ECB to Consider Rate Cut at its Thursday Meeting

The European Central Bank will be meeting tomorrow to consider a change in the Euro interest rate target.

The market widely expects a 50 basis point cut from 2.5% to 2.0%, which is still at a substantial premium to the US interest rate range of 0 to .25%.

Yesterday rumours of a deeper 100 basis point rate cut swept the trading desks and roiled the Euro/Dollar cross taking it down below support at 1.32. This provided a lift to the euro-heavy Dollar DX Index.

There is key support for the euro at 1.30. If Trichet holds the line at 50 basis points and does not signal rate cuts commensurate with the aggressive quantitative easing of the US Fed we would expect the euro to a few more sparks for the week, in addition to the JPM and Citi earnings reports.


Wall Street Journal Europe
ECB Expected to Cut Rates as Inflation Worries Ease
By NINA KOEPPEN
JANUARY 13, 2009, 6:15 P.M.

FRANKFURT -- Most economists say they believe the European Central Bank will continue with its monetary easing campaign and cut interest rates by half a percentage point Thursday to stem the risk of a deepening recession in the euro zone, although policy makers have given no clear signal about their decision.

Thirty-four of 42 private-sector banks polled by Dow Jones Newswires expect the ECB to cut the key policy rate to 2% from 2.5% currently. The ECB has already lowered interest rates by 175 basis points ...

Citi and JPM Move Their Earnings Reports to This Week

On Tuesday J. P. Morgan surprised the market by moving its earnings release from January 21 to tomorrow, January 15th, the day before the options expiration.

Today Citi announced that it is moving its own earnings release to this week, on Friday.

Is there a significance to this?

Perhaps. One likely reason is that they did not wish to put their earnings out at the same time as an historic event with the inauguration of Barack Obama on Tuesday January 20, with what is likely to be considered bad news.

There is also a likelihood that Citi and JPM wished to 'throw their cards on the table' ahead of the initial decision by Congress with regard to the disposition of TARP funds which is likely to occur next week. Economic blackmail is de rigeur for Wall Street when it is back on its heels.

Whatever does happen, we are certainly in for an interesting month of January.


Citi Fourth Quarter and Full-Year 2008 Earnings Review - Revised Date

NEW YORK -- (Business Wire) --

Citi announced it will review fourth quarter and full-year 2008 results on Friday, January 16, 2009, at 8:00 AM (EST), instead of January 22. Fourth quarter results will be issued via press release at approximately 6:00 AM (EST) on January 16, 2009.

A live webcast of the presentation, as well as financial results and presentation materials, will be available at http://www.citigroup.com/citigroup/fin. A replay of the webcast will be available at http://www.citigroup.com/citigroup/fin/pres.htm.

Corporate and US Treasury Yields from 1926 to 1934

The Bonds held up much better than one might have expected, and the spreads between corporates and longer dated Treasuries was remarkably uniform.

Bear in mind that these are yields on this chart, and the value of the underlying bonds moves in the opposite direction to the yield.