RSS feedbond yields
’The naked derivative exposures of banks to sovereigns
As spreads of all colours blow out due to the perpetually unresolved sovereign crisis in Europe, FT Alphaville has been wondering what non-fundamental factors are driving these moves. The bond market is in some places broken and in other places potentially being driven by regulation.
Eurozone, why did we bother
When you look at Eurozone bond spreads on a historical basis… you have to wonder:
Courtesy of Pictet.
Related links:
Yes, we have no ECB bond-targeting – FT Alphaville
Italy- the clock is ticking
First, a pictorial trip down memory lane.
(Click on top slide for more). That’s an Italian bond investor presentation from… 2003.
Fast forward to November 2011 and things look very different.
Emerging market yields are still enslaved to the G3
Here, charted, is the master-servant relationship between emerging and developed markets.
The following shows the average local-currency yield spread — 10-year government bond yields less 3-month interbank rates — in the G3 compared to the average spread across 25 major EM economies,
What’s an EFSF guarantee worth?
As momentum gathers behind the (deep breath) first loss guarantee on new issuance approach for Europe’s bailout vehicle, Gary Jenkins examines some of the pros and cons.
Leverage aside, the biggest plus point,
Compare and contrast – Italy and the UK
First the caveat. The following is written by the chief economist of a big Italian bank. So you can be forgiven for thinking “he would say that, wouldn’t he.”
But Unicredit’s Erik F Nielsen is surely onto something when asks why Italian funding costs are sitting above 5 per cent while investors demand just above 1.6 per cent to lend to the UK government.
Greek spreads… the day after the downgrade
The 10-year spread is wider by almost 47 basis points following Monday’s three notch move by Moody’s. Chart via Citi:
Shares in National Bank of Greece (heavy bond exposure) were down 5.76 per cent at pixel time.
President Trichet are you watching? [updated]
Because it looks like it might be time to fire up the Securities Markets Programme again.
RTRS-PORTUGUESE/GERMAN 10-YEAR GOVERNMENT BOND YIELD SPREAD WIDENS FURTHER TO 414 BPS, 26 BPS WIDER ON DAY
RTRS-PORTUGUESE/GERMAN 10-YEAR GOVERNMENT BOND YIELD SPREAD HITS WIDEST SINCE DECEMBER 1
RTRS-SPANISH/GERMAN 10-YEAR GOVERNMENT BOND YIELD SPREAD WIDENS 18 BPS TO 258 BPS,
How to save the eurozone, by JPMorgan
Forget debt restructuring. Or E-bonds. Or US-style quantitative easing.
JPMorgan have found a different way out of the European crisis.
The bank’s Joseph Lupton and David Mackie have switched some
Goldman says don’t fear the rising bond yields
At least, not until they reach 5 per cent mark in Europe.
Out on Monday — a Goldman Sachs strategy note arguing that all those rising core bond yields (think US Treasuries, bunds or JGBs) have more to do with a global growth story than old-fashioned bond vigilante-style bearishness.
Christmas shopping for US Treasuries
Have US bondholders gone on holiday already?
10-year Treasuries reached a high of 3.39 per cent on Monday before falling sharply.
This course wasn’t altered by a cautious warning from Moody’s that stimulus without future offsetting increases the likelihood of a US rating revision in the medium term.
Bailing out Ireland, bailing out banks
Here’s one Irish-bailout-in-the-works story you absolutely should be reading on Monday, courtesy of the Irish Independent:
Finance Minister Brian Lenihan is considering asking for money for Irish banks from the EU emergency fund in a bid to fend off a threatened bailout for the State…
Top of the bond yield to you
Yup. It seems there’s nothing stopping Irish bond yields racing higher on Wednesday.
Last check at about 2:42pm London time showed yields approaching a whopping 8.5 per cent. Meanwhile one of the Irish two-years was trading around 6.14 per cent.
