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’Viva Espana [updated]
The Spanish auction results are out…
RTRS -SPAIN SELLS EU5.64 BLN OF BILLS VS MAXIMUM TARGET OF EU4.5 BLN
RTRS-SPAIN SAYS 3-MONTH BILL AVERAGE YIELD 1.735 PCT VS 5.110 PCT AT PREVIOUS AUCTION
RTRS-SPAIN SAYS 6-MONTH BILL AVERAGE YIELD 2.435 PCT VS 5.227 PCT AT PREVIOUS AUCTION
…
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,
Spain pays 5.1% for three month money
There was a rather concerning auction of Spanish bills on Tuesday morning. Rarely does the front-end of the curve get this much attention.
Via Reuters:
RTRS-SPAIN SAYS 3-MONTH BILL AVERAGE YIELD 5.110
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.
The search for yield, 2011 edition
Yield, like love, can cause trouble when you search too hard for it.
Paul Fisher, executive director for markets at the Bank of England, on Wednesday gave a speech surveying the current state of financial markets.
Behold, the high-yield exodus
Uh oh. This is worrying.
From Standard Chartered’s latest credit research report on Friday:
Investors continue to desert HY bond funds in droves as outflows accelerate.
Meanwhile, the WSJ reports:
And the high-yield boom continues…
It’s the clash of the high-yield press releases this Wednesday.
Here’s Standard & Poor’s, with a new high-yield report published at 9.55am London time:
Record demand for high-yield bonds in Europe carries downside credit risk
And here’s Baring Asset Management with a press release of their own sent out 20 minutes later:
China is finally buying fewer US Treasuries, StanChart says
After numerous false starts, China appears to be buying fewer US assets.
At least, according to the analysts over at Standard Chartered.
Here’s why:
Today we present evidence which suggests that China is buying fewer US dollar (USD) assets with its new FX reserves.
New strategy – AIG will buy European junk instead of its own
AIG is back on Wall Street.
Fresh from failing to acquire its own portfolio of dodgy deals from the Federal Reserve — AIG’s Mortgage-Backed Securities (MBS) were acquired by the US central bank during
Why debt investors are taking leave of their senses
Here’s an interesting view.
Is the search for yield getting in the way of all rational sense in the market?
BNY Mellon’s Simon Derrick, currency strategist, makes the point that investors are somewhat taking leave of their senses when faced with the choice of extra yield versus added risk or crisis exposure.
A balanced take on imbalances
What does this chart mean to you?
For central bankers such as Ben Bernanke and Mervyn King, these international imbalances were partially to blame for the financial crisis. Reverse capital flows smashed open a proverbial Pandora’s box of financial fun:
Why QT, not QE, is the risk
A plan for a plan is not a plan, says HSBC on Friday.
And this is the reason why QT is the risk now, not QE.
Quick explainer: QT is what HSBC’s senior FX strategist Daniel Hui et al are calling quantitative tightening — a.k.a.
Re-evolution of the CLO
The market for Collateralised Loan Obligations — those sliced and diced business loans — may have only just reopened, but boy, has it evolved!
News came on Tuesday that JP Morgan is revising the $400m CLO arranged for Apollo Management;
A rocky road to yield
A data point, in the relentless search for yield.
The bottom tranches of Granite — the mortgage securitisation vehicle of Northern Rock — crossed the 50 price level for the first time last week. This is,
Equities’ (and insurers’) days of future past
There was a nifty little Morgan Stanley note recently which took on all that ’stocks are dead, long live bonds’ investor sentiment.
Nifty, because the bank did note short-term support for a return to equities (buybacks,
The thinking man’s dash for Euro-yield
Having told investors to buy up high-yielding Irish sovereign debt in September, Nomura’s analysts have come up with more discerning approach to protecting yield in a world of low, QE-struck core rates.
Mmm, Portuguese yield stew
Oh look, another European debt auction that was never going to fail.
Results from Wednesday’s Portuguese debt auction, via Reuters:
RTRS-PORTUGAL SELLS 450 MLN EUROS OF OCT 2014 BONDS IN AUCTION-IGCP
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.
Desperately seeking income
In common with many investors, pension funds have a problem, which can be summed up in the following two graphics from UBS:
For a variety of reasons (two bear markets in a decade, the boom in liability driven investing and so on) pension funds and other institutional investors have slashed their weightings of equities and bulked up in bonds in the past quarter of a century.
Clutching at dividends
The world has become full of risk-averse investors, and stocks will suffer.
Wait — let’s edit that.
The world has become full of yield preservers, and they will suffer stocks. Or — as is current fashion — stock dividends.
Mmm, European yield stew
The bright side of bulging peripheral bond-bund spreads, courtesy of the strategists at Nomura (emphasis ours):
…as central bank policy provides more substantial support for the economy – especially via extensions of QE and liquidity measures – we see increasing carry opportunities in higher-yielding assets,
The politics of (yen) intervention
With the S&P 500 up nearly 4 per cent in two days, commodities prices firming, better-than-expected economic data, and core bond prices under pressure, some analysts are (already) seeing a rebound in risk appetite.
Looking for Ursa Major
Time for some more flashing warning signs, just in case anyone was getting bullish and considering catching a falling knife.
This time the signals are in Europe, where debt market stress is rising again,
The bond-stock decoupling is quite the Conundrum, Citi says
Bond yields are falling, falling, falling . . . but global equity markets simply don’t seem to care:
Global stock prices have rallied 6 per cent over the past six weeks, while global bond yields have fallen a collective 25 basis points,
This is Dave’s moment
Finally. The moment David Rosenberg has been waiting for…
As the Gluskin Sheff economist stated in his regular Breakfast with Dave note on Wednesday (our emphasis):
Well, it took some patience but it looks like the economic environment I was depicting this time last year just shortly after I joined GS+A is starting to play out.
Reasons to buy high yielders
Morgan Stanley’s Graham Secker offered three reasons, to be precise. But first a bit of context.
Secker calculates that since 1926, the real price return on European stocks has been just 1.3 per cent per annum,