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US Fed Beige Book Points to Modest Growth

The Federal Reserve has released its October Beige Book.

In the report, the central bank indicated that modest growth was observed in seven districts. Meanwhile, two districts reported stronger growth, while Boston, New York, and Philadelphia saw weak performance. The weakness in those three regions was attributed to disruptions caused by Superstorm Sandy.

Further, contacts in several regions expressed concerns over the uncertainty surrounding the budget debate.

Consumer credit was mixed as higher demand for home mortgage loans and auto loans increased consumer lending in some Districts.

However, small business loan demand was generally described as weaker to only moderately higher.

Regarding hiring, most districts reported modest gains while wage and price pressures remained subdued.

Fed Governor Outlines New International Bank Regulations

Federal Reserve Governor Daniel Tarullo speaking today at the Yale School of Management Leaders Forum in New Haven, Connecticut.

His speech covered future regulation of foreign banking organizations. Mr. Tarullo noted that regulators around the world still continue to implement reforms designed to limit the incidence and severity of future crises.

The largest issue he is addressing is that the regulation of the US operations of large foreign banks has yet to be reformed.

Mr. Tarullo also said that regulators here in America only see a portion of worldwide activities of these banks. He said some risks are more closely tied to the specifically international character of certain global banks, both in America and in some other parts of the world.

The big issue is that Mr. Tarullo said that the Board of the Federal Reserve is discussing these international regulations. He noted, “I anticipate that in the coming weeks we will complete our work and issue a notice of proposed rulemaking that will elaborate the basic approach I have foreshadowed.”

US Treasuries uptick after 5-yr Note Auction

10-Yr: +04/32..1.621%.. USD/JPY: 81.85.. EUR/USD: 1.2934
US Treasuries are seeing little reaction to this afternoon’s solid but not spectacular $35-B 5-yr Note auction.

The auction drew 0.641% and a slightly weaker than average 2.89x bid/cover, the 12 auction average 2.92x with both direct (15.9%) and indirect bidders (45.4%) seeing strong takedowns.

Primary dealers were left with 38.7% of the supply. Some light buying has surfaced following the results, but action remains relatively subdued.

Out performance can be seen in the belly of the curve where the light buying has yields down as much as 2 bps.

The recent advance has the 10-yr yield threatening to push back below 1.615%. Flattening persists along the yield curve with the 2-10-yr spread tightening to 133.5 bps.

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