BloombergBrief ECO Newsletter 2014278

8/10/2019 BloombergBrief ECO Newsletter 2014278

1/9

DATA REPORTS (NEW YORK TIME)

TIME

TBA SZ Usjfiot jaekl tutue kdlsessa

1:00 UK Tktktktk

3:00 EC Griot jaekl tutue kdlsessa unte

4:00 EC Griot jaekl tutue kdlsessa unte.

5:00 EC Griot jaekl tutue kdlsessa unte

8:00 PO Portugal cabinet meeting

TIME EVENT SURVEY ACTUAL PRIOR

KEENESCORNER

0

500

1,000

1,500

2,000

2,500

2004 2006 2007 2009 2010 2012 2013

Thousands

New Home Sales New Housing Starts

Source: Bloomberg

The surprising weakness in U.S. new home sales extended to July, with the series dropping to412,000 on an annualized basis, from an upwardly revised 422,000 in June. The Bloomberg consen-sus forecast was a pace of 430,000. The report shows demand for new housing diverging in July fromthe persistently stronger homebuilder sentiment and the recovery in housing starts, which are more a

measure of business confidence. Josh Wright, Bloomberg Economist

U.S. New Home Demand Still Flagging

ECONOMIC-EVENTS CALENDAR

TIME

21:00 BZ Brazilian Presidential Debate

8/27 SW Swedens NIER New Economic Forecasts

8/27 US U.S. NATO Ambassador Lute Gives Speech

8/27 TU Turkey Rate Decision

8/28 JN Japan National Inflation Data

8/29 US Detroits Bankruptcy Plan Hearing

MOST READ ON BLOOMBERG

Yellen Jobs View Muddied by Wage Deflation

No Sign of Young Buyers for Japan Stocks

Wall Street Cant Get Bonds Respect

Junk Overtaken by High Grade as Favored Bet

WHAT TO WATCH:U.S. durable goods ordersare due 8:30a.m. and may have jumped in July at the fastest rate since early2011, according to a Bloomberg poll. Other consumer-focuseddata may show momentum ebbing. The FHFAs house priceindexat 9 a.m. probably rose less rapidly in June than May. The

Case/Shiller indexof house prices in 20 major cities also at 9 a.m. may register a fall inyear-to-year growth. The Conference Boards consumer confidence indexprobablyebbed in August after hitting a post-crisis high in July, 10 a.m.

ECONOMICS:The Richmond Feds manufacturing surveymay fall in August afterpicking up the month before, 10 a.m.

GOVERNMENT:Russian President Vladimir Putinis set to meet Ukraines PresidentPetro Poroshenkoat a trade summit in Minsk today.

COMPANIES:Amazon.comsaid it is paying $970 million in cash for Twitch, anonline gathering place for gamers. The deal, one of its biggest-ever acquisitions, is worth$1.1 billion when including retention-related payouts, said a person familiar with the talks.

MARKETS:The eurotouched an 11-month low against the dollar. Goldrose the mostin almost three weeks. WTI crudetraded near the lowest price in seven months.

DAYBOOK

Alex Brittain

Putin, Poroshenko Meet; U.S. Durables, Houses

7:00 BZ FGV Const Costs MoM 0.22% - 0.80%

8:00 HU Central Bank Rate 2.1% - 2.1%

8:30 US Durable Goods Orders 7.1% - 0.7%

8:30 US Durables Ex Trans 0.5% - 0.8%

8:30 US Cap Goods Ship NDEA 0.5% - -1.0%

8:30 US Cap Goods Ord NDEA 0.2% - 1.4%

9:00 US FHFA House Price Ind 0.3% - 0.4%

9:00 US House Price Purch Ind 5.0% - 1.3%

9:00 US S&P/CS 20 City MoM 0.00% - -0.31%

9:00 US S&P/CS Comp-20 YoY 8.30% - 9.34%

9:00 US S&P/CS HPI NSA 172.84 - 170.64

9:00 US S&P/CS US HPI NSA - - 150.76

9:00 US S&P/CS US HPI YoY - - 10.35%

10:00 US Consumer Conf Index 88.5 - 90.910:00 US Richmond Fed Mfg Ind 6 - 7

18:45 NZ Food Prices MoM - - 1.4%

21:30 AU Const Work Done -0.5% - 0.3%

Doug Duncan, senior vice presidentand chief economist at Fannie Mae, onthe new normalin U.S. housing.

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BRIEF Economics

NEWS, ANALYSIS AND COMMENTARY

TUESDAY

08.26.14www.bloombergbriefs.com

or use by [email protected] only. Redistribution only allowed with firm license. Call +12126179030 foo.

