• RTRS: Troika report on Greece won’t be released until after US election
• Troika announces one-week break in Greek negotiations
• Fed’s Williams: FOMC could buy more bonds after Op Twist ends
• Schaeuble: Germany in agreement Spain doesn’t need aid
• Canadian Aug CPI 1.2% y/y vs 1.3% y/y exp
• Deputy PM Saenz: Budget to be approved Sept 27
• Fitch: No plans to review Italy's sovereign rating near-term
• Robert Shiller warns on Canadian housing
• Cyprus should leave euro if bailout conditions unbearable: Party head
• Lockhart says now not the time to buy more Treasuries
• S&P sees 20-25% chance of US election
• Volcker: QE3 won’t save economy
• Gold touches 6-month hight at $1787, retraces to $1773
• S&P 500 flat at 1460
• On the week, down 0.4%
• On day, JPY leads, NZD lags. Overall changes miniscule.

The early theme was to dump the US dollar after the comments from the Fed’s Williams. EUR/USD fizzled ahead of 1.3050, just as it did in Europe. The risk rally (and USD slump) didn’t last long beyond the US stock market open. Risk edged down for the remainder.

USD/JPY limped below 78.10 to a global session low but was very quiet overall.

Cable slumped after two attempts at 1.63, finishing the day about 50 pips below.

USD/CAD slid early on M&A talk but rebounded to 0.9767 on the soft Canadian CPI and factory data, along with weaker risk appetite. Similar pattern for AUD.

Overall, we put a bunch of doji stars on the charts with nearly no changes from yesterday.

The weekly CFTC Commitments of Traders report, which is tabulated at the close on Tuesday:

• EUR short 73K vs 94K prior
• JPY long 15K vs 33K prior
• GBP long 14K vs prior short 4K
• AUD long 69K vs 68K prior
• CAD long 111K vs 102K prior
• CHF short 4.5K vs 9K prior
• NZD long 17K vs 10K prior

A few points: 1) This is the first report on EUR since the ECB and Fed decisions. It still shows plenty of room to squeeze higher. 2) About time the market turned around and got long cable. 3) CAD longs getting near the red zone.

Those of you who are longtime readers of ForexLive know that each fall we participates in a fundraising drive for a cause very close to my heart, the National Down Syndrome Congress’s Buddy Walk.

Over the years, the ForexLive community has raised over $11,000. This year I have set an ambitious goal of $10,000.

Any donation, no matter how small is appreciated. As an incentive, any contribution over $100 will receive a ForexLive tee-shirt as a thank you gift.

Hit this link to participate. Thanks in advance!

The Telegraph picked up comments former Fed Chairman Volcker, who narrowly beats Warren Buffett as my favorite octogenarian.

"Another round of QE is understandable – but it will fail to fix the problem. There is so much liquidity in the market that adding more is not going to change the economy."

Nope.

It takes money out one packet at the Fed and puts it in another. Net result, zero. That is until the demand for money improves and cash leaks out of excess reserves on deposit at the Fed and is put to use in the real economy. That’s when inflation will be a risk. Until then, not so much.

• Chance of recession 20-25%
• Residential real estate investment contributing to GDP growth this year
• US growth seen 2.2% in 2012, 1.8% in 2013

Biggest mover and plenty of volatility as well.

The pair is down 130 pips on the week but 230 from Wednesday’s high.

Looking at the weekly chart alone, it’s being pulled in several directions.

1. The multi-year trend is lower, as shown by the channel
2. Since July, however, the pair is up nearly 10 big figures
3. This week, there has been a correction

Given all that, a choppy trade up to 104.00/50 seems like the path of least resistance but overall I don’t see any great signals in this pair so that might be a sign to fade any sharp moves.

Only took home $13.7 mln. He paid just less than $2 mln in taxes on that for an effective tax rate of 14.1%.

I think he made over $20 mln the year before.

Romney, a private equity executive takes advantage of carried interest, a tax treatment available to partners in investment pools.

