Posts Tagged ‘sovereign debt’

Notes From Underground: Yields Increase But Watch Out, Take Care, Beware

December 19, 2017

The long-end of the U.S. Treasury curve steepened Monday and Tuesday as bond futures did some technical damage, closing under the 200-day moving average. It joined the 2-, 5- and 10-year Treasuries, which have been below the important technical level since September. U.S.Treasury yields rose as the ECB failed to lift European sovereigns. The BUNDS, FRENCH OATS and Italian BTPs all saw significant increases in their yields. BUT I ADVISE PATIENCE AND CAUTION BECAUSE THE ECB IS SUPPOSEDLY SET TO FINISH ITS MONTHLY PURCHASES BY DECEMBER 21. As of the close of last Friday the ECB had bought ONLY 33 billion of assets leaving it 27 billion EUROS of its QE quota. It has two days in which to push yields lower and we don’t know how much they have purchased over the past two days.

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Notes From Underground: Draghi Fires a Water Pistol at Global Liquidity

March 10, 2016

After the smoke had cleared from ECB’s announcement to cut the deposit rate another 10 BASIS POINTS to NEGATIVE FORTY, the central bank ADDED MORE MONEY TO THE SYSTEM VIA AN INCREASE IN QE TO EIGHTY BILLION EUROS A MONTH. The press called this a BAZOOKA but I THINK IT IS A WATER PISTOL. The most significant piece of the press release on monetary policy decisions was item six, “A NEW SERIES OF FOUR TARGETED LONGER-TERM REFINANCING OPERATIONS (TLTRO 2), EACH WITH A MATURITY OF FOUR YEARS, WILL BE LAUNCHED, STARTING IN JUNE 2016. BORROWING CONDITIONS IN THESE OPERATIONS CAN BE AS LOW AS THE INTEREST RATE ON THE DEPOSIT FACILITY.”

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Notes From Underground: THE BANK OF THE UNITED STATES (THE FED) … That is the REAL Jackson’s HOLE

August 21, 2011

The week ahead will be waiting for the words of wisdom from Ben Bernanke and his take on where the U.S. is at and where the economy is possibly going. THERE WILL BE NO QE3. IT IS NOT BECAUSE OF RICK PERRY BUT BECAUSE QE2 IS A FAILURE BY ANY METRIC. THE YIELD CURVE IS FLATTER; UNEMPLOYMENT HASN’T IMPROVED; AND THE BELOVED PORTFOLIO BALANCE CHANNEL IS A NON-EVENT– AS MEASURED BY THE S&P/BOND RATIO–FOR THAT BELOVED INDICATOR IS BACK TO WHERE IT WAS AT LAST YEAR’S BERNANKE BLOCKBUSTER SPEECH. What did we get for the $600 BILLION in asset purchases. I know things would’ve been much worse. The FED has locked itself in to a two-year zero rate policy so it makes Bernanke’s task very difficult as the FED has expended a great deal of good will and has very little to show for its effort.

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Notes From Underground: The clock to the end of the first quarter and the money from the BIG EASY has overwhelmed

March 29, 2011

Wow, what a long strange trip it has been. This quarter has certainly been visited by the four horsemen of the apocalypse. Every time the market thinks it has seen a cataclysmic event, something new arrives on the stage. Floods in Australia, earthquakes in New Zealand and Japan, high food prices and riots in the world over, and of course there is always war breaking out somewhere. In a prior time (THINK 1960s), we had a different hedge group writing: IT’S GOOD NEWS WEEK by  the HEDGEHOPPERS.

All these calamities and still the equity markets in the U.S. have rallied and the DOLLAR has failed to invoke its haven status. The only explanation I can discern from this action is that EASY MONEY from our friends at the FED has trumped all else. It seems that DOLLAR-based investors are searching for any type of investment that can yield more than inflation. Risky assets get bid up as money scours the investment map. Commodities, high-dividend yield stocks, high-yield corporate bonds are all desired.

Yet, as the Financial Times reported today,  the demand for MUNI BONDS isn’t there post Meredith Whitney as the yields are insufficient to overcome the fear of default. At least GREECE pays you a true risk yield to purchase its SOVEREIGN DEBT. The end of the quarter leaves me thinking that the FED and all the other QE-providing BANKS have so perverted the global interest markets that the decision to remove the monetary stimulus will create a great deal of volatility. The question is, when?

The coming quarter will begin to answer that question but the political stage will continue to surprise as 2012 brings forth many elections. In May, the Canadians will go to the polls and the Portuguese will follow. I am certain that other Parliamentary Governments will fall as the austerity budgets begin to take a toll on voters of many Western nations. As the quarter comes to an end, the EUR/YEN cross that has been the barometer of so much of the risk on/risk off paradigm, is breaking out to new highs since the second quarter of 2010. Is this a reflection of the G-7 intervention or merely the need for Japanese investors to seek higher yields outside of Japan?

The FT reported yesterday that several macro hedge funds suffered severe losses from the March 17 YEN rally that sent the DOLLAR/YEN rate to 76-plus. As the quarter ends, there are more questions than answers but I sincerely hope that the FED will begin to remove some of the haze that engulfs global financial markets. The politics will create volatility. Responsible central bank policies would do much to help remove some of the greater uncertainties. For many, this was certainly a “WINTER OF DISCONTENT.” Being a CUBS FAN, it is time for HOPE to SPRING ETERNAL.Hey Bernanke, PLAY BALL.

Happy Thanksgiving FROM NOTES : WE ARE GRATEFUL FOR OUR READERS AND THEIR THOUGHTS

November 23, 2010

The markets were riddled with all sorts of political news today as North Korea felt neglected and found a way to move center stage. The North Koreans like to have the spotlight shine on them when they need something from the world. I figure they must need food and heating oil for the winter so they upped the tension on the PENINSULA by lobbing some artillery shells into a South Korean military exercise. It is sad that SOUTH KOREANS had to die while Pyonyang played their typical games. A boycott of the North cannot work as the corrupt dictatorship just raises the temperature on hostilities until the world provides them with what they want and need. It is time to start bringing the U.S. troops home. Let the Chinese and Koreas resolve the problems that result from the arrested development of the North Koreans. Let the South Koreans be under the U.S. NUCLEAR UMBRELLA and start cutting back on U.S. global overreach. Oh by the way, don’t forget the bread and the heating oil so the North can get on with its goal of sucking the life out of its “citizens.”

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