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2/9

-4.5

-4.0

-3.5

-3.0

-2.5

-2.0

-1.5

-1.0

-0.5

0.0

0.5

1.0

'90 '93 '96 '99 '02 '05 '08 '11 Jan-14

Three Month Moving Average

CFNAI Source: Federal Reserve Bank of Chicago

-20

-18

-16-14

-12

-10-8

-6-4

-2

02

4

68

1012

-8

-6

-4

-2

0

2

4

6

8

'85 '95 '05

GDP (lhs)

LEI (rhs)

GDP CYOY , LEI TOTL

Source: Bureau of Economic Analysis, The Conference Board

Leading Economic Indicators (Y/Y%) Vs Real GDP Growth (Y/Y%)

Chicago Fed National Activity Index

Barometers Suggest U.S. Economy to Grow 3% in Third Quarter

U.S. economic activity grew an average of1 percent in the first half the product ofa steep 2.1 percent contraction during thefirst three months of the year, and a sharp4 percent rebound in the second quar-ter. All eyes are focused on third-quarterperformance to see how strong, or frail, therecovery effort has been. Looking at threerecently released barometers, it appears asif the economy is on pace to register abouta 3 percent gain in the current quarter.

The Chicago Feds National Activity Indexfor July climbed to 0.39 from an upwardlyrevised 0.21 posting in June the fifthconsecutive reading above zero. This isan encouraging sign since a value of zerodenotes an economic performance in linewith its historical trend rate of growth. Thethree-month growth rate also increasedfavorably to 0.25 from 0.16 in June.

Economists like to look at the National Ac-tivity Index since it is a broad-based barom-eter comprising 85 economic indicators andthus tends to minimize extreme fluctuations.During July, 53 of the components madepositive contributions to the headline index.

Also included in this Fed report are foursubcomponents regarding production/income, employment/unemployment,

consumption/housing and sales/orders/inventories. The employment gauge is anexcellent proxy for the pace of labor marketconditions. In July, the employment-relatedindicators contributed 0.13 points to theCFNAI, weaker than seen in June, whentheir role was twice as large.

The Conference Board reported a solid0.9 percent surge in its index of leadingeconomic indicators, suggesting the secondhalf performance could be quite strong. Thecoincident index rose 0.2 percent in July,implying a solid beginning to third quarteractivity. The Conference Boards index ofleading economic indicators has enjoyed anexcellent history predicting turning points inthe business cycle; unfortunately, it hasnthad as great a record estimating the magni-tude of those changes.

Meanwhile, the coincident to lagging indi-cator, another ratio used in the determina-tion of turning points in the business cycle,improved to 88.0 in July from 87.9 in June,but remains in a notable downward trendsince registering a cyclical peak in January

BIG PICTURE RICHARD YAMARONE, BLOOMBERG ECONOMIST

2011. While no indicator is fool-proof, thismeasure has an impressive history (clickto see chart).

Of all the indicators to be released overthe past three trading sessions, only onesupported a slightly stronger performance.This was the Atlanta Feds GDPNowmodel a relatively new nowcasting modelupdated with the latest inputs to the quar-

terly GDP report immediately following therelease of the various monthly reports. As ofAug. 19, the GDPNow model estimates realGDP growth to be an annualized 3 percentin the third quarter, which is higher than the2.8 percent projection of Aug. 13. The up-ward revision was based on the latest hous-ing starts andCPI releases. See details onthe model here: bit.ly/1ls3MQI

1 2 3 4 5 6 7 8 9

08.26.14 www.bloombergbriefs.com Bloomberg Brief | Economics 2

http://localhost/var/www/apps/conversion/tmp/scratch_6/bit.ly/1ls3MQIhttp://localhost/var/www/apps/conversion/tmp/scratch_6/bit.ly/1ls3MQIhttp://localhost/var/www/apps/conversion/tmp/scratch_6/bit.ly/1ls3MQIhttp://localhost/var/www/apps/conversion/tmp/scratch_6/bit.ly/1ls3MQI


3/9

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4/9

MARKET CALLSBY BLOOMBERG NEWS

Jennifer Vail, head of fixed-incomeresearch at U.S. Bank Wealth Manage-

ment, said Federal Reserve Chair JanetYellens shift from a very dovish to a morebalanced approach benefits the dollar.Her comments spoke to a U.S. on thepath of rate normalization that could befaster than what the market anticipates, ata time when the prospects for the rest ofthe globe are more bleak, she said. Vailexpects the dollar to end the year at $1.31per euro before rallying further.

Dodd Kittsley, global head of ETF na-tional accounts and strategy at DeutscheBank Securities, said fundamentals pointto a stronger U.S. dollar for some time.

Deutsche Bank forecasts the dollar rally-ing to at least $1.30 per euro by year-end.

Eric Green, TD Securities head of U.S.rates and economic research, expectsthat more aggressive easing by the ECBcould lead to more aggressive tightening

by the Fed. The ECBs launch of QE willhave the effect of pulling front-end U.S.rates higher and long-end rates lower, and

will bring the Fed into play sooner ratherthan later, he said.

Anders Faergemann, a senior portfoliomanager at PineBridge Investments, saidAsia stands out as an alternative safe ha-ven due to limited exposure to geopoliti-

cal tensions. The Indonesian rupiah couldturn out to be one of the real winners in aprolonged conflict between Ukraine and

Russia, he said, while Malaysia offers adecent alternative.

Shirley Tsai, a bond trader at Hontai LifeInsurance, said the German-U.S. yielddifference may widen fur ther as the U.S.economy continues to gradually improve.

