Update - 11/7/2013
Phillip Cochran, Series 7 and 63
VP/Chief Investment Officer
The ECB lowered its interest rate to .25%, a move that was unexpected by the markets. As a result, Europe just kicked the Beard out of the driver's seat and is now taking us down memory lane. Treasuries are being gobbled up like tic-tacs and yields are being punished. See treasuries below:
2yr .274% (-1.6bps)
3yr .526% (-2.2bps)
4yr .951% (-3.2bps)
5yr 1.300% (-3.7bps)
7yr 1.984% (-2.9bps)
10yr 2.626% (-1.6bps)
30yr 3.762% (-1.2bps)
While Treasuries are down versus the open, they are significantly down from previous days this week, when the 2yr had been as high as .31%.
The good news is that the 3rd quarter GDP numbers posted at 2.8% instead of the expected 2.0%. To say that we don't believe this number is an understatement. Now the reason for the better GDP posting is that inventories are much stronger than expected, all other components of the GDP were down, so this is expected to wash out by 4th quarter. In other words, it seems that true GDP will fall in line with the lowered expectations. As is to confirm this notion, the market is not at all reacting to the GDP number.
We still expect a poor showing tomorrow, and further advise members to get in and buy what they like before tomorrow. Even if we are wrong, and the number is good, we will see a return to this week's opening numbers at best, which means no new prints.