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’Imagine no recoveries in bank senior debt
Seems kinda churlish to throw this out amidst the biggest bank bond rally since 2009. But…
We believe investors should assume a low (possibly 0%) recovery rate on most senior unsecured bank bonds
In practice,
We want negative Treasury yields
Interesting exchange in the latest minutes of the TBAC – Treasury Borrowing Advisory Committee, which brings together primary dealers and US Treasury officials… (Hat-tip Bondscoop)
The question was asked if it made sense for Treasury to permit bids and awards at negative interest rates in marketable Treasury bill auctions.
The Italian bid, redux
We’re sticklers for this stuff — but it’s an important point by Societe Generale’s analysts on Tuesday: (click charts to enlarge)
There’s your exosphere-thin trading in Portugal at the moment, incidentally…
Marc Faber on why equities are better than ‘safe assets’
Marc Faber, publisher of the Gloom, Boom and Doom report, tells Bloomberg TV on Friday (our emphasis):
I wouldn’t say they are particularly attractive but, look, I am in Switzerland at the moment. The 10 Year government bond yields is 0.7% and you can buy quality companies and they have a dividend yield of maybe 3%.
The great Australian bond run
We noted a while back that Australia was facing a serious problem in its bond markets. In short, the country seems to be running out of public government debt.
There isn’t anywhere near enough to satisfy demand.
Das transmission
Just to warm you up for Thursday’s European Central Bank policy meeting…
Though not many are expecting a rate change, Societe Generale’s Kit Juckes points out that the German two-year bond yield is close to going lower than Japan’s:
On the flightiness of uninsured deposits
There’s a heated debate going on in the blogosphere between Amar Bhidé, professor at Tufts’s Fletcher School of Law and Diplomacy, and Felix Salmon, Reuters blogger extraordinaire. Reuters’ Peter Thal Larsen has also waded in.
Keep calm and call the War Loan
(Alternative title: Financial repression meets the History Channel?)
Telling the UK government to issue 100-year bonds clearly wasn’t out-of-the-box enough for Societe Generale’s rates strategist Julian Wiseman.
Signor Monti, sensazionale [updated]
The price action in on Italian bonds on Monday, that is.
Out of the danger zone, for now.
Thanks Angela. From the FT:
In an apparent concession, Ms Merkel agreed that private sector bondholders would not be asked to bear some of the losses in any future sovereign debt restructuring,
Strong demand for Spanish debt [updated]
No, really there is.
Via Reuters on Thursday.
RTRS-SPAIN 2015 BOND AVERAGE YIELD 5.187 PCT (LAST AUCTION 3.639 PCT)
RTRS-SPAIN 2016 BOND AVERAGE YIELD 5.276 PCT
RTRS-SPAIN 2017 BOND AVERAGE YIELD
Of bonds and automobiles
It’s universally accepted that the moment you drive a car out of a showroom, it will be worth less than what you bought it for.
It’s one reason why ‘car finance’ makes dealers so much money. They offer you the cash to buy the new car outright,
Honey, I shrunk the seniors
We missed this earlier — these are Societe Generale credit strategists’ 2012 forecasts for supply of bank and corporate bonds issued in euros.
Spot the odd (shrunken) one out?
Five years ago,
Dios mío! – redux
Oh dear.
Oh dear, oh dear.
Oh dear, oh dear, oh dear.
Bunga, bunga
Italian bond yields are falling — the 10-year’s below 7 per cent:
European equity markets are rallying, helped by rumours of an emergency ECB announcement later today.
And… Italy has managed to get that 12-month T-bill auction away.
Italian bond rout [updated]
The restaurants are full, the planes are fully booked and the hotel resorts are fully booked as well.
– Silvio Berlusconi
While in the bond market…
At the other end of the curve, Italy would now pay 5.7 per cent to borrow for twelve months.
The EFSF’s funding funk
Casualty of “market conditions” on Wednesday – the EFSF’s latest bond issue.
The EFSF had mandated Barclays Capital, Credit Agricole and JP Morgan on Monday to price off a ‘no-grow’ €3bn 10 year deal to finance Ireland’s next bailout loan tranche,
The Papandreou plunge
Ten- and 30-year US Treasuries yield below two and three per cent, respectively…
The German 10-year now under 1.8 per cent…
And the Italian 10-year now trades below 90 cents on the euro with a 6.3 per cent yield.
But what does Mrs Watanabe think?
Apparently Sarkozy has phoned Hu Jintao on Thursday, to beg er, ask China to wire cash through the EFSF. Somehow.
Shouldn’t someone also be calling Mrs Watanabe?
Japanese investors are among the biggest private sources of demand for euro-denominated debt outside the eurozone.
(Mis)pricing the UK
Has the bond market got it right when it comes to the UK?
On Tuesday, Lex investigated why the UK can raise debt at substantially cheaper levels than its eurozone counterparts, in particular France.
Fund management woe – redux
Another grim update from UK fund management sector. This one’s from Ashmore.
The emerging markets specialist, which recently joined the FTSE 100, has revealed a big fall in assets under management and a Paulsonesque performance from its recently acquired equities business.
European repo turns to Japan
The latest European repo council survey is out, and some interesting new trends have been detected.
For example, since the last survey was taken in December 2010:
Dollar-denominated repo has fallen to make up 16 per cent of the market,
Chinese whispers, the Italian bond non-reaction
Right then, how has news that the Chinese government is considering making significant purchases of Italian bonds affected the yield on the 10-year note?
Oh dear.
But it’s really not surprising,
Treasuries, Lehman-fied [updated]
If there’s a chart to encapsulate Thursday’s market panic:
It’ll be the 10-year Treasury yield falling under 2 per cent. That’s breaching the lows seen in 2008 after Lehman Brothers collapsed. We’re checking when Treasuries were last this low,
Shock and awe in the Eurozone
What was the ECB trying to achieve on Thursday by reactivating the SMP but purchasing only Irish and Portuguese government debt? (It appeared that the ECB was buying them again, at longer maturities, on Friday.)
There are plenty of theories.
Single point of failure
(Chart from a Fitch report. Background here, here — and here.)
The Romans always copy the Greeks (including the repo market)
Readers might recall the following two FT Alphaville posts “Take HDAT, Greek politicians” and “Frozen in the Greek repo market”.
Both discussed the idea that Greece may have unwittingly sparked its own funding disaster by encouraging excessive shorting in Greek bonds when it moved to act on settlement fail issues (because the move mostly involved moving the settlement failure goal posts,
Welcome to the Global Sovereign Crisis, says Deutsche
Deutsche Bank’s fixed income research team don’t see any need to beat around the bush.
We’re in the early stages of the Global Sovereign Crisis. End of.
A theme they’ve been pushing for some time now.
On the matter of misvalued Chinese land
Phew..! What a relief.
The Chinese danger is no more.
As we all know by know, data released on Wednesday categorically confirmed that Chinese growth had defied recent tightening measures by monetary authorities and continued on track in the second quarter at 9.5 per cent (thus saving the world).
Is fiscal union the only answer?
It’s panic stations in the eurozone again on Tuesday.
But this time a new theme is emerging when it comes to potential resolution.
It’s fiscal union.
George Soros said as much in the FT on Monday,