Daily Data Flow: Expect Low U.S. Interest Rates for Three Years; China Widens Trade Surplus; AIG Update

Fed Stuck at Zero Into 2015 Seen in Swaps, QE Odds Reach 99% (Bloomberg)
Money Market traders now expect to see U.S. borrowing costs at record lows for three more years as the economic outlook worsens. Current bond prices indicate slow growth possibly for a prolonged period. A U.S. interest rate strategist cautioned that the problems have been bigger than anticipated and will require time to resolve.

China Trade Surplus Widens as Imports Contract (Marketwatch)
China posted a wider-than-projected trade surplus in August as imports unexpectedly contracted from the year-ago period, indicating anemic domestic demand, according to data released Monday. An economist who focuses on China for Bank of America Merrill Lynch said the drop in imports was “not good, but not that scary.” Reduced imports may suggest weakened demand but the falling prices of commodity imports also are a factor, and China may purchase more commodities and boost spending on infrastructure to benefit from the current low prices, he explained.

United States to Slash Stake In AIG (Financial Times)
The U.S. Treasury Department will sell $18 billion of American International Group Inc., slashing its stake in the New York company by more than half and making the government a minority shareholder for the first time since September 2008. The White House described the stock sale as a “commitment to recover taxpayer money.” President Obama will be able to tout the government’s progress in winding down its stake in AIG as the November presidential election approaches.

Hedge Funds Lifted Wagers to 16-Month High Before Rally (Bloomberg)
Hedge funds raised bullish commodity bets to the highest levels in 16 months amid speculation that policymakers in the United States, China and Europe will revive global growth. Commodity prices have risen for a sixth week. Wagers on a silver rally climbed for a sixth week and to the highest since Feb. 28, while those for cocoa jumped 57% to the most since May 2010.