Kaiser Family Foundation. The Washington Post (26 Oct.)

*you cannot buy bonds now and possibly not until 2011.
Treasury seeks to lengthen due date on debt
The Treasury plans to change the average due date of its outstanding debt to 72 months from 49 months, according to this article. The Treasury would then try to increase sales of 10- and 30-year bonds by 40% over the next year. The object would be to take advantage of low interest rates this year, analysts said. "The Treasury will want a longer debt duration before interest rates rise. We have to deal with sales, sales, sales. The huge issuance will make Treasury yields go higher," said Tsutomu Komiya, an investment manager in Tokyo at Daiwa Asset Management. Bloomberg (26 Oct.)
*and from acrossthecurve
Debt Extension
October 26th, 2009 8:13 am
Bloomberg carries this article on the need for the US Treasury to lengthen the average maturity of its debt. Simply stated that would require the issuance of more longer dated paper and less sales of bills and 2 year notes.
One analyst at FTN Securities (an unnamed analyst) suggests that the Treasury might have to sell 40 percent more 10 year and 30 year bonds next year.

*the IMF has been wrong from the gitgo in its analysis of the world economy, so why would you listen to them now? You shouldn't!
IMF: Latin America, Caribbean should prepare to drop stimulus
The economies of countries in Latin America and the Caribbean are headed into a period of healthy growth and they should get ready to start dismantling the stimulus programs that helped them through the downturn, the International Monetary Fund said in a report. The region is projected to expand by 2.9% in 2010, on the heels of a 2.6% decline this year, the IMF said. The region is poised to experience such a strong recovery that it could trigger run-ups in the value of local currencies, the IMF said. "A few countries may soon be facing strong capital inflows, and at some point could experience stronger currencies and even overheating," the report said. Bloomberg (23 Oct.)

ECB's Noyer calls for more caution at banks
A member of the European Central Bank's Governing Council says banks are returning to the risky practices they engaged in before the financial crisis. The worst is yet to come for banks' balance sheets, Christian Noyer warned: "Most of the negative effects of the economic downturn on balance sheets are still to come." He said it is too early for banks to begin paying large sums in compensation as they did before the crisis. Reuters (25 Oct.)

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