Joseph A. LaVorgna,@Lavorgnanomics Joseph A. LaVorgna, Managing Directorand Chief U.S. Economist at Deutsche Bank. New York City globalmarkets.db.com

For simplesolutions tofollow tweets

about compa-nies, industriesand markets onthe Bloombergterminal runTWTR

TWEET OF THE DAY

BRIEF

BRIEFSON THE

RADIOTune into First Word on Bloomberg Radio at6:20 a.m. EST weekdays to hear in-depthanalysis, commentary and previews of upcomingnewsletters from our economists and editors.

1130 AM New York 1200 AM Boston SiriusXM

1 2 3 4 5 6 7 8 9




5/9

OVERNIGHTBY BLOOMBERG NEWS

-1.5

-1.0

-0.5

0.0

0.5

1.01.5

2.0

2.5

3.0

Poland

Hungary

Sweden

Euro AreaDenmark

Czech Republic

U.K.

Source: Bloomberg

%

Real RatesNegative Real Rate

Real Rates Still Positive in Hungary, Poland and Sweden

Hungarian policy makers may keep rates on hold for the first t ime in more than two years, a Bloom-berg survey shows. The central bank has lowered the rate by 490 basis points since July 2012. Thatstill leaves the real rate at the second-highest level in the EU, at 2 percent, compared with minus 1.1

percent in the U.K. Niraj Shah, Bloomberg Economist

Asia Pacific

New Zealandposted a trade deficitfor July of NZ$692 million ($577 million)greater than the median estimate in aneconomists survey for a deficit of NZ$475million. This compares with a June tradesurplus of a revised NZ$242 million.

Australianweekly consumer sentimenrose to 113.5, according to the ANZ-RoyMorgan Consumer Confidence index.This was up from the prior weeks figureof 112.5.

Japans services producer priceindex rose 3.7 percent in July from a yearearlier, in line with the median estimate in

an economists survey. The countrys smalbusiness confidence index was posted at47.7 for August.

The Philippinesposted a June tradesurplusof $713 million, greater than theforecast in an economists survey of a$250 million surplus. Importsfell 3.6 per-cent in June, year on year. An economistsurvey forecast a rise of 3.4 percent.

South Korean department storesalesrose 2 percent year on year in July,after falling 4.6 percent, year on year, theprevious month.

Singaporesindustrial productionrose 3.3 percent year on year in July, inline with the forecast of an economistssurvey. Month on month, seasonally ad-justed production for July rose 2.7 percent

Europe

FinlandsJuly unemployment ratewas 7 percent. An economists surveyforecast a rate of 7.6 percent.

The U.K.sBritish Banking Associa-tion Julymortgage approvalsfell to42,792 from 43,180 for the month prior.

The median estimate in an economistssurvey was for a rise to 44,065.

PolandsJuly retail salesrose 2.1percent year on year, in line with aneconomists survey. Month on month, Julysales rose 4.7 percent which was also inline with a survey forecast. The countrysunemployment ratefor the same monthwas posted at 11.9 percent.

A Federal Reserve Bank of New York staff report considers a leverage-basedmeasure of financial instability. We find that a forced liquidation of the fund

threatened to destabilize some financial markets, particularly the markets forbank funding and equity volatility.http://goo.gl/UnQo8c

An IMF working paper takes a look at conventional and insidious macroeco-nomic balance-sheet crises. Conventional balance-sheet crises are triggeredby external imbalances and balance sheet vulnerabilities. Insidious crises aretriggered by internal imbalances and balance sheet vulnerabilities. The paperargues that policy makers are now better able to forestall conventional crises, butthey are much less capable of early detection and avoidance of insidious crises.http://goo.gl/UPct6B

The San Francisco Feds Economic Letter for August examines U.S. highwayspending and federal stimulus. Highway spending in the United States between2008 and 2011 was flat, despite the serious need for improvements and the bigboost to state highway funds from the Recovery Act of 2009. A comparison ofhow much different states received and spent shows that these federal grantsactually boosted highway spending substantially.http://goo.gl/GLR2f2

AROUND THE WEB New research and commentary on the Web

>>> @kevindepewFOLLOW KEVIN DEPEW

ONE OF THE 101 FINANCE PEOPLE YOU HAVE TO FOLLOW ON TWITTER- BUSINESS INSIDER

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6/9

. . . - . . . - .

- . ..

. .

-

U.K. Wage Growth at Series Low

U.K. Turning Into Nation of Self-Employed

Yellen Drew Battle Lines for FOMC at Jackson Hole

BOE WATCH NIRAJ SHAH, BLOOMBERG ECONOMIST

FED WATCH JOSH WRIGHT, BLOOMBERG ECONOMIST

A record number of self-employed peoplein the U.K. will add to the debate within theMonetary Policy Committee about how toassess labor-market slack, as membersconsider when to raise interest rates.

The share of self-employed in the work-force reached a record 15 percent this yearas 4.6 million people worked for themselves.That compares with 13 percent in 2008.

