Posts Tagged ‘Euro/Swiss cross’

Notes From Underground: Putting Things In Perspective

December 5, 2017

Just a few quick points that are relevant to the markets at the end of the year:

1. Tonight I am including charts of the U.S/German two-year yield differentials. The U.S. two-year note is yielding 256 basis points above the German rate. This is relevant because both instruments are high quality assets that play an important role as collateral in the funding markets. I’ve also included a 25-year chart of the U.S. 2/10 yield curve. Note that the last two INVERSIONS occurred before significant equity market corrections. Does this current flattening portend a stock market correction? We can’t be certain because the role of the central banks has certainly created an investment environment where markets suffer from a lack of RISK PREMIA in all asset prices.



Notes From Underground: Au Revoir, Marine Le Pen

May 8, 2017

Now we can finally put the French elections behind us as its citizens maintained the status quo and elected Emmanuel Macron to a five-year term. Parliamentary elections follow in June but the two main parties, Socialists and Republicans, aren’t expected to face challenges. But, if the more conservative Republicans gain control of the Parliament and the prime minister post it will force Macron to move further to the right-center. If Macron moves away from the Hollande Socialist camp it will result in political protests from the Left. Macron will experience a difficult presidential term if the government is gridlocked by continual demonstrations. The German chancellor is going to ask a great deal from Macron: fiscal austerity, as well as a restructuring of the French domestic economy.


Notes From Underground: Bank Of Canada Holds Rates Steady at 1% (No Surprise There)

April 17, 2012

The BOC announced that rates will remain on hold and the Canadians will watch to see what happens in Europe as an important indicator of bank policy. It is unanimous that all central banks are concerned about the economic situation in Europe. Even the Chinese have noted the deterioration in Europe as a reason to be cautious about trying to slow the economy too quickly. However, in a confusing headline, “IMF PREDICTS MODEST GROWTH AS EUROPE STARTS TO EXIT RECESSION,”¬†the Washington Post seems to think the worst is over for Europe. This headline is off base as the body of the article reveals, but such is the crap that drives the markets.¬†IMF¬†Managing Director Christine Lagarde is begging for increased funding for a bigger firewall for Europe and then this headline appears. Which is it: Crisis averted or further vigilance and action necessary to calm the European debt markets?