There was a decent, but by no means stellar, US jobs number:
Employers added workers in December at about the same pace as the prior month, and the unemployment rate matched a four-year low, showing sustained gains in the U.S. labor market even as lawmakers were struggling to reach a budget deal.
Payrolls rose by 155,000 workers last month following a revised 161,000 advance in November that was more than initially estimated, Labor Department figures showed today in Washington. The median estimate of 82 economists surveyed by Bloomberg called for a increase of 152,000. The unemployment rate held at 7.8 percent after the November figure was revised up from a previously reported 7.7 percent.
The S&P 500 reached a milestone of sorts:U.S. stocks rose, sending the Standard & Poor’s 500 Index above the highest closing level since December 2007, after data showed employers added workers in December at about the same pace as the prior month.
Mark Whitehouse of Bloomberg writes an interesting review of an IMF paper by two IMF officials, chief economist Olivier Blanchard and economist Daniel Leigh, titled Growth Forecast Errors and Fiscal Multipliers:
This paper investigates the relation between growth forecast errors and planned fiscalconsolidation during the crisis. We find that, in advanced economies, stronger planned fiscal consolidation has been associated with lower growth than expected, with the relation being particularly strong, both statistically and economically, early in the crisis. A natural interpretation is that fiscal multipliers were substantially higher than implicitly assumed by forecasters. The weaker relation in more recent years may reflect in part learning by forecasters and in part smaller multipliers than in the early years of the crisis.
…
First, because of the binding zero lower bound on nominal interest rates, central banks could not cut interest rates to offset the negative short-term effects of a fiscal consolidation on economic activity. Christiano, Eichenbaum, and Rebelo (2011) have shown, using a dynamic stochastic general equilibrium (DSGE) model, that under such conditions, fiscal multipliers can exceed 3. Since episodes characterized by a binding zero lower bound (also referred to as “liquidity trap” episodes) have been rare, only a few empirical studies investigate fiscal multipliers under such conditions. Based on data for 27 economies during the 1930s—a period during which interest rates were at or near the zero lower bound—Almunia and others (2010) have concluded that fiscal multipliers were about 1.6.Second, lower output and lower income, together with a poorly functioning financial system, imply that consumption may have depended more on current than on future income, and that investment may have depended more on current than on future profits, with both effects leading to larger multipliers (Eggertsson and Krugman, 2012).
Third, and consistent with some of the above mechanisms, a number of empirical studies have found that fiscal multipliers are likely to be larger when there is a great deal of slack in the economy. Based on U.S. data, Auerbach and Gorodnichenko (2012b) have found that fiscal multipliers associated with government spending can fluctuate from being near zero in normal times to about 2.5 during recessions.5 If fiscal multipliers were larger than normal and growth projections implicitly assumed multipliers more consistent with normal times, then growth forecast errors should be systematically correlated with fiscal consolidation forecasts.
Perhaps Keynesian economics will make a comeback! I’ve often remarked that I don’t mind large deficits in hard times … as long as there is a credible plan, with accompanying legislation, for paying off the new debt within 20-30 years.
America is a country in which rights are paramount. Unless you’re a bank:
“This dispute does not go to the merits of the matter but it does raise an important issue of principle: Whether we and other banks, large and small alike, have the fundamental right long recognized in this country to communicate freely with and seek confidential guidance from their lawyers,” Zuccarelli said in an interview.
Bryan Hubbard, an OCC spokesman, declined to comment on the agency’s inquiry.
In the letter sent to JPMorgan general counsel Stephen Cutler, the inspector general — the Treasury’s internal watchdog — dismissed JPMorgan’s arguments on attorney-client privilege, saying the OCC “could not do its work” if banks were allowed to withhold information on that basis. The OCC, an independent bureau of Treasury, asked the IG office to review the situation, Thorson said in the letter.
Failure to produce the records “will have to be seen as a continuing purposeful impediment to the authority of the OCC,” Thorson said in the letter, and would require “further action by our office.”
Coming up next: hand over your Facebook password or be charged with obstructing justice.
DBRS has a new methodology for rating life insurers, but there were no major changes and it did not result in any ratings actions. They did not opine on the result of OSFI’s consideration of the definition of capital.