Self-employment has accounted forabout four-fifths of the increase in U.K.employment since 2008. That may in partreflect the impact of the recession as wellas an aging population. The number ofwomen in self-employment is increasing

at a faster pace than the number of men.At the same time, the average income of

self-employed workers has collapsed by22 percent during the same period. Thatmay be contributing to weak wage growthas well as depressed tax receipts, even asthe total number of employed increases.

Earnings excluding bonuses rose by just0.6 percent in the three months throughJune on an annual basis, representingthe slowest pace since the series began

Federal Reserve Chair Janet YellensJackson Hole speech shouldnt be read asa policy signal or dismissed as a ruminative,academic affair. The key to this speech wasits value in clarifying the terms of the debateon the Federal Open Market Committee.

Towards the end, Yellen clearly laid outthe two scenarios that she sees as definingthe hawk/dove divide on the committee.Crucially, they are alternative readings ofthe unusual aspects of this recovery thathave many scratching their heads aboutquestions of labor slack, wage inflation, de-mographics and secular stagnation (to say

nothing of the infamous zero lower bound).At heart, its a debate about decision-mak-ing under conditions of uncertainty thebasic conundrum facing policy makers,business leaders and investors alike.

Under one scenario, the relationshipbetween inflation and unemploymenthas changed. Wending her way througha discussion of downward nominal wagerigidities and pent-up wage deflation,Yellen notes such a deep shift implies thatthe first clear signs of inflation pressurecould come later than usual in the progres-sion toward maximum employment. Thatcould lead to a policy error in which theFed would keep rates too low for too long,necessitating an abrupt and potentiallydisruptive tightening of policy later on.

Under the alternative scenario, the key

shift has been more a function of theinternal dynamics of the labor market,such that signs of inflation initially appearbefore the labor market has fully recovered,then recede as discouraged workers are

drawn back into the labor force. If the Fedthen raised rates as soon as inflation hit2 percent, it would short-circuit the laborrecovery which, she notes, would not beconsistent with the dual mandate.

Yellen doesnt come out and say whichside she is on because that is not hergoal. So whats she up to? Pedagogy. Yel-len plays the long game. This is an award-winning teacher and former point personfor the Feds communication policy. Asshe has done with the exit strategy, Yellenis doing a little public education, broad-casting early the nature of the FOMCs

deliberations. Keep your eyes peeled forreferences to these scenarios in futureFed minutes and research papers, andlook for Fed speakers to position them-selves along this front.

Source: Bloomberg

in 2001. The Bank of England on Aug. 13halved its wage growth forecast to 1.25percent by the end of year. Weak wage

growth is the key piece of the jigsaw thatis probably preventing the majority in theMPC from voting for a rate rise.

1 2 3 4 5 6 7 8 9




7/9

German-U.S. Spread May Be Bad Omen for Equities as Dovish Draghi Sends Yields Lower

Chase takes a look atyesterdays trading incredit default swapindexes and corporatebonds against the back-drop of broader investorsentiment, the equitymarkets and monetarypolicy changes.

Following a stock decline on Friday thatsnapped a four-day rally, U.S. equity andCDX indexes rebounded yesterday. They

were spurred by President Mario Draghisremarks at the Jackson Hole conferencethat fanned speculation that the EuropeanCentral Bank plans to implement monetarystimulus.

The S&P 500 Index hit a record 1,997after breaching 2,000. In credit, the high-yield CDX index narrowed five basis pointsand the MCDX, composed of 50 municipalissuers, narrowed three basis points. Eventhe CDX emerging-market index, whichdeclined about four percentage pointsbetween early July and early August, sawimprovement.

The impact of Draghis remarks was mostapparent in European government bonds,with 10-year yields for Greece, Portugal,Italy and Spain falling by as much as 20basis points. Spains 10-year yield is nowbelow that of the U.S. 10-year Treasury a situation not seen since April 2010 even with the difference in credit qualitybetween the countries. Spain is rated A1/BBB and its five-year CDS traded at 66basis points yesterday, while the U.S. israted AAA/AA and its five-year CDS tradedat 18 basis points.

Another major takeaway of interest to any-one who follows international bond yields

is that the spread between the German10-year yield and the U.S. 10-year yield isthe widest since 1999. Traders have fol-lowed this differential since 2006 becauseit signaled two previous U.S. equity-marketreversals. The second chart, which was fea-tured in this column on Jan. 10, illustratesthis point and has seen growing interest.

Contact Chase at [email protected]

with any questions or feedback.

TAKING CREDIT CHASE VAN DER RHOER, BLOOMBERG APPLICATION SPECIALIST

U.S. CDS INDEXES

IG 56 (-2)

HY 307 (-7)

EM 278 (-3)

EUR CDS INDEXES

ITRAXX 60 (unchanged)

HIVOL 70 (unchanged)

XOVER 246 (-2)

German-U.S. 10-Year Differential Has Signaled Two Equity Reversals

Spains 10-Year Yield Drops Below That of U.S. Treasury

. . . -

REC

RECREC

REC

. . . -

Assess sovereign credit risk for Spain with{SRSK ES} and compare with that of the U.S.{SRSK US}. Track European government bond yields with{WB EU}.

