As a special treat, the below podcast.
FT Alphaville reporter David Keohane met Simon Derrick, chief currency strategist at BNY Mellon. They geeked out on various FX topics. Read more
Some wise words from John Kemp at Reuters on Tuesday, now contemplating the side-effects of the bubble in fear:
It is the importance of non-rational motivations that explains why Keynes placed so much emphasis on “animal spirits” or the state of investors’ and entrepreneurs’ expectations. By sapping that willingness to shoulder a degree of incalculable uncertainty, the bubble in fear destroys the vital process by which economies form capital, grow and generate employment. Read more
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. DAS Rutherford [Matthew Rutherford, Deputy Assistant Secretary for Federal Finance] noted that there were operational issues associated with such a rule change, but that the hurdles were not insurmountable. It was the unanimous view of the committee that Treasury should modify auction regulations to permit negative rate bidding and awards in Treasury bill auctions as soon as feasible. Rutherford noted that any decision on this policy change would likely be made at the May refunding. Read more
Treasuries have gone through the looking glass.
As we’ve discussed, it’s largely because market participants have become overly obsessed with holding safe-haven securities, demanding Treasuries and nothing else. Read more
Benchmark US borrowing costs fell below 2 per cent for the first time in at least 60 years as markets took fright at increasing signs of global economic weakness and equities worldwide, the FT reports. US 10-year Treasury bonds, the linchpin of the global financial system used to price many assets around the world, yielded as little as 1.97 per cent on Thursday, their lowest since April 1950, according to Global Financial Data. There were also savage falls for German and British borrowing costs, which hit record lows. “It is a moment. Why can’t Treasury yields have a 1 per cent handle given where growth is?” said Steven Major, global head of fixed income research at HSBC. The catalyst for the latest bout of risk aversion – which saw stock markets plunge globally and gold hit another record high – was weaker-than-expected US manufacturing and unemployment data. That came on top of a slew of bad growth numbers from Europe as well as rising fears about the funding of European banks. For more on how US Treasuries and high powered money may be becoming a Giffen good, see FT Alphaville. Read more
If there’s a chart to encapsulate Thursday’s market panic:
Bullion gained more than 2 per cent on Tuesday, Reuters reports, roaring to all-time highs for a second consecutive session to stand above $1,750 as equity markets dived on growing fears of a global recession following last week’s US credit downgrade. Traders said investors ranging from sophisticated hedge funds to European savers were turning to bullion as they pulled money out of tumbling equity markets, the FT reports. Investors in gold through exchange traded funds hold a record 2,276 tonnes of gold, more than most central banks. Dealers said sales of coins and small bars to European investors were on Monday the highest so far this year. Read more
Here’s a safe haven idea you may not have thought of.
The Great British Krona. Read more
Compare….
Gold? Pffft.
The euro? Too euro-trash. Read more
It’s probably safe to say the Norwegian krone has already been pretty well tipped in 2011, given a certain well-known correlation:
Government bond yields continued to tick lower as investors’ thirst for safe-haven assets shows no sign of letting up, while stocks’ September rally takes a breather, the FT reports. An auction of two-year Treasury bonds saw them price at the lowest-ever yield, though most assets were little moved during the session. Traders’ reluctance to make a sharp move continues into another week. No one wants to get caught in the crossfire of ‘a currency war’, it would seem. The FTSE All-World equity index touched six-month highs earlier in the day, as Wall Street’s Friday rally spilled over into Asia, which took the benchmark’s advance to 9 per cent in September. Read more
Tinned food? Check. Bunker? Check. Emergency smokes? Check.
Rolex watch, Toblerone, fondue kit, cuckoo clock? Check. Read more
Len Welter, Chief Technology Officer, at Data Explorers — which monitors short positions — is not convinced short positions had anything to do with driving the current equity sell-off.
According to him, analysis of institutional flows indicates that there were six times as many longs as shorts in the market throughout most of last year, as well as leading up to May. Read more
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2About China's capacity to absorb more capital
3Secret liquidity and Scottish independence
4Spain's awful unemployment
5Pump up, debase
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8Buyback to enrich
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