A strange thing is happening in commodity markets.
As we already commented on Twitter, what the physical supply and demand situation is telling us is getting increasingly disconnected from what the forward and futures markets are saying.
The curve, in short, is feeling mispriced. Read more
The abstract from the latest paper by Peter T. Leeson entitled “Human Sacrifice” (H/T Tyler Cowen at Marginal Revolution): Read more
Okay, who’d forgotten that FDIC deposit insurance for non-interest-bearing transaction accounts expires at the end of December?
We confess, it did slip our minds — momentarily. Read more
Reuters: 19-Sep-2012 10:41 – GERMANY SELLS 4.084 BLN EUROS IN TOP-UP OF 2-YEAR SCHATZ AV YIELD 0.06 PCT
That’s Germany selling 2yr paper at a POSITIVE yield for the first time since June, having got rid at zero-yield in August. Investors also bid 2.1 times the amount allotted, the most since January. Read more
FT Alphaville has already referred to the weird phenomenon of unsecured funds trading through secured funds in the UK this week, as reported by ICAP.
By definition, secured borrowing should be cheaper than than unsecured. Read more
Low yields in the context of epic supply may baffle some people, but not UBS’s Chris Lupoli.
Lupoli, part of Global Macro Team, seems, if anything, to subscribe to our negative carry shift theory — the idea that a more permanent curve transformation may be under way. Read more
This is the third installment in FT Alphaville’s “Beyond Scarcity” series, a somewhat radical look at the impact of technological progress and efficiency on the volume of goods and services being produced by the system, asking whether “abundance” could now be a key determinant of deflationary forces in the western world.
On top of this, we have considered the role played by “artificial scarcity”, whether imposed wittingly or unwittingly by industry participants as a counterweight to such deflation, and to what degree such measures could now be running into scalability issues. In short, whether there is a limit to how much artificial scarcity private organisations can impose to counteract deflationary forces of abundance, without experiencing diminishing returns. Read more
FT Alphaville would like to survey the following statement:
Economists are failing to account for mass technological innovations when making forecasts and constructing models. Read more
Mohammed El-Erian has penned a few thoughts about Germany’s negative yielding bubill auction and indentifies — quite rightly — that there are major risks associated with this precedent.
Ultimately, as FT Alphaville has also argued, a negative yielding regime of this sort could bring about exactly the sort of voluntary capital destruction conditions that turned the 1930s crisis into a depression. Read more
Germany appears to have had a successful auction of six-month debt on Monday.
That said, there is a caveat. The auction for €3.9bn worth of paper achieved a bid-to-cover ratio of 1.8 versus a previous bid-to-cover of 3.8. The average yield was a negative 0.0122 per cent — a bit of an auction first. Read more
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.
It pertains to Bhidé’s proposal that a 100 per cent state deposit guarantee system might be just what is needed to nip the current crisis in the bud. Read more
These two charts, courtesy of Icap’s Euro Repo Weekly, tell it all:
Who said demand for German debt was floundering?
Monday’s auction of six-month Bubills pulled in an impressive average yield of no less than 0.0005 per cent — yes, that’s to the fourth decimal point. Read more