Ramon Ramirez

The Treasury of the United States of America is considering issuing a new type of financial instrument: floating rate debt. The Treasury had already considered this idea back in the early ninetees but it never decided to implement it. The move comes at an odd time, given that interest rates have never been so low and that everybody is trying to do the opposite: lock the low rates. The Wall Street Journal reports that some analysts believe that the move is not odd at all, and that it actually makes sense. The Treasury wishes to reduce its reliance on short-term bills, which is why it has been issuing more long term debt, pushing the weighted average maturity of the U.S. debt to 62.4 months at the end of 2011 from 49 months 3 years earlier. The US federal government can issue a 10 year bond with a yield of 1.92% as opposed to the 0.09% yield for 3 month notes. Although the 10 year yield is at an all-time low, it is still cheaper to borrow at 0.09%. By issuing floating rate debt, the Treasury would be able to borrow for longer periods while benefiting from the low interest rates. It would be actually doing the opposite of locking interest rates by locking the money for longer periods and paying a floating yield on the meantime. But of course, if rates start to go up, so would the rate on this new type of instrument. The WSJ adds that countries such as Italy and the UK are big issuers of floating rate debt and that it expects strong demand for such products in the US.

The single currency rose 0.30% against sterling after the announcement of the latest figures for the UK's PMI. The purchasing managers index came out worse than expected, dropping to 50.5 (instead of 51.5) from 51.9. Yesterday, the EMU's CPI came short of expectations at 2.6% while the M3 money supply grew more than expected, reaching YoY growth of 3.2%. Retail sales in the EMU's biggest economy, Germany, have grown MoM and YoY by 0.8% and 2.3%, respectively. At the same time, S&P downgraded 16 Spanish banks, which could push a sell off on the euro. The pair is currently trading at 0.8180, below 0.8504 (200 SMA), facing resistance at 0.8170, ahead of 0.8186 and 0.8210, according to Fxstreet.com pivot points on technical tools. On the downside, there is support at 0.8130, before 0.8106 and 0.8090.

The greenback, measured by the US Dollar Index, is trading almost unchanged on Tuesday, ahead of the ISM manufacturing index and the Construction Spending in the US. Market participants expect the results to be slightly below the previous prints. The dollar is hovering over month’s lows as April has witnessed the world’s reserve losing ground against almost all its major rivals. At the moment: AUD -1.10%, EUR +0.04%, GBP -0.19%, NZD -0.71%, CAD +0.04% CHF -0.05% and JPY +0.01%. Wall St. futures are down 0.18% at 13,205 pts. and S&P500 futures are losing 0.25% at 1,396 pts. WTI is down 0.37 % at $104.45 and Gold is retreating 0.33% at $1,660 The index is down 0.01% at 78.84 as of writing, with the next resistance at 78.97 ahead of 79.10 and then 79.25 Support levels are located at 78.70 followed by 78.55 and 78.42

Separating bank legacy real estate assets makes sense Allows banks to focus on main business Will not seek new aid for banks Will see new bank transactions in coming days Suggests EIB, EU funds for growth