Source: Bloomberg LP

Source: Bloomberg LP

1 2 3 4 5 6 7 8 9


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8/9

1D YoY 52W Average 52W FORW. LAST 1D CHG YoY 52W Average 52W 5Y

%Chg %Chg Min Last Max PE 12M YIELD BPS BPS Min Last Max CDS

MXCA Index Canada 1978. 8 0.5% 22. 8% 1589 1979 15.1 GCAN10YR Index Canada 2.04% -3.3 -65.1 2.0 2.8 n.a.MXUS Index U.S. 1911. 3 0.5% 20. 6% 1560 1911 15.6 USGG10YR Index U.S. 2.37% -1.4 -41.7 2.3 3.0 17.1

MXAR Index Argentina 2346.8 0.7% 49% 1,513 2949 8.4 Argentina 1805

MXBR Index Brazil 2578. 3 2.4% 21. 0% 1,916 2587 10.6 GEBR09Y Index Brazil 11.91% -1.9 230.2 11.4 13.5 141.3MXCL Index Chile 1713. 0 - 0. 2% - 8. 3% 1,577 2098 15.0 Chile 61.5MXCO Index Colombia 1151. 1 -0.2% 0. 7% 888 1201 16.3 COGR10Y Index Colombia 6.59% -2.0 -52.5 6.1 7.4 79.2MXMX Index Mexico 7434. 7 0.4% 12. 8% 6,159 7450 18.9 GMXN10YR Index Mexico 5.81% -0.1 -49.4 5.6 6.7 68.7MXPE Index Peru 1272. 5 - 0. 2% 15. 8% 1,021 1276 13.3 GRPE10Y Index Peru 5.18% -2.0 n.a. 5.1 6.6 81.5

MXAT Index Austria 103. 7 0. 5% - 11. 5% 99 127 13.3 GAGB10YR Index Austria 1. 17% -2.8 -113.2 1.2 2.5 31.3MXBE Index Belgium 80. 9 - 0. 3% 15. 4% 68 81 16.4 GBGB10YR Index Belgium 1. 26% -2.9 -151.1 1.3 2.9 43.5MXCZ Index Czech Rep. 296. 2 0.0% 21. 9% 236 296 12.8 CZGB10YR Index Czech Rep. 1. 27% -8.1 -115.6 1.3 2.6 #N/A NMXDK Index Denmark 6251. 2 - 0. 5% 27. 3% 4,771 6349 18.0 GDGB10YR Index Denmark 1.26% -2.7 -81.3 1.3 2.2 24.4MXFI Index Finland 104. 1 - 0. 3% 26. 0% 80 105 16.2 GFIN10YR Index Finland 1. 09% -2.1 -108.0 1.1 2.3 26.1MXFR Index France 121.3 -0.1% 7.1% 110 129 13.2 GFRN10 Index France 1. 29% -2.5 -117.3 1.3 2.6 41.2

MXDE Index Germany 126.3 -0.4% 9.1% 111 134 12.3 GDBR10 Index Germany 0.93% -1.4 -96.0 0.9 2.0 21.0MXGR Index Greece 18. 1 - 0. 1% 20. 6% 14 22 25.3 GGGB10YR Index Greece 5.63% -6.9 5.6 10.5 n.a.MXHU Index Hungary 815. 7 0. 1% - 16. 0% 749 995 9.4 GHGB10YR Index Hungary 4.47% 0.0 -193.0 4.2 6.7 167.2MXIE Index Ireland 36. 6 - 0. 2% 15. 8% 31 43 17.6 GIGB10YR Index Ireland 1.78% -4.3 na 1.8 4.2 50.4MXIT Index Italy 59. 0 - 0. 2% 20. 9% 48 66 13.2 GBTPGR10 Index Italy 2. 43% -4.6 -194.6 2.4 4.6 88.9

MXNL Index Netherlands 101.0 -0.1% 7.0% 91 103 13.9 GNTH10YR Index Netherlands 1. 09% -2.8 -120.2 1.1 2.5 30.3MXNO Index Norway 2836. 6 0.1% 15. 7% 2,443 2963 11.9 GNOR10YR Index Norway 2.32% -0.8 -62.9 2.3 3.3 12.7MXPL Index Poland 1768.7 0.5% 2.8% 1,565 1852 12.8 POGB10YR Index Poland 3. 03% -6.4 -139.3 3.0 4.9 65.8MXPT Index Portugal 45. 5 0. 6% - 13. 6% 41 59 16.4 GSPT10YR Index Portugal 2. 99% -4.9 -356.5 3.0 7.4 146.2MXRU Index Russia 686. 4 -0.2% -5. 7% 591 841 na RUGE10Y Index Russia 4.90% 0.9 41.7 3.9 5.7 232.0MXES Index Spain 120. 7 0.2% 28. 6% 90 125 15.1 GSPG10YR Index Spain 2. 20% -6.0 -226.1 2.2 4.6 60.3

MXSE Index Sweden 1 05 64 .3 -0.3% 1 0.5% 9,316 10715 15.3 GSGB10YR Index Sweden 1. 48% -3.0 -100.2 1.5 2.7 15.2MXCH Index Switzerland 1119.8 0.1% 7.9% 1,002 1136 15.3 GSWISS10 Index Switzerland 0.48% 0.5 -64.2 0.4 1.3 n.aMXGB Index U.K. 2004.7 0.2% 4.4% 1,874 2029 13.5 GUKG10 Index U.K. 2.46% 5.7 -25.5 2.3 3.1 20.2

MXEG Index Egypt 1835. 8 - 0. 5% 64. 0% 1,062 1845 10.6

MXIL Index Israel 230. 3 - 1. 4% 26. 5% 179 244 10.8 GISR10YR Index Israel 2. 58% -7.0 -145.0 2.6 4.1 88.0MXJO Index Jordan 203. 1 0.8% 10. 6% 172 245 n.a.