• 2013 will be an improvement over 2013

It’s barely a week since QE3 and three Fed officials have already talked about doing more.

–Senate Majority Leader Says He’s In Talks With GOP On Voting Schedule
–Sen. Reid: Final Vote On Stop-Gap Could Be Friday, Saturday or Sunday
–Sen. Minority Leader Says GOP Is Ready To Vote On Stop-Gap Bill

By John Shaw

WASHINGTON (MNI) – Senate Majority Leader Harry Reid said Friday
that the Senate will vote on the 2003 fiscal year stop-gap spending bill
by Sunday, adding that he remains in talks with Republican leaders to
set the time of the vote.

Speaking on the Senate floor, Reid said the final vote on the
spending bill will occur in the coming days and the debate will not
extend into next week.

But he said it remains unclear if the final vote will be Friday,
Saturday, or Sunday

Speaking after Reid, Senate Minority Leader Mitch McConnell
hammered Democrats for an unproductive year and being more anxious to
leave Washington than to work.

But he added that Republicans are ready to vote on the final bills
that are on the agenda.

The FY’13 stop-gap spending bill under consideration funds the
government through March 27, 2013. The 2013 fiscal year begins Oct. 1
and so far Congress has passed none of the 12 spending bills for the
coming fiscal year

The House approved the stop-gap spending bill last week on a 329 to
91 vote.

Once the measure clears the Senate, it will go to President Obama
for his signature.

Passage of the stop-gap bill ensures the government will be funded
until next spring.

** MNI Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

Reuters Fed reporter Jon Spicer has the transcript of an intense, revealing exchange between Dallas Fed President Richard Fisher and an analyst from a wealth management firm.

You elect these people, you pay for their campaigns, you put them in office. If they cannot straighten out the fiscal problems in this country, get some new ones. Do not turn to the central bank. Because if you turn to the central bank to solve our problems we're going to be in serious trouble… the Federal Reserve has limited powers.

Someone get Fisher on the ticket.

By Isobel Kennedy

NEW YORK, (MNI) – The agency mortgage-backed securities market
remains on fire Friday in continued reaction to the Federal Reserve’s
recent actions but some caution flags have also been raised.

The current coupon 30-year MBS hovers near the highs of day and is
yielding 1.84% vs. yesterday’s close of 1.90%. The spread to a blend of
5-year and 10-year Treasuries is +61 basis points vs. +68 yesterday.

Sources report that some shorts are finally getting stopped out
amid better real money buying from banks, money managers, fast money and
REITs across the stack.

The Fed, of course, continues to buy each day and origination
selling has been relatively light at under $2 billion Friday.

The market began doing better the moment the Fed announced on
September 13 that it would be buying $40 billion agency MBS per month
with no end date mentioned.

This comes on top of the $37 billion of MBS buying the Fed must do
from September 14 to October 11 because of the prepayments it receives
monthly on its $844 billion agency MBS portfolio.

The market got an extra goose higher late Thursday when the Fed
announced it bought $17.5 billion agency MBS in the week ended September
19. Those purchases seemed to be about equally split between new QE3
buys and regular weekly prepayment reinvestment buys.

But the market has come a very long ways and a degree of caution
has set in. The 30-year MBS rate was at 2.36% before the Fed’s
announcement on September 13. The spread to the Treasury blend stood at
+113 bps.

In order to buy $17.5 billion agency MBS, the Fed bought every
coupon, name and maturity available. It bought Fannie Maes, Freddie Macs
and Ginnie Maes. It bought 15-years and 30-years. It bought 2.50%, 3.00%
and 3.5% coupons for delivery in October, November and December.

The market took note Friday that the Fed had bought a surprising
number of Fannie Mae 3.50% coupons.

The mortgage strategy team at Credit Suisse late yesterday advised
clients to sell Fannie 3.5s and receive in 10-year swaps.

