Week of December 18, 2011 thru December 24, 2011

Japan Govt Drafts FY2012 Budget Worth Y90.3 Trln

TOKYO (MNI) - Japan's government on Saturday said it has drafted a budget for fiscal 2012 totalling Y90.334 trillion, slightly smaller than Y92.412 trillion for the initial fiscal 2011 budget.

According to the plan, general-account spending, excluding debt-servicing costs, will total Y68.390 trillion, down slightly from Y70.863 trillion for this fiscal year.

New government bond issues will be Y44.244 trillion, down slightly from Y44.298 trillion this year.

These figures are within the government's targets. The fiscal framework endorsed by the cabinet has called for capping general-account spending at Y71 trillion and limiting new-bond issuance to Y44 trillion in the fiscal 2012 budget.

Japan Govt To Sell Y149.7 Trln Of Bonds In Market in FY 2012

TOKYO (MNI) - Japan's Ministry of Finance said Saturday that it plans to sell Y149.7 trillion worth of government bonds in the market in the fiscal year beginning April 1, 2012, higher than the Y144.9 trillion initially slated for the current fiscal year.

The so-called calendar base debt sales, or the amount of government bonds that the finance ministry sells directly to the market through auctions, would increase for a fourth consecutive year.

Apart from JGBs to be sold to refinance maturing bonds, the MOF will sell Y44.244 trillion of new bonds to fund the government's fiscal 2012 budget, down from this year's initial plan (which does not account for supplemental budgets) of Y44.298 trillion, the ministry said.

US News Events Calendar

--Meetings & Events of Interest to Subscribers



07-Jan 2300/1800 St. Louis Federal Reserve Bank President James Bullard speaks to the Korean American Economic Assoc.

US IRS: 2-Mos Tax-Cut Extension Adds Tax for High Incomes

WASHINGTON (MNI) - The IRS Friday told high-income taxpayers they will owe 2% more on wages in excess of $18,350 -- an annual rate of $80,100 --earned during the two months the payroll tax cut has been extended:

Payroll Tax Cut Temporarily Extended into 2012 IR-2011-124, Dec. 23, 2011

Nearly 160 million workers will benefit from the extension of the reduced payroll tax rate that has been in effect for 2011. The Temporary Payroll Tax Cut Continuation Act of 2011 temporarily extends the two percentage point payroll tax cut for employees, continuing the reduction of their Social Security tax withholding rate from 6.2 percent to 4.2 percent of wages paid through Feb. 29, 2012.

Fed Extends Volcker Rule Comment Period Til Feb 13

WASHINGTON (MNI) - The following was issed by the Federal Reserve Friday afternoon:

Agencies Extend Comment Period on Volcker Rule Proposal

Four federal agencies on Friday extended until February 13, 2012, the comment period on a proposal to implement the so-called Volcker Rule of the Dodd-Frank Wall Street Reform and Consumer Protection Act.

The Dodd-Frank Act requires regulators to implement certain prohibitions and restrictions on the ability of a banking entity and nonbank financial company to engage in proprietary trading and have certain interests in, or relationships with, a hedge fund or private equity fund.

TheFXSpot: 'Risk-Off' Unwinds Lift Stks, Commods; Dlr Mixed

NEW YORK, Dec 23 (MNI) - Another bout of "risk-off" position unwinds, seen ahead of year-end, served to underpin stock and commodity prices, at the expense of U.S. Treasuries Friday, traders said,

Analysis: Canada Housing Mkt Thrives While Prices Surge

OTTAWA (MNI) - Canada's housing market continues to perform strongly, though its high sales and prices are a mixed blessing because they help underpin the domestic economy but give rise to concerns about growing household indebtedness.

Mark Carney, the governor of the Bank of Canada, terms Canadian household debt the country's biggest domestic economic risk, but says the danger is not imminent and pales behind the foremost risk to Canada's economy, contagion from Europe.

The largest contributor to Canadian household debt also is the largest single contributor to the consumer spending that has been Canada's economic mainstay during the 2008-2009 recession and to the present: the C$1.079 trillion residential housing sector.

US Swaptions: Vol Steady Amid Lt Flow, Downside Skew Softer

CHICAGO, Dec 23 (MNI) - After some early weakness at points along the surface, over-the-counter swaption premiums turned largely steady on Friday's shortened pre-Christmas holiday session.

US$ CREDIT SUPPLY PIPELINE - December 23, 2011

Investment-grade $250M+ Deals Announced/Launched(#)/Priced(*)/Pass(X)

Date $MM Issuer/CR/Descr Mat Yield Lead(s) 12/22 X - Freddie Mac Reference Note 12/19 650 *ILFC (B1/BBB-) 10 8.625% C/DB/GS/MS T+681.5

COMING SOON Fannie Mae to annouce Benchmark Note Wed, 1/4/12 Freddie Mac to announce Reference Note, Wed, 1/11/12 FHLB to announce Global, Wed, 1/18/12

>>Scroll Down for More More Muni & Agency Supply/Calendars

Rumored/Pipeline PMC=Pending Market Conditions, TALK=Market Chatter, NOTE=Reported Potential Deal RDS=Roadshow to Start, RDE=Roadshow Ended, SHF=Shelf Filing

Sovereigns Date $MM Issuer/CR/Descr Mat Lead(s) NOTE Brazil (Baa2/BBB) 10? NOTE Brazil (Baa2/BBB)

Credit Default Swaps:IG17 2-1/2 Wk Tight As Risk Mkts Improve

CHICAGO, Dec 23 (MNI) - The benchmark investment-grade indexes on U.S. credit default swaps narrowed to a 2-1/2 week tight Friday, in line with higher stocks and improvement in other sister markets.

The U.S. IG17 narrowed by 0.75 basis points to 120.75-122.25 bps, its best level since December 7. This compared to the all time series wide of 149.75 bps set on Oct 3 and the 1-3/4-month tight of 119 bps set on Dec 7.

The IG17 reacted to better U.S. stocks as the Dow Jones Industrials added 74 points to 12,243. Meanwhile, volatility as measured the Chicago Board of Options VIX was last -0.15 at 21.01.

Sources said stocks were aided by the U.S. House of Representatives passage of a two-month payroll tax cut extension.