MXMA Index Morocco 277.5 -0.4% 9.9% 247 292 14.3MXZA Index South Africa 1290. 1 0.3% 23. 9% 1,013 1292 14.6 GSAB10YR Index South Africa 8.17% -4.7 -8.6 7.3 8.9 176.6

MXAU Index Australia 1151. 9 0.1% 10. 0% 1,036 1154 14.9 GACGB10 Index Australia 3.35% -8.1 -65.9 3.3 4.4 n.a.MXCN Index China 66. 9 - 0. 3% 13. 7% 56 67 9.3 GCNY10YR Index China 4.28% 1.0 29.0 4.0 4.7 69.0MXHK Index Hong Kong 1 34 29 .9 -0.6% 1 8.1% 11129 13591 15.6 HKGG10Y Index Hong Kong 1.92% 0.0 -67.6 1.8 2.6 n.a.

MXID Index Indonesia 6091. 1 - 0. 7% 30. 8% 4,487 6179 14.6 GIDN10YR Index Indonesia 8.27% -0.2 -24.2 7.0 9.2 133.3MXIN Index India 992. 9 - 0. 2% 37. 2% 699 996 16.3 GIND10YR Index India 8.56% -0.4 22.3 8.2 9.1 n.a.MXJP Index Japan 786. 8 - 0. 5% 11. 7% 685 808 14.0 GJGB10 Index Japan 0.50% -0.8 -26.3 0.5 0.8 36.7MXKR Index Korea 588.1 0.2% 8.4% 542 608 9.8 GVSK10YR Index Korea 3.11% -3.8 -61.4 3.0 3.8 50.5MXMY Index Malaysia 657.1 0.0% 6.5% 603 669 15.2 MGIY10Y Index Malaysia 3.96% 0.8 1.1 3.6 4.3 77.7

MXNZ Index N. Zealand 112.7 0.6% 8.9% 102 119 19.9 GNZGB10 Index N. Zealand 4.16% -6.7 -48.2 4.1 4.8 n.a.MXPH Index Philippines 1221. 8 0.1% 19. 0% 941 1222 18.3 PDSF10YR Index Philippines 4.36% -0.8 63.0 3.5 4.6 82.9MXPK Index Pakistan 525.0 -0.7% 6.5% 458 565 8.4 PKIB10YR Index Pakistan 13.36% 2.0 135.0 11.9 13.4 n.a.MXSG Index Singapore 1765. 6 -0.1% 7. 9% 1,579 1804 n.a. MASB10Y Index Singapore 2.34% -1.0 -36.0 2.1 2.8 n.a.MXTH Index Thailand 542. 2 - 0. 1% 15. 8% 432 543 12.9 GVTL10YR Index Thailand 3.71% -4.0 4.9 3.4 4.4 91.5MXTR Index Turkey 1153528 1. 7% 18. 7% 866K 1215K 10.8 Turkey 181.7

LAST 1D Chg YoY 52W Average 52W 1Y Z- TICKER LAST 1D YoY 52W Average 52W 1Y Z-

PRICE bps/% bps/% Min Last Max SCORE PRICE % CHG %CHG Min Last Max SCORE

$$SWAP10 Curncy 10Y US Swap Spread 14.2 0.2 -4.2 4 20 0.3 ARS Curncy Argentine Peso 8. 40 0. 0% - 33. 0% 5.6 8.4 10.5$$SWAP2 Curncy 2Y US Swap Spread 21.8 -0.8 3.5 7 23 3.0 BRL Curncy Brazilian Real 2.29 0.5% 4.0% 2.2 2.4 1.4USGGBE01 Index 1Y Breakeven Rate 0.4 0.0 -0.4 (0.2) 2.1 (0.8) CAD Curncy Canadian Dollar 1.10 -0.1% -4.3% 1.0 1.1 3.9.2Y10Y Index 2Y10Y Spread 187.6 -0.6 na 188 265 (38.3) CLP Curncy Chilean Peso 5 83 .1 5 0 .0 % -12 .1 % 494.0 584.4 6.3

.10YV3MSP Index 3M10Y 238.7 0.0 -39.3 231 297 0.8 COP Curncy Colombian Peso 1935. 54 0. 6% - 0. 5% 1844.2 2055.3 1.7

.TED3M Index 3M Ted Spread 22.3 0.0 -3.4 14 25 (0.3) MXN Curncy Mexican Peso 13.14 -0.1% 0.4% 12.7 13.5 1.2

