The Financial Times – Lex: US yields Investors are pondering the shapely consequences of the Federal Reserve’s decision to reinvest the proceeds from maturing mortgage-related securities into US government bonds. Many reckon the front end of the yield curve will flatten. That is because the Fed’s rules, which prohibit it owning more than 35 per… Continue reading The Yield Curve
<Click on chart for larger image> The Wall Street Journal – Europe’s Debt Fears Return; Focus on Irish Auction After a brief summer lull, signs of stress are resurfacing in Europe’s weaker economies as investors fret that a slower economic rebound across the globe could exacerbate Europe’s financial problems. The cost of protecting against bond… Continue reading Are European Concerns Resurfacing?
The Financial Times – ‘True sovereigns’ immune from eurozone contagion There are plenty of doomsayers who think it is only a matter of time before the sovereign risk crisis spreads from the eurozone to other countries, including the US, UK and Japan. This is not going to happen in my view. That is because the… Continue reading Contagion
The Wall Street Journal – Big Banks Loosen Lending Standards Big banks in recent months eased standards on small-business lending for the first time since late 2006, a Federal Reserve survey found, but customers of all sizes showed little appetite for loans with the economy slowing. Banks eased lending standards and terms modestly from April… Continue reading Lending Standards
The Financial Times – Resurgence of controversial hedge fund strategy The hedge fund strategy pioneered – and made notorious – by Long Term Capital Management is returning to prominence amid one of its most successful years yet, aided in large part by the massive issuance of bonds by the UK government and other sovereigns. Fixed-income… Continue reading Copying LTCM’s Strategy From The 1990′s – What Could Possibly Go Wrong?
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Barron’s – Michael Santoli: Bonds Sneeze, but Is It Contagious? Wall Street tries to divine what the big chill in the bond market means for stocks. THE SUMMER HEAT NOTWITHSTANDING, Wall Street is now thick with folks shivering over the collapse of Treasury-bond yields, reading it as an augur of a coming deflationary ice age.… Continue reading What Do Low Bond Yields Mean?
<Click on chart for larger image> Bloomberg.com – China Favors Euro Over Dollar as Bernanke Alters Path China, whose $2.45 trillion in foreign-exchange reserves are the world’s largest, is turning bullish on Europe and Japan at the expense of the U.S. The nation has been buying “quite a lot” of European bonds, said Yu Yongding,… Continue reading China
The Financial Times – US fund manager warns on mortgage guarantee Bill Gross, who manages the world’s largest bond fund, said on Wednesday that he would not buy bonds backed by mortgages unless the US government continued to guarantee the debt. His comments, in an interview with the Financial Times, will raise the stakes ahead… Continue reading What To Do With Fannie/Freddie?
The Wall Street Journal – ‘Junk’ Bonds Hit Record Companies Rush to Issue Riskier Debt as Investors Look for Higher Returns Corporate borrowers with less than investment-grade ratings sold $15.4 billion in junk bonds this week, a record total for a single week, according to data provider Dealogic. The month-to-date total, $21.1 billion, is especially… Continue reading Credit Markets
The Wall Street Journal – GERALD P. O’DRISCOLL JR.: The Fed Can’t Solve Our Economic Woes A policy of low interest rates is a textbook response of monetary authorities to the economic weakness brought on by deficient aggregate demand. The policy is justified by pointing to various ways in which money can promote economic activity—including… Continue reading The Limits Of The Federal Reserve