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Scotland Stays, Alibaba Goes   September 15 - September 19
Fri, 19 Sep 04:26 PM EST/09:26 PM GMT
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The DJIA and the S&P500 saw fresh all-time highs on Thursday and most global markets (with the glaring exceptions of Shanghai and the Hang Seng) closed on Friday just off their highs of the week. As equities gained ground the 10-year UST yield saw ten-week highs around 2.66% on Thursday. With risk assets on fire, many commentators speculated whether this week's monster Alibaba IPO could be a symbolic top in markets, while others looked at the ominously weak inaugural TLTRO auction as a sign of very deep dysfunction in Europe. Meanwhile, China's seemingly benign downturn has taken a turn for the worse, prompting a more direct response on the part of the PBoC, which unveiled a CNY500 billion standing liquidity facility (SLF) provision for the nation's top five banks. Scotland gave London a scare as polls showed the independence referendum was too close to call, but ultimately voted to remain in the UK. For the week, the DJIA rose 1.7%, the S&P500 gained 1.3% and the Nasdaq added 0.3%.

Heading into Wednesday's Fed decision, there were expectations that the FOMC might drop the "extended period" language in order to prepare the way for its exit strategy. Instead, Fed Chair Yellen again highlighted in her press conference that the Fed's language has always been conditional and data-dependent, and said the Fed's views about the outlook had not changed much, which meant that there was little need to adjust the wording. While the Fed statement and Yellen's press conference could hardly be called hawkish, changes to the dot chart clearly suggested a greater willingness to tighten policy in 2015 and 2016. Another surprise was the release of a general outline of principles for the process of normalizing policy, which included the statement that interest on excess reserves (IOER) would be the primary tool for moving the fed funds rate and overnight repos would be a secondary tool for moving rates.

On Thursday the ECB disclosed lenders borrowed a mere €82.6 billion in four-year loans from its new TLTRO facility, falling well short of expectations for take-up of €133 billion. Bond yie ...
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