Market Update - 4 Jan 2013

• How fast does feel good sentiment evaporate? Pretty fast indeed, as market just can’t seem to have a sustained rally.

• Market looks beyond the agreement on Tuesday and now focus on the battles ahead with the debt ceiling and spending cuts, I guess the bigger picture for now is still positive but market is taking a breather after quite abit of action past couple of days.

• Also we are expecting the NFP numbers tonight and the bulls are likely to have took some profit ahead of the release before they continue with the buying of risky assets should the numbers be in line or better than expectations.

• Add to that, some are reading the FOMC minutes to suggest an earlier end to QE than markets previously envisioned, and those sentiments are weighing on stocks/risk assets and supporting the USD. The minutes stated that “several others thought that it would probably be appropriate to slow or stop [Treasury and MBS purchases] well before the end of 2013.” And a separate excerpt stated that members discussed the possibility that “additional purchases could complicate the Committee’s efforts to eventually withdraw monetary policy accommodation…”

• USDMYR also opened higher at 3.0450 in line with the rest of markets as 3.0300 now becomes the new intermediate support and trading range shifted lower to 3.0200-3.0800.

• Treasuries fell for a third day, pushing the 10-year note yield to a more than seven-month high, after Federal Reserve policy makers said they may end their $85 billion monthly bond purchases sometime in 2013.
  
• U.S. government debt fell earlier as a private report showing companies added more jobs in December boosted speculation tomorrow’s monthly employment report may top forecasts. The yield on the benchmark security rose the most since October yesterday as lawmakers approved a budget averting income-tax increases for more than 99 percent of households, breaking an impasse about how to avert the so-called fiscal cliff. Congress must next tackle the U.S. debt ceiling, which reached its $16.4 trillion limit on Dec. 31.

• German 10-year government bonds declined for a second day as further signs of improvement in the U.S. economy curbed demand for the safest European assets.
  
• Bund yields reached a two-month high after data showed companies in the U.S. added more workers in December than economists forecast.

• French bond rates rose even as borrowing costs fell to a record low at a sale of 10-year securities. Dutch and Finnish government bonds also dropped along with Belgian debt, which slid amid speculation the nation’s debt agency will issue a new 10-year syndicated security this month.