Exactly. The calls to go into equity are aggressively misplaced. That is all I will comment on.Originally Posted by cbsh38584
Newbie
Exactly. The calls to go into equity are aggressively misplaced. That is all I will comment on.
Newbie
Other than bonds I also advise clients on FX. Having some trading experience helps.I'm a conservative person, but to me, it's not worth the risk. That sort of interest is just 1.2% more than what some banks are offering when they have promotion.
It's like the banks saying USD will drop to 1.18 / 1.19 end of 2013, but who knows? Worse yet for EUR versus USD - movement in the past 3 months defeats conventional logic.
Fully agree that it however makes sense for those who have MYR costs / expenses as a hedge
Actually the EURUSD move made sense.
- ECB reduced the size of its balance sheet slightly as compared to the Fed, BoE and BoJ
- Year end repatriation of EUR in 2012
- No mention of interest rate cuts by Draghi
In FX, everything is relative. Fundamentals matter yes, but timing is of a greater concern.
We all know a strong EUR will kill off exports, especially for Germany. The question is when does the reversal happen? For that we look at Technical Analysis. In the meantime, enjoy the EUR uptrend - sell JPY USD GBP and buy EUR.
Newbie
That is one angle. Going solely by that logic, FDs in Indian banks in Rupees would reap the best yields.Such yield is quite low right. A one year FD across the causeway in a reputable bank will get you 3.88%.
Senior
Would like to seek the views of expert here. What do you think of Eastspring Monthly payout "M" class. I have bought it below a $0.90 and now it has risen to $1.060 with a monthly payout with yield of 5% pa. Is it risky to hold?
Newbie
Article on how long it might take for US unemployment to drop to the 6.5% which the Fed requires before raising interest rates again.
Newbie
Fed’s Bullard Urges Cutting QE Pace if Data Stay Strong
By Steve Matthews - Feb 2, 2013
Federal Reserve Bank of St. Louis President James Bullard said he expects U.S. growth to gain enough momentum to let the central bank reduce the pace of asset purchases as early as the middle of the year.
“We should think about tapering or adjusting the program,” Bullard said yesterday in an interview in Washington. “If you get some good data for a couple of months, maybe you’d say, ‘Okay, we go back to $75 billion per month instead of $85 billion or something like that.’”
The St. Louis Fed president said he expects the U.S. unemployment rate, 7.9 percent in January, will drop to the “low 7s” by year’s end, which he said would meet the Federal Open Market Committee’s test of “substantial improvement” in the labor market needed to end purchases. “Almost anybody would have to say that would be substantial improvement compared to where we were at the time of the launch of QE3,” he said.
Yet it would be problematic to stop expansion of the balance sheet at year’s end without slowing purchases earlier, Bullard said.
“You don’t want that cold turkey aspect to the program,” he said. “If we got some good signs through the spring or the summer, then I think we could throttle back just a little bit without saying you are going to end the program on any particular day.”
Bullard backed the FOMC’s decision this week to continue purchasing securities at the rate of $85 billion a month, the third round of a policy known as quantitative easing or QE, after growth stalled last quarter. Policy makers have pushed the benchmark interest rate close to zero and expanded Fed assets to more than $3 trillion to spur growth and reduce unemployment.
Payrolls Surge
Bullard spoke in yesterday’s interview immediately after the release of last month’s employment data. Payrolls rose 157,000 following a revised 196,000 advance in the prior month and a 247,000 surge in November, Labor Department figures showed. The jobless rate increased from 7.8 percent.
Stocks rallied, sending the Dow Jones Industrial Average above 14,000 for the first time in five years, while Treasuries fell. Ten-year note yields rose three basis points, or 0.03 percentage point, to 2.02 percent at 5 p.m. New York time yesterday, according to Bloomberg Bond Trader data. Earlier, yields dropped as low as 1.92 percent. The Standard & Poor’s 500 Index rose 1 percent to 1,513.17.
Bullard, who calls himself the “North Pole of inflation hawks,” has been viewed as a bellwether for investors because his views have sometimes foreshadowed policy changes. His speeches and interviews moved the two-year Treasury yield more than those of any other Federal Open Market Committee member in 2011, according to a Macroeconomic Advisers report.
Seven Faces
He was the first Fed official in 2010 to call for a second round of asset purchases. He published a paper in 2010 entitled “Seven Faces of the Peril,” which called on the central bank to avert deflation by purchasing Treasury notes.
The St. Louis Fed president’s support of the FOMC purchases came after he last month offered a mixed assessment of bond buying, calling it a “very aggressive policy” that is “making me a little bit nervous.” Kansas City Fed President Esther George dissented from the decision in her first vote, citing concern that record stimulus could increase the risk of financial instability.
