Pain trade continues higher

The pain trade higher continues as G20 Finance Ministers meet in Paris and hammer out details of what they will do next to deal with their debt problems and Google provides blowout numbers. Behind that, things are still shaky. China reported Sept CPI up 6.1%, keeping the pressure on authorities to keep policy tight at the same time bank loan growth slowed to the least amount since Dec ’09 and M2 growth rose at the slowest pace since Feb ’02. The Shanghai index fell after 3 days of gains. In Europe, the S&P downgrade of Spain to AA- just followed what Fitch did last Friday. Spanish yields are moving to 3 week highs though and Italian yields are up too ahead of the Berlusconi confidence vote. French bond yields are spiking, with the 10 yr yield up 13 bps to above 3% for the 1st time since Aug. The Belgium 10 yr is up by 10 bps and their 5 yr CDS is rising to a record high. Back in Asia and following the Indonesian rate cut earlier this week, the Singapore monetary authority said they will slow the pace of Singapore $ gains in its band against a basket of other currencies. This is a version of monetary easing although some thought they would do more by push for an outright decline in its currency.

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