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’Further further reading
For the commute home, or while marking your over/under on tomorrow’s payrolls number,
- Banks’ litigation losses in tabular form.
- 200 years of treasuries.
- PE conference attendees say that PE firms add value some of the time.
UpTIC in China’s treasury holdings? Sort of
The US treasury department has published the preliminary results of its annual revisions to foreign holdings of US securities.
In chart form, with an explainer to follow:
The US treasury department publishes monthly estimates of these numbers based on interviews with US financial institutions.
Gaddafi’s market – US edition
Spotted: Vix, the ‘fear gauge’, up nearly 28 per cent on Tuesday.
A 2011 Egyptian revolution-encompassing high. (Though still way below 2010 eurozone-crisis levels.) According to VelocityShares,
Beware the special US Treasury market
FT Alphaville has been keeping an eye on the composition of the Federal Reserve’s US Treasury purchases for a while.
It’s important to watch because the more the Fed buys of any particular issue, the less of a free float is available for everybody else — a fact which may skew pricing or encourage a security’s so-called ‘specialness’ in the market.
Housing and jobs – a bit better but still bad
The two ugly sisters of the US economy’s fairytale recovery reared their heads in data releases Thursday morning.
First up, housing starts. Release from the Commerce Department:
NEW RESIDENTIAL CONSTRUCTION IN NOVEMBER 2010 The U.S.
Bonds: Bubble, bubble, toil and trouble
After this week’s mass sell-off in Treasuries, debate is still raging about whether this is a bursting bond bubble — and whether we should all be stampeding into equities and out of commodities (or even,
The (mostly) unrevealing FOMC minutes
The FOMC minutes contained little that was new or shocking, mostly confirming what was already known.
The committee reduced its forecasts for growth and inflation in the next three years, and increased its forecast for unemployment.
Soma confusion in US Treasuries
As part of QE2, the Fed relaxed its System Open Market Account (Soma) limits restricting it from buying more than 35 per cent of any single issue in US Treasuries.
Sort of.
Because the actual statement reads rather weirdly:
Whatever happened to the bond bulls?
Readers might remember how the RBS rates team became rather bullish on bonds over the summer.
You know — ‘oozing with bond bullishness’, 10-year bunds yielding at 1 per cent by the end of 2010, that sort of thing.
China and the missing Treasuries
An amusing Bloomberg chart from last week:
The idea is that given the large additional asset purchases expected from QE2 and the ongoing Bank of Japan interventions, the US Fed and Japan could soon overtake China as the biggest holder of US Treasuries.
The inflationista returns
Is someone turning queasy on QE2?
Here’s a Bloomberg chart showing the (sizeable) spread between the five-year forward US break-even inflation rate and five-year Tips yields:
As we said, sizeable — and as we’ve noted before,
Japan piles into resources, but is it an inflation hedge?
More details of Japan’s most recent stimulus measures have come out in the last 24 hours, and one of them in particular has got goldbugs and inflationistas’ tongues a wagging.
And that would be the move to create a sovereign wealth fund more focused on resource-related investments than previously imagined.
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,
So QE-asy it hurts
Gold glittering past a nominal record high:
The dollar sinking to a five-month low against the yen:
And even the euro is getting used to life at $1.35.
Clearly, Tuesday’s insider-y WSJ article on the Fed and QE2 has made waves.
An intriguing pick-up in Treasury settlement fails
Some curious developments in the US Treasury market to report.
First, there’s been a relatively strong burst of settlement failures in the US Treasury repo market in the last week.
According to data compiled the New York Fed,
More mystery in quarterly repo patterns
Readers might remember a WSJ story earlier this year which highlighted intriguing end-of-quarter peculiarities in New York Fed data on primary dealers in repo markets.
The WSJ’s point was that the irregularities could have been the result of banks trying to mask their risk levels in the past five quarters by temporarily lowering their debt,
The largest arbitrage ever documented
National Bureau of Economic Research research claims to have documented the largest ever arbitrage.
It’s contained in a great little paper published earlier this month and it isn’t a fancy, schmancy accessible to high frequency traders only type of trade.
Goldman still expects a further $1 trillion of QE
More Bah! Humbug! from Goldman’s chief economist Jan Hatzius.
Although last week’s economic data makes a big “QE2″ announcement from the Fed unlikely at the September 21st FOMC meeting, Hatzuis still believes more unconventional monetary easing is on its way,
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,
Disembark the QE2
Perhaps the good ship won’t be sailing after all.
The market reaction to Wednesday’s better than expected US ISM report:
RTRS-US TREASURIES EXTEND LOSSES AFTER SURPRISINGLY STRONG ISM MANUFACTURING
Where’s Zhou Xiaochuan?
It’s not often that central bankers go missing.
Zhou Xiachuan, governor of the People’s Bank of China, was rumoured to have done so at the end of last week.
Rumours of Zhou’s disappearance were catapulted into internet infamy after Stratfor,
Bullet casings on the floor, blades whirring in the distance
Aviator shades? Check. Wagner CD? Check. Money-abseiling kit? Err…
Mr Market is waiting for Fed chair Ben Bernanke’s speech at Jackson Hole. And, though he should know better, he is whispering to himself about more QE.
Oops, MBS settlements failing again
Oh dear.
After reversing their upward trajectory of late, MBS trade settlement fails in the US primary dealer repo market picked up rather forcefully last week.
This, for example, is how the latest primary dealer data survey from the New York Fed showed fails to deliver and receive coming in respectively:
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):
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,
Risk off, tin hat on
The risk switch was firmly flicked to “off” on Tuesday afternoon, following weaker than expected US housing data. Much weaker than expected. Sales of existing homes slumped to their lowest level on record in July according to the National Association of Realtors.
Guest post: The Fed does not want debt monetisation
FT Alphaville presents a guest post from Jerry H. Tempelman, CFA, who was previously a Senior Financial and Economic Analyst with the Federal Reserve Bank of New York. The views expressed are strictly his own.
Bunds are the new treasuries, when they want to be
FT Alphaville wondered earlier why German bunds would be affected by convexity hedging dynamics in the US, one of the factors that is supposedly driving 10-year US bond yields to fresh lows.
Could it all be down to that old devil,