After putting Spain’s credit rating on review for a possible downgrade back in June, we finally heard back again from Moody’s and they decided to leave their Baa3 rating, one notch above junk, unchanged thus saving Spain from joining its junky neighbors Ireland, Portugal and of course Greece. Moody’s #1 factor in doing so was the news that the ECB will come to the rescue if needed as “losing market access has been materially reduced” as a result. Moody’s also said they see “evidence of the Spanish govt’s continued commitment to implement the fiscal and structural reform measures that are needed to stabilize its debt trajectory.” They also cite the “ongoing progress towards restructuring the Spanish banking sector.” In response, Spanish bonds are rallying sharply and the IBEX index is at a 3 week high. Italian bonds are also higher in sympathy and the euro is at a one month high vs the US$. The UK’s unemployment rate fell to 7.9% from 8.1%, the lowest since June ’11 with the number of jobless claims unexpectedly down by 4k in Sept.

Noteworthy in Asia, Thailand cut interest rates after South Korea did last week.

In the US, the MBA said purchase apps rose for a 4th week but by just .9%. Refi’s though fell for a 2nd week by 5.3% as mortgage rates have stopped going down. Notwithstanding Fed buying, the FNMA 30 yr coupon yesterday closed at the highest in a month.

Category: MacroNotes

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