Kerry Swallows Phony Job Data

Huge Bonds Sell-Off Pushes Up Mortgage Rates

Insider Leak of Jobs Data Probed; White House Under Scrutiny

From Volume 3, Issue Number 14 of Electronic Intelligence Weekly, Published Apr. 6, 2004

Kerry Swallows Phony Job Data

John Kerry's initial response to the release of faked employment figures on April 2 was to call it "welcome news." Kerry issued a short statement April 3, accepting the figures at face value. "I hope it continues," he said, but added: "For too many families, living through the worst job recovery since the Great Depression has been, and continues to be, far too painful." Then, in his radio response to the George W. Bush's Saturday, April 3 morning radio show, Kerry ignored the jobs report, and Bush's manic euphoria, altogether, speaking only about his "plan" to use taxes to "bring the jobs home."

Huge Bonds Sell-Off Pushes Up Mortgage Rates

Following the release of the fabricated super-bullish job figures by the U.S. Labor Department on April 2, worldwide bond markets were shaken dramatically. Up to now, the chances that the Federal Reserve would raise interest rates before the November election had been assessed as being very low.

But suddenly, the prospect of a rate increase by August or September has appeared on the radar screen. The immediate consequence was a huge sell-off on bond markets on Friday, April 2, pushing up the yield of 10-year U.S. Treasuries from 3.89% to 4.15%, that is, 26 basis points, characterized by Reuters as "the biggest single-day rise since the Long Term Capital Management hedge fund crisis late in 1998." For two-year U.S. Treasuries, the yield shot up by 23 basis points from 1.62% to 1.85%. The sell-off on the U.S. bond market was further accelerated by a comment from Bill Gross, head of the world's largest bond-trading fund PIMCO, who advised investors on Friday afternoon, that from now on they should buy "anything but [U.S.] Treasuries."

As long-term bond yields are the basis for defining mortgage interest rates, the average 30-year mortgage rate increased to 5.52% on Friday, compared to 5.40% the week before, according to Freddie Mac. The full impact of the bond-market turmoil on mortgage rates is expected to show up this week. Stock prices of mortgage lenders, home builders, and home-improvement retailers fell sharply on April 2.

Insider Leak of Jobs Data Probed; White House Under Scrutiny

The Securities and Exchange Commission (SEC) and the Commodity Futures Trading Commission (CFTC) will investigate insider trading ahead of the job market report, according to the Financial Times and Reuters April 3.

The April 2 announcement of the ostensible creation of 308,000 new U.S. jobs during March, had a huge effect on global financial markets, including a bond-market panic, a sharp decline of the euro and the British pound versus the dollar, and a $12 decline of the gold-futures price.

But strangely enough, these market reactions began two minutes before the official release of the job report at 8:30 a.m. in New York, allowing the early traders to gain or save billions of dollars. Apparently, there were strong movements on the U.S. and European bond markets starting at 8:28, which then spilled over into the foreign-exchange markets. There were also reports of very strong demand for so-called economic derivatives, that is, bets on the specific outcome of economic data, offered by Deutsche Bank and Goldman Sachs in advance of the jobs data. Describing the unusual developments, London's Financial Times quotes HSBC currency expert David Bloom, saying: "Before the payrolls [figure] is released, you can normally hear a pin drop; there is a hushed silence. But suddenly two minutes before the numbers [were released], there was extraordinary activity, a crescendo, a cacophony."

The source of the apparent leak was first attributed to Reuters, which put out a wire on the job figures on the Yahoo website. The wire is dated 8:28 a.m. EST. Reuters denied breaking the 8:30 embargo, claiming that a wrong clock in its London office was the reason for just putting an incorrect time stamp on the wire.

The usual procedure for the release of the data to the media, is that journalists, sitting in a locked room at the Labor Department with restricted communication, are given the data 30 minutes before the 8:30 embargo. The Bureau of Labor Statistics (BLS) states that the security at the agency is tight, and it is actually very unlikely that one of these journalists could have triggered the insider trading. But, who else?

The only other institution which routinely receives the job figures in advance, is the White House.

Reuters described it in the following way: "On the day before the release, the number is given to President George W. Bush through his economic team, the Council of Economic Advisors. The BLS said it gives the data to no one else. Neither the Labor Secretary Elaine Chao or Federal Reserve Chairman Alan Greenspan see the data ahead of its release, though it is widely believed Bush's advisers share the data with key cabinet and Fed officials so they can prepare a response."

The SEC, the CFTC, and the Labor Department have started an investigation on the matter. The CFTC has also met with officials of the Justice Dept.

All rights reserved © 2004 EIRNS