Ahead of tomorrow’s details from the FOMC of the amount and pace of their fresh asset purchase program, India and Australia both raised interest rates by 25 bps in order to stem inflation pressures. The move by the RBI was as expected but the RBA did surprise and as a result the Aussie$ touched parity with the US$ again. While the Fed has had negative real interest rates in place for 5 out of the last 8 years, the RBA has it for just 6 months in ’01. Australia’s hard money focus is a main reason why they haven’t had a recession in 19 years (yes China helps too). The debt of Greece, Ireland, Portugal and Spain are trading soft again. The Irish 5 yr CDS is at another new high for a 2nd day at 505bps. With respect to the US elections today, assuming no major surprises more than we’ve already seen, the only important unknown not priced in to the markets is what the exact tax rates for income, dividends, and cap gains will be in 2011.