“The cumulative outperformance of FN 3s and 3.5s vs. rates has
surpassed last week’s levels following Thursday’s release of Fed’s
month-to-date purchases in September,” Credit Suisse said in a research
note.

“We favor selling FN 3.5s to express this view due to our
expectation that Fed purchases should decisively tilt towards FN 3s, at
current rate levels,” Credit Suisse said.

Credit Suisse admits “the onerous negative carry makes it a
challenging trade. However, we believe risk/reward is favorable given
extreme valuations and potential for profit taking near quarter-end.
Continued aggressive buying of FN 3.5s is a key risk to this trade, in
our view.”

The strategy team at BNP Paribas thinks heavy demand from the Fed
for MBS in the face of negative net MBS issuance will allow them to
further outperform Treasuries and that “riskier asset classes,
particularly corporate bonds, with their similar credit quality and
liquidity, are likely to do even better.”

Global debt investors that use benchmarks “will face asset
shortages in the face of this QE-induced contraction in available
investment grade assets. This is expected to provide technical support
to US IG credit despite low yields and historically full valuations, and
will help to perpetuate the current strong demand for high quality new
issue paper. High yield and emerging markets credit also benefit from
this dynamic,” BNP said in a research note.

For reference, this is what the Fed announced on September 13:

— To make open ended purchases of agency MBS each month totalling
$40 billion; From September 14 to September 30, the pro rated amount is
$23 billion;

— To make purchases totally $45 billion each month in the Treasury
market until the end of December. This is an extension of their Maturity
Extension Program, or Operation Twist as the Street calls it, where the
Fed sells shorter dated Treasuries and buys longer dated Treasuries. The
Fed said all its programs will be analyzed at the end of the year so the
future of MEP is not clear at this point;

— Fed will continue to buy agency MBS each month with the proceeds
of prepayments made to its approximately $800 billion MBS portfolio.
Each month the Fed tells the markets how many prepayment related
reinvestment purchases it intends to make. They have been running as low
as $25 billion a month to as high as $37 billion a month recently;

— Fed said it expects its low rate policy to stay in effect until
at least the middle of 2015. It had been until at least the end of 2014
previously.

** MNI New York Newsroom: 212-669-6430 **

[TOPICS: M$U$$$,M$$AG$,MN$MO$,MAU0B$,MMUFE$]

By Steven K. Beckner

(MNI) – Atlanta Federal Reserve Bank President Dennis Lockhart
described the Fed’s aggressive monetary easing measures last week as a
“forceful attempt” to stimulate the economy and reduce unemployment, but
indicated Friday he is prepared to support even “more action” if the
economy doesn’t improve.

Lockhart, a voting member of the Fed’s policymaking Federal Open
Market Committee, said “additional asset purchases” are one option.

After expressing some ambivalence about additional monetary
stimulus in recent months, Lockhart ended up voting with the 11-1
majority last Thursday when the FOMC announced it would buy $40 billion
per month of mortgage backed securities until the outlook for the labor
market improves “substantially.

The FOMC also extended its “forward guidance” on the path of the
federal funds rate to “at least through mid-2015.” And it said it
“expects that a highly accommodative stance of monetary policy will
remain appropriate for a considerable time after the economic recovery
strengthens.”

“The necessary natural healing from the large disruption of the
financial crisis will certainly be supported, and likely accelerated, by
the stance of policy with the new features introduced last week,” he
said.

Lockhart said he felt “a call to action” after August data showed
the economy was slowing from an already “anemic” pace. And he said he
came to the conclusion that weak labor market conditions can be
“ameliorated” by monetary policy, despite disagreements among his
colleagues about the extent to which joblessness is cyclical or
structural.

Lockhart described the FOMC’s two-pronged stimulus campaign as “a
preventative” — aimed at improving economic prospects “by reducing the
potential downside apparent in the incoming data.”

But he said he expects the policies to “do more than just prevent
backsliding.”

To be effective, he said the new measures “must lower interest
rates, raise asset prices, and reduce policy uncertainty.”

