Saturday, December 7, 2013
9:45 AMHilsenrath: Taper on table, but look for dovish guidance change
- The jobs report definitely puts the taper on the table in December, writes Jon Hilsenrath, but it's not all good news. The household survey - out of which comes the UE level - shows the jobless rate fell from 7.2% in September to 7% in November, but employment rose just 83K against a decline in the labor force of 664K. Another way of saying this is the labor force participation rate fell to 63% last month from 63.2% in September (and 63.6% a year ago).
- While this probably won't stop the taper, it could mean a change in guidance, says Hilsenrath, where the FOMC either places less emphasis on the unemployment rate (there's already evidence of this) or indicates it wants to see headline UE at less than 6.5% before considering rate hikes.
- Communication success: Markets are finally believing tapering does not equate to tightening. As investors braced for the taper in September, they also priced in the Fed's first rate hike by the end of 2014. Braced again for the taper today, futures markets aren't indicating the first rate hike until late in 2015.
- Treasury ETFs: TBT, TLT, TMV, SHY, IEF, TBF, PST, EDV, TTT, TMF, TLH, ZROZ, SBND, IEI, DLBS, TYO, DTYS, VGLT, UST, BIL, SHV, UBT, TLO, TBX, VGSH, VGIT, GSY, LBND, DTYL, SCHR, SCHO, TYD, ITE, TYBS, TENZ, DTUL, TUZ, SST, DTUS, FIVZ, TBZ, DFVL, DLBL, DFVS, TYNS