The Euro region officially grew again in Q3 on a q/o/q basis for the first time since Q1 ’08 as both Germany and France saw growth for a 2nd straight quarter, albeit a touch less than expected. Overall, the Euro zone grew .4% q/o/q, .1% less than expected and because of the slight miss relative to forecasts, European bonds are higher and US Treasuries are following, sending the 10 yr bond yield to the lowest level in a week and a half on a closing basis. This comes even with another round of huge supply this week, a weaker than expected 30 yr bond auction, US$ concerns and a record high in gold. Foreign central banks who are intervening in the FX markets to weaken their currency and accumulating dollar’s as a result are parking money in Treasuries and US banks are also playing their own carry trade with free money from the Fed. Also, concerns with the US economy won’t abate as WMT, JWN and KSS all talked about a restrained consumer.
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