It was a good day for the Canadian preferred share market, with PerpetualPremiums gaining 11bp, FixedResets winning 13bp and DeemedRetractibles up 12bp. Volatility was average, but all on the upside. Volume continued to be very low.
| HIMIPref™ Preferred Indices These values reflect the December 2008 revision of the HIMIPref™ Indices Values are provisional and are finalized monthly |
|||||||
| Index | Mean Current Yield (at bid) |
Median YTW |
Median Average Trading Value |
Median Mod Dur (YTW) |
Issues | Day’s Perf. | Index Value |
| Ratchet | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0266 % | 2,487.8 |
| FixedFloater | 4.26 % | 3.62 % | 29,442 | 18.00 | 1 | 0.8137 % | 3,777.1 |
| Floater | 2.80 % | 3.00 % | 54,178 | 19.75 | 4 | 0.0266 % | 2,686.1 |
| OpRet | 4.62 % | -5.60 % | 50,346 | 0.41 | 4 | 0.0381 % | 2,602.2 |
| SplitShare | 4.63 % | 4.67 % | 48,412 | 4.35 | 2 | 0.2015 % | 2,879.3 |
| Interest-Bearing | 0.00 % | 0.00 % | 0 | 0.00 | 0 | 0.0381 % | 2,379.5 |
| Perpetual-Premium | 5.25 % | -0.06 % | 71,717 | 0.77 | 30 | 0.1098 % | 2,338.1 |
| Perpetual-Discount | 4.85 % | 4.88 % | 132,763 | 15.70 | 4 | 0.1628 % | 2,646.3 |
| FixedReset | 4.92 % | 2.90 % | 202,436 | 4.01 | 78 | 0.1302 % | 2,472.9 |
| Deemed-Retractible | 4.87 % | -0.08 % | 109,907 | 0.36 | 46 | 0.1202 % | 2,434.0 |
| Performance Highlights | |||
| Issue | Index | Change | Notes |
| MFC.PR.C | Deemed-Retractible | 1.15 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.73 Bid-YTW : 4.70 % |
| GWO.PR.Q | Deemed-Retractible | 1.20 % | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 26.21 Bid-YTW : 4.53 % |
| VNR.PR.A | FixedReset | 1.26 % | YTW SCENARIO Maturity Type : Call Maturity Date : 2017-10-15 Maturity Price : 25.00 Evaluated at bid price : 26.49 Bid-YTW : 3.23 % |
| PWF.PR.P | FixedReset | 1.49 % | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-01-04 Maturity Price : 23.64 Evaluated at bid price : 25.88 Bid-YTW : 2.90 % |
| Volume Highlights | |||
| Issue | Index | Shares Traded |
Notes |
| BNS.PR.Z | FixedReset | 37,591 | TD crossed 19,100 at 24.70. YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.65 Bid-YTW : 3.21 % |
| BNS.PR.Q | FixedReset | 24,090 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 24.97 Bid-YTW : 3.21 % |
| FTS.PR.G | FixedReset | 21,669 | YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-01-04 Maturity Price : 23.77 Evaluated at bid price : 24.40 Bid-YTW : 3.59 % |
| IFC.PR.A | FixedReset | 18,000 | YTW SCENARIO Maturity Type : Hard Maturity Maturity Date : 2022-01-31 Maturity Price : 25.00 Evaluated at bid price : 25.91 Bid-YTW : 3.26 % |
| ENB.PR.D | FixedReset | 17,743 | TD crossed 10,500 at 25.55. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-01-04 Maturity Price : 23.31 Evaluated at bid price : 25.50 Bid-YTW : 3.58 % |
| ENB.PR.T | FixedReset | 15,283 | Recent new issue. YTW SCENARIO Maturity Type : Limit Maturity Maturity Date : 2043-01-04 Maturity Price : 23.18 Evaluated at bid price : 25.28 Bid-YTW : 3.73 % |
| There were 13 other index-included issues trading in excess of 10,000 shares. | |||
| Wide Spread Highlights | ||
| Issue | Index | Quote Data and Yield Notes |
| TRI.PR.B | Floater | Quote: 22.59 – 24.10 Spot Rate : 1.5100 Average : 0.8370 YTW SCENARIO |
| ELF.PR.G | Perpetual-Discount | Quote: 24.30 – 24.80 Spot Rate : 0.5000 Average : 0.4222 YTW SCENARIO |
| POW.PR.D | Perpetual-Premium | Quote: 25.08 – 25.25 Spot Rate : 0.1700 Average : 0.1056 YTW SCENARIO |
| HSE.PR.A | FixedReset | Quote: 26.08 – 26.27 Spot Rate : 0.1900 Average : 0.1266 YTW SCENARIO |
| BAM.PR.T | FixedReset | Quote: 25.75 – 25.92 Spot Rate : 0.1700 Average : 0.1071 YTW SCENARIO |
| BNS.PR.K | Deemed-Retractible | Quote: 25.70 – 25.95 Spot Rate : 0.2500 Average : 0.1886 YTW SCENARIO |