“These intermediate results must increase confidence of consumers
and businesses,” he continued. “That must lead to a heightened
inclination to spend, invest, and take risk. And these actions must
result in more economic activity, rising demand, and ultimately hiring.”

Lockhart called the MBS purchases “well-timed” with recent housing
market improvements, echoing comments made in a news conference Thursday
on the sidelines of a Kansas City Fed jobs forum.

“By maintaining downward pressure on mortgage rates and by
encouraging growth of mortgage-financed purchase activity, sales
activity … should accelerate, and upward pressure on home prices
should contribute to consumer confidence,” he said. “The policy action
should have positive sector-specific effects with spillover to general
conditions.”

“An improving housing sector will help calm one headwind that has
impeded a stronger recovery,” he added.

Lockhart said “MBS purchases will continue until we see a better
employment situation.”

“If we do not see improvement, more action may be taken,” he said
adding, “I hope the resolve of the FOMC is clear.”

To reinforce the point, he said the FOMC statement and Chairman Ben
Bernanke’s comments in his post-FOMC news conference “emphasized that
further policy actions, possibly in the form of additional asset
purchases, will be decided on the basis of the extent of improvement in
the outlook for labor market conditions over the coming months.”

Lockhart said “the outlook for inflation will also be a critical
consideration,” but he had earlier observed that while inflation has
“hewed closely” to the Fed’s 2% target, “the record of employment gains
has been less comfortable.”

He said he “couldn’t entirely rule out the weakening of other
headwinds,” such as the fiscal cliff and the European debt crisis. If
those headwinds dissipate, he said “the outlook could be considerably
more favorable in a few months time.”

** MNI **

[TOPICS: M$U$$$,MFU$$$,MGU$$$,M$$CR$,MT$$$$,MMUFE$,M$$BR$]

• Fed will buy bonds until employment improves

They’ll buy bonds forever.

Though there seems to be rather little link between ultra-loose monetary policy and employment, Atlanta Fed president Lockhart seems to have drunk the Chairman’s Kool-aid, saying the Fed will buy bonds until unemployment improves.

My policy is slightly different. I’m going to eat cheeseburgers and drink beer until the employment market improves.

At least my policy helps butchers, farmers and beer distributors…

The Troika confirms earlier reports that it is taking a week off.

They say the mission has made ‘good progress’.

No further comment on the report that it will delay a decision until after the US election.

–House Speaker Blasts Obama, Senate Dems For Fiscal Cliff Impasse
–Rep. Boehner: Taxe Increases Now Would Hurt U.S. Economy
–Rep. Boehner: Slams Obama, Hill Dems For Fiscal Cliff ‘Negligence’

By John Shaw

WASHINGTON (MNI) – House Speaker John Boehner Friday blasted
President Obama and Senate Democrats for the current impasse on the
coming fiscal cliff, adding that House Republicans have done all they
can do to resolve critical tax and spending issues.

“We have done our work,” Boehner said at a briefing.

He said Obama and Senate Democrats have blocked action on bills
that would avert the fiscal cliff.

“It isn’t leadership. It’s negligence,” Boehner said.

Boehner praised GOP efforts to replace across-the-board spending
cuts that are set to begin in January, saying the coming sequestration
is the fault of Democrats.

“The sequester was designed to be ugly. Why? Because no one would
go there,” he said, adding that Obama did not push for a budget deal in
the Super Committee that would have prevented the sequester.

Boehner argued that tax and entitlement reform are urgently needed
and must “travel parallel paths” as they move through Congress.

Boehner once again said that increasing taxes is not part of the
nation’s fiscal solution.

Senate Majority Leader Harry Reid said Thursday he remains
confident that policymakers will find a way to avert the fiscal cliff
later this year.

“I don’t believe we’re going to go over the fiscal cliff,” Reid
said at a briefing.

Reid said that several rounds of budget talks in 2011 have created
a foundation for reaching a bipartisan budget agreement after the Nov. 6
elections.