.LIBORIOS Index 3M Libor/OIS 14.7 0.2 -1.1 12 17 (1.0)JPEIPLSP Index EMBI+ Spread 303.9 -0.3 -55.2 272 405 0.3 GBP Curncy British Pound 1.66 0.0% 6.4% 1.6 1.7 2.5

.AAA10Y Index IG Corp Spread 166.2 1.4 -15.3 150 197 (2.5) CZK Curncy Czech Koruna 21.09 0.0% -9.0% 18.6 21.1 4.3

.AAABAA Index IG HY Corp Spread 63.0 0.0 -23.0 53 85 (3.8) DKK Curncy Danish Krone 5.65 0.0% -1.2% 5.4 5.7 -0.4

MUNSMT10 Index Muni Spread 92.4 0.4 -17.9 86 115 (1.6) EUR Curncy Euro 1.32 0.1% -1.3% 1.3 1.4 0.4HUF Curncy Hungarian Forint 237. 32 - 0. 1% - 5. 9% 211.7 237.5 2.5

VIX Index CBOE VIX Index 11.7 0.2 -3.3 10.3 21.4 (1.6) NOK Curncy Norwegian Krone 6.16 -0.2% -2.0% 5.8 6.3 2.2SKEW Index CBOE Skew Index 135.4 0.3 15.3 114.2 143 4.1 PLN Curncy Polish Zloty 3.17 -0.1% 0.0% 3.0 3.3 -0.3

RON Curncy Romanian Leu 3.33 -0.1% -0.5% 3.2 3.4 -0.6

LAST 1D YoY 52W Average 52W RSI RUB Curncy Russian Ruble 36.16 0.0% -8.6% 31.7 36.6 4.8

PRICE %Chg %Chg Min Last Max 30D SEK Curncy Swedish Krona 6.93 0.0% -6.1% 6.3 6.9 3.3CHF Curncy Swiss Franc 0.92 0.0% 0.9% 0.9 0.9 -1.3

C 1 Comdty Corn 3 59 .0 -0.3% -30 .4 % 352 516 36.4 TRY Curncy Turkish Lira 2.17 -0.4% -7.9% 1.9 2.3 3.9KC1 Comdty Coffee 183. 0 0.1% 60. 5% 102 212 51.8 UAH Curncy Ukranian Hryvnia 13. 55 0. 0% - 40. 0% 8.1 13.6 167.6SB1 Comdty Sugar 15.5 0.7% -6.9% 15 20 39.6W 1 Comdty Wheat 542. 8 0. 0% - 17. 1% 515 732 45.3 ILS Curncy Israeli Shekel 3.58 0.2% 0.8% 3.4 3.7 -1.0

ZAR Curncy S. African Rand 10. 68 - 0. 3% - 3. 3% 9.6 11.3 2.5

LA1 Comdty Aluminum 2052. 0 0.3% 10. 4% 1,641 2057 60.6HG1 Comdty Copper 319. 7 -0.7% -3. 7% 298 347 52.3 AUD Curncy Australian Dollar 0.93 0.1% 3.0% 0.9 1.0 -1.2GC1 Comdty Gold 1289. 0 0.9% -7. 5% 1,195 1421 47.7 CNY Curncy Chinese Renminbi 6.15 0.0% -0.5% 6.0 6.3 -0.6SI1 Comdty Silver 19. 5 0. 8% - 18. 7% 19 25 43.2 HKD Curncy HK Dollar 7.75 0.0% 0.1% 7.8 7.8 -1.3

INR Curncy Indian Rupee 60.50 -0.1% 6.3% 58.5 68.8 1.0CO1 Comdty Crude (Brent) 102.8 0.2% -7.2% 102 117 41.5 IDR Curncy Indonesian Rupiah 1 17 07 .0 -0.1% -7.3% 10847 12261 3.4

CL1 Comdty Crude (WTI) 93. 5 0. 2% - 11. 7% 92 111 36.8 JPY Curncy Japanese Yen 103. 86 - 0. 2% - 5. 2% 96.7 105.3 1.5XB1 Comdty Gasoline 275.3 0.1% -6.7% 250 313 43.3 SGD Curncy Singapore Dollar 1.25 -0.1% 2.6% 1.2 1.3 0.2NG1 Comdty Natural Gas 3. 9 -0.2% 11. 8% 3.4 6.1 45.5 NZD Curncy N. Zealand Dollar 0.83 -0.1% 6.2% 0.8 0.9 0.7

KRW Curncy S. Korean Won 1016. 88 - 0. 3% 9. 4% 1008.6 1116.3 -3.7

CRY Index CRB index 288.5 0.0% -1.5% 272 313 36.5 THB Curncy Thai Baht 31.92 -0.2% 0.2% 31.0 33.1 1.8

BDIY Index Baltic Dry Index 1088.0 -0.7% -7% 723 2337 67.2 TWD Curncy Taiwan Dollar 30.00 0.0% -0.1% 29.4 30.6 1.1

