Market Update 4_12_11: From headlights to nukes...it's a global economy

Last night I had to replace a headlight socket in the wife’s car.  This should be an easy 5 minute job…you cut some wires…you splice some wires…a little electrical tape and you’re done.  Well about 30 minutes into my 5 minute job I start to laugh at the absurdity of the whole thing.  A Taiwanese company made a replacement part for a German car, that was subsequently sold to a guy in Tennessee…and everyone involved expected this to work.  It didn’t really go as anyone planned.  After burning 30 minutes, laughing at the intricacies of international commerce that are in play, making some redneck modifications to the parts, and contributing a few dollars to the “swearing jar” I get the job done and shut the hood.  This morning I come in to work and I find that the intricacies of international commerce and a globally linked economy are not done with me.  The 10-year Treasury is up three-quarters of a point this morning on news that Japan has increased the severity level of their nuclear crisis from a 5 to a 7. 

 

A “5” is apparently the way to admit you have a problem but that you have control over it (ie It’s just a drink or four).  A “7” is the end of the line…the worst rating there is (ie you admit you have a problem…but you’re admitting it to the judge at your DUI hearing).  Well Japan is in front of the DUI judge today…and the world doesn’t like it…so they are once again fleeing to the safety of US Treasuries.  The 10-year was trading as high as 3.59% yesterday…today it has lost 11 bps in yield to trade at 3.48%.

 

There isn’t a lot of economic data to discuss today…the market is almost entirely driven by concerns over Japans nuclear crisis.  What this means for the world’s third largest economy (and it’s follow on effect for the global economy) remains to be seen, but it certainly doesn’t imply anything positive for growth.  It should also serve as more cover for the Fed to complete their planned QE2 purchases.

 

If you have any questions or if there is anything I can be doing for you just let me know. 

 

Steve Scaramastro, SVP

800-311-0707