“Everyone knows what needs to be done,” Reid said.

** MNI Washington Bureau: (202) 371-2121 **

[TOPICS: M$U$$$,MFU$$$,MCU$$$]

• ECB spokesman says “nothing to add” to EU Commission’s statement that reports of  delay in the Troika report until after the US election is nonsense

By Kasra Kangarloo

WASHINGTON (MNI) – Housing data released in the week ahead may
continue the trend set by the unexpectedly strong existing home sales
figure already released for the month of August.

The July S&P Case Shiller home price index will be released Tuesday
at 9:00 a.m. ET and the July Federal Housing Finance Agency’s home price
index will be released Tuesday at 10:00 a.m. ET. August new-home sales
will also be released Wednesday at 10:00 a.m. ET and the September
pending home sales index will be released Thursday at 10:00 a.m. ET.

The recent strength in home sales has been foreshadowed to a large
degree by stronger home builder confidence and housing construction
starts over the past few months. It may be that with August data, sales
will finally begin to gain real traction in spite of continued weakness
in the jobs market.

Home prices will likely lag behind the climb in sales, though
National Association of Realtors’ chief economist Lawrence Yun noted in
the existing home sales release that a dwindling inventory of
foreclosed homes is putting upward pressure on prices generally.

Consumer confidence data will also be released next week, with the
Conference Board’s September consumer confidence index due Tuesday at
10:00 a.m. ET and the University of Michigan’s final September consumer
sentiment index on Friday at 9:55 a.m. ET.

Consumer confidence received a surprise boost in the initial
University of Michigan survey and the IBD/TIPP economic optimism index
in September. This may have been due to a temporary surge following the
Democratic National Convention, according to economists interviewed by
MNI — next week’s data could make or break the trend.

Initial jobless claims, to be released Thursday at 8:30 a.m., may
also be signaling renewed weakness in payroll figures, as the past two
weeks have posted above 380,000. The timing of the Labor day holiday may
have skewed seasonal adjustments made by the Bureau of Labor Statistics,
so next week’s data should provide a reality check.

The advanced durable goods report for August will be released
Thursday at 8:30 a.m. ET. Manufacturing data has lately trended toward a
weakening in the sector. The Institute of Supply Managers’ purchasing
managers index has shown a contraction nationally for the last three
months, with some of the key leading indicators, such as new orders,
leading the shift downward.

The MNI Chicago Report purchasing managers’ index, which
historically has maintained a strong correlation with the national ISM
index, will be released Friday at 9:45 a.m. ET.

The third estimate of second quarter GDP will also be released
Thursday at 8:30 a.m. ET and is expected to show an unchanged reading of
1.7% growth.

Other data to be released over the week include September personal
consumption and income on Friday at 8:30 a.m. ET, the Dallas Federal
Reserve manufacturing activity index on Monday at 10:30 a.m. ET, the
Richmond Federal Reserve manufacturing index on Tuesday at 10:00 a.m.
ET, the Kansas City Federal Reserve manufacturing activity index on
Thursday at 11:00 a.m. ET, and the National Association of Purchasing
Managers’ Milwaukee index on Friday at 9:00 a.m. ET.

Federal Reserve speakers for the week are listed below:

San Francisco Federal Reserve President John Williams will speak at
the City Club of San Francisco Monday at 3:30 p.m. ET.

Philadelphia Federal Reserve President Charles Plosser will speak
on the economic outlook in Philadelphia on Tuesday at 12:00 p.m. ET.

Chicago Federal Reserve President Charles Evans will speak to the
Chamber of Commerce in Indiana on Wednesday at 1:15 p.m. ET.

–Kasra Kangarloo is a Washington reporter for Need to Know News

** MNI Washington Bureau: 202-371-2121 **

[TOPICS: M$$FI$,M$U$$$,MAUDS$]

On one hand, everyone wants to dump dollars because of this:

On the other hand, every headline out of Europe makes you go:

So you try gold.

…and get whipsawed anyway.