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Daily Market Commentary

A rumoured bailout of AMBAC late yesterday had traders rushing from risk free into risky assets.  Citi is rumoured to be leading a group who will inject capital into ANBAC to save its AAA credit rating.  We think the credit rating agencies are rapidly losing credibility (ironic, no?) in this mess.  While the market usually latches onto a story before the agencies do, particularly in the case of downgrades, I would hardly put MBIA or Ambac in the same league as Berkshire Hathaway and General Electric.



ADP Employment change, which sometimes provides some insight into the following day's NFP numbers, is out this morning, and it isn't pretty.  Using payroll data from ADP's base of 500,000 US business clients (24 million employees), they report changes in employment. February reported a loss of 23,000 jobs, while 18,000 gain was expected.  ADP hasn't printed this low since April 2003.  See chart in Daily FI Snapshot.


The real government reported payrolls comes tomorrow.  Recall that there was a surprise loss of jobs in January, and Feb is expected to eek out a gain of 25,000.  The employment picture is not looking bullish, to say the least.  Reports are negative and revisions from previous reports are downwards.



With the economy souring and US primaries underway, the talk of government intervention into the economy is all over the press.  Clinton and Obama threatening to renegotiate NAFTA, the Fed and Bush administration bailing out homeowners, Congress putting together a "fiscal stimulus package", the Senate banking committee talking about new measures in the industry to protect from another such disaster.  This doesn't even step into the agricultural forum...  All this chatter is the sign of a weak economy, and that is reflected in 1.59% two year treasury bond yield.  When will this peak?  Your guess is as good as mine, but we seem to be in the thick of it now.



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