Bonds Sending Negative Messages, Japanese Jobless Rise

Record lows in US yields and record highs in Portugal are flashing warning signals. JPY and USD were the leaders with EUR and NZD lagging. Japanese unemployment rises and so does industrial production and household spending. Status of Thursday nights trades is below.

The flight on JPY continued Monday as US yields plunged across the curve with 5-year notes trading at a record 0.73%. In Portugal, the crisis continues to intensify with 10-year notes above 17%.

The outlook for the US is diminishing and some economists have downgraded Q1 forecasts. More signs of mixed growth emerged Monday as December personal spending was flat compared to the +0.2% expected. Personal income pointed to an improvement of balance sheets as it rose 0.5% versus the 0.4% consensus.

QE3 hopes were dealt a minor blow with core PCE up 0.2% m/m compared to the +0.1% expected.

Asia-Pacific Preview

In Japan, December industrial output rose 4.0% y/y vs fcsts of +2.7%. Japan Dec employment fell 100K y/y vs +80K in Nov as employment posted the 1st y/y Rise in 2 months. Dec unemployemnt rate 4.6% vs expectations of 4.5%. Dec spending rose 0.5% y/y vs expectations of -0.1%, the first y/y rise in 10 mnths.

Australia's National Bank's Monthly Business Survey showed business conditions index was unchanged at +1 in Dec, while Business confidence rose to +3 from +2 in Nov.

Thursday nights trades: One EURUSD long hit all targets, the other was unfilled. Both dual trades in ESH (S&P500 March contract) hit all targets, while 1 gold long nears the final targetthe other remained unfilled. One oil long was stopped out, while the other nearing its target. One AUDNZD short hit all targets, while the other is in progress. Fresh set of Tuesday trades is due after the London Tuesday open.

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