Roubini Fears the Bond Vigilantes May Come to U.S.

The Fed: Who Still Owes What? (DealBook New York Times) DealBook itemizes what's still outstanding through emergency programs and open credit lines:"Hedge funds, pension funds and other investors have some $25 billion in outstanding loans from the Fed, some backed by subprime consumer debt. The central bank’s books are stocked with $66 billion of securities related to Bear Stearns and the American International Group, and the troubled insurer also owes $20 billion on a Fed credit line."


China: US in Worse Shape than Europe (CNBC via Reuters) Is it political—or do the Chinese really believe this? "The U.S. dollar will be safe for the next six to 12 months, because global markets are focused on the euro zone's troubles, Chinese central bank adviser Li Daokui said on Wednesday when asked about U.S. President Barack Obama's plan to extend tax cuts for all Americans. Treasurys are likely to become cheaper, the central bank adviser said. But Li, an academic adviser on the People's Bank of China monetary policy committee, said the fiscal health of the United States was in fact worse than Europe's, and that U.S. bond prices and the dollar would fall when the European economic situation stabilizes."

Dollar up on Jump in Treasury Yields (CNBC via Reuters) "The dollar extended gains on Wednesday on a spike in U.S. Treasury yields as a proposed extension of tax cuts raised growth expectations for the U.S. economy. Traders took their cue as the 10-year U.S. Treasury yield rose to 3.25 percent, a level not seen since late June and beyond Tuesday's high of 3.18 percent. The rise in yields was broadly seen as dollar supportive near-term, despite the adverse fiscal impact of the U.S. government's tax plan."

Is Tax Deal a "Stealthy Stimulus"? (Wall Street Journal) "The tax package heading to Congress could give a noticeable boost to the economy next year, economists said, giving the Obama administration a second, stealth stimulus package without antagonizing lawmakers reluctant to spend more to spur growth. Apart from extending Bush-era tax cuts, which were set to expire at year's end, the agreement includes other components pegged at about $200 billion, including a payroll-tax cut for workers and an extension of unemployment benefits, which are likely to boost growth in 2011. The total package could amount to $900 billion worth of spending and tax cuts over two years."

Rates Up, Mortgage Refinancing Drops (Bloomberg) "The number of mortgage applications in the U.S. fell last week as higher lending rates led to a fourth straight decline in refinancing. The Mortgage Bankers Association’s index decreased 0.9 percent in the week ended Dec. 3, figures from the Washington- based group showed today. Refinancing fell 1.4 percent, while purchases climbed 1.8 percent, the third straight increase."

Roubini Fears the Bond Vigilantes May Come to U.S. (CNBC & Reuters) "Economist Nouriel Roubini on Wednesday voiced concern over a compromise on extending tax cuts struck by US President Barack Obama and Republican leaders, saying the agreement could expose the US to bond vigilantes who will drive up bond yields."

"Futures mixed as bond yields rise" (Yahoo Finance via Reuters) "Stock index futures were mixed on Wednesday, pressured by rising bond yields and a stronger dollar. Yields rose along with the greenback following Tuesday's deal to extend tax cuts that intensified worries about inflation and the costs of the government's debt burden. Higher bond yields makes it more expensive for consumers and businesses to borrow, while stocks and the dollar have moved in opposite directions of late. A rise in yields and the dollar could also draw money away from equities. The 10-year U.S. Treasury yield rose to 3.25 percent overnight, a level not seen since late June and beyond Tuesday's high of 3.18 percent. Adding negative sentiment was news the U.S. Securities and Exchange Commission has issued more than a dozen subpoenas in its investigation of insider trading on Wall Street, potentially undermining public confidence in the markets."