GI1 COMB Index GS Cmdty Index 602.5 0.0% -7.1% 599 669 36.3CMDI3MO Index Bloomberg 3M Cmdty 229.5 0.0% -7.2% 226 230 53.1 EURGBP Curncy Euro-Pound 0.80 0.0% 7.8% 0.8 0.9 -2.1DBLCDBAT Index DBIQ Diversified Ag Index 214.7 -0.1% 4.7% 200 243 38.8 EURNOK Curncy Euro-NOK 8.14 -0.1% -0.8% 7.8 8.5 2.2CMDIBASS Index Bloomberg Base Metal 205.4 0.6% 4.9% 181 207 57.4 EURCHF Curncy Euro-Swiss Franc 1.21 0.0% 2.2% 1.2 1.2 -1.3Source: Bloomberg. Updated at 5:30 a.m. ET, Aug. 26, 2014

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9/9

KEENES

CORNEROn AirListen on the radio at these regularly scheduledtimes and dates. SURVEILLANCE

Weekdays 7:00 AM-10:00 AM.

Tom Keene joins Ken Prewitt for Bloomberg Surveillance

BLOOMBERG ON THE ECONOMY

MondayThursday 7:00-8:00 PM.

Tom Keene interviews high-profile guests and looks at

the economy.

PodCastListen on the web athttp://www.bloomberg.com/podcasts/surveillance/

Also available on the Bloomberg terminal: BPOD

Twitter / On DemandFull interviews are available atTom Keene on Demand http://www.bloomberg.com/tvradio/

radio/and follow him on twitter @tomkeene

Doug Duncan, senior vice president and chiefeconomist at Fannie Mae, spoke with Tom Keeneand Eric Chemi about the new normal in U.S.housing and why the renting stigma is long gone.

Todays guests:Tim Bitsberger, BNP Paribas; Jan Piotrowski,The Economist; Gina Martin Adams, WellsFargo; Carl Riccadonna, Deutsche Bank.

months, weve put out four small researchpapers that show there is likely to besome sustained conservatism of peoplethat might be first time buyers in the past,the most recent we called something onthe order of married, educated, working,

and still not buying. We look at that cohortthat has a college education, that has agood job, that is married, which is one ofthe big triggers. If you compare them toprevious cohorts, they are not buying atthe same rate. Its true nationwide.

Q: Where is normal? I want to say dowe get back to 2006? But I assume thatis an irresponsible statement.

A:We did some demographic work,and if you see a stable economy andthe change in population that would beconsidered a long run average, say from

now until 2020, we think its about 1.6million produced units of housing, whetherits manufactured housing, multi-family, orsingle family annually. And were only go-ing to be something between 1 million and1.1 million this year. Our forecast is aboutone million. So were out in 2018 maybe,were back to normal.

Q: Tell me about renting versus buying.

A:The stigma has gone from renting. Sowe talked about the millennials. Theyresaying, well, Im not married or Im notin a hurry to have children, so Im flex-ible. Renting provides flexibility. It is a

legitimate choice to save money to buya home, to get my credit in shape to beable to sustain a home. So the ratio ofown to rent got way out of whack in themid-2000s with 69 percent home owner-ship. Its down below 65 percent. It may goa little bit lower, 63 percent to 64 percentwouldnt be a surprise. And then, as yousee these first timers come back in, thenwe think the 64 percent to 65 percenthome ownership rate is kind of a reason-able number. And one other note thereis that there was an assumption that theboomers would all be downsizing, and

that that would add to the churn. Thatsnot happening. To date, the boomers arekeeping their houses and actually someof them are adding houses. So when weasked them why, theyre saying, well, wewould like the kids to come home andbring the kids and have a place to stay,and its our home. Its where all the memo-ries are. Were not ready to move yet.

(This interview was condensed and edited.)

Q: What did we learn at Jackson Hole?

A:I think on balance that there is still alot of confusion about what exactly theemployment data means, maybe a littlebit of a shift toward earlier tightening thanwhat might have been talked about. I dont

think thats a substantive change.

Q: How much will the U.S. be affectedby a real economy slowdown in Eu-rope, which is conveyed with a weakereuro and with these interest rates? Canthat come over to the United States?

A:Well, I think it already has. I think partof the reason that long rates have comedown over the last few months was thatthere isnt yet a sense of longer termstrengthening in Europe. And, of course,all the geopolitical issues there are onlystrengthening that view. So that certainlywas something we picked up in our survey

for the National Association of BusinessEconomics. Two-thirds of the respondentsdont believe that enough has been donefrom a policy perspective at the EU.

Q: You chopped your U.S. housingeconomy view. How much did you chop?

A:We revised 2014 down a little bit. But2015, we revised down significantly, particu-larly in the starts arena. We think sales willactually be up over both 2013 and 2014. Butpeople are calling for a breakout year, whichmaybe theyre thinking 10 percent, 15 per-cent, 20 percent up. We dont see that. We

see maybe five percent above 2013; 2014we will actually be less than 2013.

Q: What is different now when youcompare and contrast new homes withexisting homes between now and 2006?

A:The bottom rung on the ladder isfirst time buyers. And in 2006, we had asignificant component of the market thatwas first time buyers. In the last couple of

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BloombergBrief ECO Newsletter 2014278

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