So then I said “Taper? I just met her!”

The sell-side is starting to weigh in on what this morning’s jobs report may or may not mean for the prospects of September tapering on 9/18.

Here’s BofA Merrill Lynch:

In light of the mixed employment report, we are sticking to our call for “no taper in September.” However, given the lack of guidance out of the Fed, any probability distribution around tapering must be relatively flat. We rank the three main scenarios as follows:

No taper: Keep language that suggests tapering later in the year, but make no immediate cuts. (Our judgmental probability: 55%)

Small taper: Cut purchases by $10 to $15 bn. (Probability: 30%)

Big taper: Cut purchases by $20 to $25 bn. (Probability: 15%)

translation: flip a f***ing coin.

Here’s Credit Suisse, from a report this morning entitled ‘The Taper Cometh’:

We maintain our longstanding view that, while no time is perfect, the best
opportunity this year for the Fed to initiate a cutback in its QE3 asset
purchase program will be at the upcoming September 17-18 FOMC meeting.

The most likely tapering operation, we think, would be to scale back the
current monthly $40bn MBS / $45bn Treasury purchases by $10bn each. Our
second favorite option would be an initial taper of $15bn, a $5bn cutback in
MBS purchases and $10bn in Treasuries – the merit of this being mainly that
it brings the two purchase sizes into alignment at $35bn each.

Here’s Goldman Sachs’s Jan Hatzius, who also says they’re going forward, irregardless of the weakness in today’s report:

“While the August employment report was a moderate disappointment, we believe it is probably not weak enough to prevent the FOMC from tapering in September. However, it does raise the likelihood of a “dovish taper,” which could include a small size of the overall adjustment to purchases, and which we think would likely coincide with an enhancement of the forward guidance. The continued decline in the participation rate further highlights the justification for maintaining the fed funds rate at an exceptionally low level even after unemployment reaches 6.5%.”

Are we still pretending this is investment analysis or can we start referring to “playing the taper” as gambling?

let mew know.

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