Afternoon Thoughts

The SP is now 100 handles above the post election/fiscal cliffing low. The yield curve has steepened somewhat and the bond has retreated accordingly. The near universal belief that additional LSAP is coming in some bucket, to bump the Fed balance sheet to 4T, has not fanned the usual Wiemar analogies. The outlier would be to claim victory and stand pat. The trouble is the Fed has already implanted the notion that indifferent roll off is latent tightening, thus they are somewhat committed to more. "Emergency" measures are just "Policy actions" now.

With supply on tap in front of the announcement, the Street may be picking a few basis points off unsuspecting taxpayers (little TV outrage for that). Should be interesting. If you want notes, we like them down here weak, not buying strength on good news tomorrow.

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