U.S. to Sell $78 Billion in Long-Term Debt Next Week (Update1) - Bloomberg.com

There's a short coming in the bond contract.

There's just too much supply, and not enough buyers.

We've already seen 121.16 today and we're now a point lower.

I can't imagine it'll get to 123.16, but if it does, it's a big-time short.

Paterson got burned on the ECB bailout, but we've learned our lesson there.

Notice that the Yen is the only currency still standing, and that's only because their monetary authorities have been living in the clouds for the past 50 years.

* * * * * J B K * * * * *

San Francisco

The Treasury said it will auction $38 billion in three-year notes on May 11, $24 billion in 10-year notes May 12 and $16 billion in 30-year bonds May 13. The total amount was less than the median forecast in a Bloomberg News survey of bond dealers.

http://www.bloomberg.com/apps/news?pid=20601068&sid=aIjOfp3dNS9A

Greek Quarantine Tested as Spain Denounces Contagion (Update3) - Bloomberg.com

This is too easy.

Denounce the currency speculators.

Sell bonds and watch them tank.

Watch, as the ECB buys them at par.

* * * * * J B K * * * * *

San Francisco

Investors are already testing the euro region's efforts to contain the Greek crisis.

Greek bond yields have risen above their level before the government agreed on a European Union-led bailout on May 2 as escalating protests cast doubt on its ability to drive through austerity measures. Spanish and Portuguese bonds also renewed last week's slide as investors question their ability to cut budget deficits. The extra yield that investors demand to hold Spanish debt over bunds today rose close to a 13-year high.

http://www.bloomberg.com/apps/news?pid=20601068&sid=aSpDbd.FbxK4

Trichet May Rewrite ECB Rule Book to Tame Greek Risk (Update2) - Bloomberg.com

If he had any integrity, Trichet'd resign.

Hell, if I had any brains, I'd resign.

Of all the actions I least expected, this one is the hardest to understand.

A common currency has been the only pillar of strength in Europe, and now they throw it all away with the stroke of a central bank policy pen.

The Euro won't survive for long if it has to buy the bonds of all the incompetent, socialist governments of Europe.

I guess the bet now is who's next? Spain, Ireland, Portugal, or a country we're not aware of?

I'm taking a week off from currency prognostications to cool the fevered brain.

* * * * * J B K * * * * *

San Francisco

European Central Bank President Jean- Claude Trichet, who capitulated on a January pledge not to relax lending rules for the sake of one country, may have to sacrifice more principles to prevent Greece from bringing down the euro.

Trichet yesterday diluted rules for the second time in a month to guarantee the ECB will keep taking Greek government bonds as collateral for loans. The central bank may have to extend that to other nations, renew a program of lending unlimited cash to banks for a year, and even start buying government debt if the 110 billion-euro ($146 billion) bailout plan for Greece fails to stem the euro's slide, economists said.

http://www.bloomberg.com/apps/news?pid=20601068&sid=aMSO_VQTTzAU

Factory orders jump 1.3 percent in March | Reuters

The durables number is the relevant one, and shows growth slowing.

Maybe we're now ready for a substantial rise in interest rates, and a consequent pause in the stock market.

* * * * * J B K * * * * *

San Francisco

New orders received by U.S. factories jumped unexpectedly in March as businesses rebuilt inventories, pointing to continued strength in manufacturing, a government report released on Tuesday showed.

Orders for manufactured goods rose 1.3 percent after an upwardly revised 1.3 percent gain in February, initially reported as a 0.6 percent rise, the Commerce Department said.

Economists polled by Reuters were expecting a 0.1 percent decline.

When transportation orders were stripped out, orders surged 3.1 percent, the biggest gain in almost five years. Excluding defense, factory orders were up 1.3 percent.

Non-defense capital goods orders excluding aircraft, viewed as an indicator of business confidence, leaped 4.5 percent, the steepest increase since December 2007.

Durable goods orders fell 0.6 percent, the first decline in four months, but the decline was less than the originally reported 1.3 percent fall.

http://www.reuters.com/article/idUSTRE6433AH20100504?type=GCA-Economy2010

ECB Comes to Greece’s Aid by Waving Collateral Rules (Update3) - Bloomberg.com

Ah Ha.

The smoking gun is found.

The smart guys, me not included, knew this would happen.

This policy allows the ECB to flood the EC with fresh cash as it buys worthless Greek bonds - at par - from bankrupt Greek banks.

So much for ECB discipline. Sometimes my naivete amazes me, too.

I can see the lines forming.

Spain will now sell bonds to the public and Spanish banks.

The bonds will fall in value as reality takes hold.

Then, the ECB buys them at par.

Three? Who's got number three?

Be patient. There's plenty of cash for everyone.

* * * * * J B K * * * * *

San Francisco

The European Central Bank joined the international rescue of Greece, saying it would indefinitely accept the country's debt as collateral regardless of its country's credit rating, underpinning gains in the bond market.

The decision came less than a day after Greece agreed to a 110 billion-euro ($145 billion) package of emergency loans from the International Monetary Fund and its euro-region allies. Under the plan backed by the ECB, Greece pledged 30 billion euros in budget cuts to bring a deficit of 13.6 percent of gross domestic product within the EU limit of 3 percent in 2014.

"The ECB is a key player in the rescue package designed to help Greece and it is clearly buying insurance against the likelihood of further multiple downgrades of the Greek debt, something that might lead to a halt of ECB financing to the Greek banks," said Silvio Peruzzo, an economist at Royal Bank of Scotland Group Plc in London.

http://www.bloomberg.com/apps/news?pid=20601068&sid=aTAygysllnxM

Construction Spending in U.S. Unexpectedly Increased in March - Bloomberg.com

Private construction - meaning commercial - is still taking on water and looking for a lifeboat.

Residential, as always, is immune.

People have to live somewhere, whether they rent or buy.

* * * * * J B K * * * * *

San Francisco

Construction spending in the U.S. unexpectedly increased in March, propelled by gains in state and local government projects.

The 0.2 percent increase brought spending to $847.3 billion, and followed a revised 2.1 percent drop in February that was larger than previously estimated, Commerce Department figures showed today in Washington. The value of private projects dropped to the lowest level in 11 years.

http://www.bloomberg.com/apps/news?pid=20601087&sid=algW1yTJqQfE&pos=2

Consumer spending up, savings at 18-month low | Reuters

Coincident indicators confirming the expansion.

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San Francisco

U.S. consumer spending rose in March for a sixth straight month as households pushed savings to a 1-1/2 year low, further evidence consumers were starting to take a bigger role in the manufacturing-led recovery.

The Commerce Department said on Monday spending rose 0.6 percent after rising by an upwardly revised 0.5 percent in February, previously reported as a 0.3 percent gain.

http://www.reuters.com/article/idUSTRE63F2NT20100503