Fitch on how sovereign CDS helps fund deficits
Memo to financial regulators who want to ban or limit CDS:
Fitch Solutions finds that the liquidity of a sovereign’s credit default swap (CDS) is highly correlated with the level of the underlying bond yield.
Front-running the Fed
US bond markets are shut for Columbus Day — which means it’s the perfect time to stop and take stock of recent US Treasury yields. Two- and five-year notes both touched record lows last Friday after those dismal non-farm payroll numbers:
Let them eat Irish bonds
Here’s an, erm, simple solution to the problem of Ireland’s ballooning deficit and pension funds rocked by ultra-low bond yields; just have them buy Irish bonds:
(Reuters) – Ireland’s pension industry is seeking a change to regulations that would allow it to price annuities based in part on Dublin’s government bonds,
A surprisingly large QE-ffect
A new paper from the Fed’s finance and economics discussion attempts to shed light on the flow and stock effects of large-scale Treasury purchases — in other words, quantitative easing.
After analysing chunks of data in Cusip form,
Those bund-lengthening pension funds
You remember the summer’s flattening of the yield curves, don’t you?
It was especially pronounced on bunds — as late as August 25, for instance, the 2-year and 30-year parts of the German yield curve flattened to about 215bps:
Mmm, Greek yield moussaka
This was an interesting Greek debt revelation on Tuesday:
(Reuters) – Foreign investors bought most of Greece’s issue of 3-month T-bills auctioned on Tuesday, the head of the country’s debt agency (PDMA) told Reuters.
Access denied?
Is that what Goldman’s Erik Nielsen means when he talks about losing access to the market?
The Irish 10-year bond yield has reached danger record levels on Monday:
Meanwhile, Patrick Honohan,
Bond and bill auctions, bashed all round
Now here’s an unglücklich result for Germany’s debt management agency.
That is, if results from Wednesday’s 10-year bund auction are anything to go by. Flashes via Bloomberg (emphasis ours):
GERMAN BUND AUCTION:
Japan: Hold the ‘Kan can’ jokes please
So the fat lady has sung – or rather, the sumo wrestler has grunted – and Japan’s latest political circus is over (for now).
Naoto Kan has retained his somewhat battered position as the country’s prime minister,
Where have all the direct bids gone?
Thursday’s US 30-year Treasury auction proved more telling than might have been expected.
As Reuters reported (our emphasis):
NEW YORK, Sept 9 (Reuters) – An auction of $13 billion of reopened 30-year bonds <US30YT=RR>
Central banks are depressing (yields)
Stephen Lewis at Monument Securities is trying to rationalise the ultra-low state of government bond yields.
It all started on Wednesday, when he pointed out that current long-dated yields in the US and in the UK are now lower than they were during the Great Depression.
Pondering last week’s bond sell-off
Could it be that the epic run in government bond prices has finally come to an end?
For example this was the action in the yields of US, German and UK government ten-year debt last week:
But as Marc Ostwald of Monument Securities notes in an early Monday email,
‘We think the [US Treasury] market is ripe for a pullback’
One to add to the US Treasuries bubble meme.
RBC Capital Markets’ head of US rates strategy and former BofA-er, Michael Cloherty, ask whether yields are now reaching such low levels they’re about to displace some of their own buyers.
The bund whisperer
And now for some fishy ‘how low can they go?’ bond-rally business.
Here’s an interesting development in the bund options market — passed along in a note on Thursday by Citi’s FX analysts (emphasis ours):
Everyone’s an Albert these days
Accept no imitations.
And this one’s got a nice tinge of I-told-you-so about it. The title of the latest missive from SocGen perma-bear Albert Edwards:
They laughed. Oh how they laughed.
Albert — who has been warning about massive global deflation since,
Lower — and flatter — for longer
And the bond band played on. Wednesday’s instalment — the US yield curve flattening below 200 bps between the 2-year and 10-year:
That’s for the first time since April 2009, as Reuters notes.
Perhaps outdone,