Bullard said the three-month average payroll growth of 200,000 jobs a month shown in yesterday’s jobs report is “an encouraging sign for the U.S. economy.”
‘Impressive’ Growth
“The 200,000 a month for three months is impressive,” he said. “Unemployment did tick up but generally speaking unemployment is down from where it was last September when the Federal Reserve first went into QE3,” he said.
Bullard said he continues to expect growth of about 3 percent this year with unemployment falling to close to 7 percent by year’s end.
“I’m somewhat more optimistic than most about the U.S. economy in 2013,” Bullard said. “Basically some of the uncertainties the economy faced in 2012 have been mitigated to some degree, and the leading one is Europe.”
Federal Reserve Bank of New York President William C. Dudley echoed Bullard’s optimism about the international economy yesterday, which he said is “gradually improving” in a trend that benefits U.S. growth. “Things aren’t perfect but I think that things are definitely improving and that will be helpful for the U.S. outlook,” Dudley said yesterday in response to audience questions after a speech in New York.
Newbie
Today's bond issuance. First time I've seen an issuance email without a coupon rate
Issuer:
GPB Eurobond Finance plc
Borrower:
Gazprombank (Open Joint-Stock Company)
Issuer Ratings:
Baa3 (Moody's)/BBB- (S&P)
Expected Issue Ratings:
Baa3 (Moody's)/BBB- (S&P)
Currency:
CNH
Format:
LPN, Reg S only, Registered Form
Status:
Fixed Rate, Senior
Size:
CNH Benchmark
Tenor:
3 Years
Use of Proceeds:
General corporate purposes
Details:
Irish Stock Exchange Listing, English Law
Denominations
CNH 1,000,000 X 100,000
Clearing:
Euroclear/Clearstream
Joint Bookrunners:
BNPP (B&D), GPB-Financial Services
Expected Timing:
As early as today's business
mutant powerpuff
Then how will investors know what to expect?Today's bond issuance. First time I've seen an issuance email without a coupon rate
Is this type of bond, without a coupon rate, well subscribed usually?
Newbie
No lah, I think my banker forgot to include in his tableI was just being cheeky
Newbie
Article on recent poor performance of corp bonds, and the bad times to come(?)
Newbie
Via Morgan Stanley, Back to the 1930s? What Would a Currency War Look Like?
What did the currency war of the 1930s look like?
The backdrop for the currency war of the 1930s was the Gold Standard and the Great Depression (many economists blame the former for the latter). By fixing the value of the currency to the price of gold, the Gold Standard prevented a country from printing too much money. If it did, people would simply exchange it for gold (or for other currencies pegged to gold). Yet, this rigid ‘rule’ also denied policy-makers any flexibility to deal with shocks to their economies. This was the reason why the UK abandoned this regime, setting off a volatile chain of events:
What lessons can we draw from the events of the 1930s?
- On September 19, 1931, sterling was taken off the Gold Standard. It was devalued against gold and hence against the ‘gold bloc’ currencies (currencies that remained pegged to gold). The run-up to this event and its fallout was felt throughout the world.
- Prior to the devaluation, in June and July 1931, one prominent bank in both Austria and Germany failed, which led to capital controls being imposed in both places. Capital controls protected these economies in the near term, but exacerbated fears about the future of sterling and the Gold Standard itself.
- Following the devaluation of sterling, Norway and Sweden went off the Gold Standard on September 29. A day later, Denmark followed.
- The US economies, like other countries of the gold bloc, lost competitiveness and exports turned down. Eventually, in January 1934, the US Congress passed the ‘Gold Reserve Act’ to nationalize gold held by banks and monetized it by giving banks gold certificates that they could use as reserves at the Fed. More importantly, it also forced a devaluation of the US dollar against gold.
- Like the US economy, the remaining gold bloc countries (France, Germany and some smaller economies) also suffered a loss of competitiveness and poor export and industrial production growth. By 1936, they gave up and abandoned the Gold Standard as well.
We draw three pertinent lessons from that episode:
Lesson 1: As in every crisis, events were and will always be highly non-linear, with domestic conditions the most likely cause: It was painfully high unemployment that was the main driver of the devaluation of sterling.2 Although unemployment had been painfully high for a while, it was only a few months prior to the devaluation that market fear really ratcheted up.
Lesson 2: Markets punish policy uncertainty: Needless to say, there were dramatic movements in the exchange rate of the countries that devalued. However, with the devaluation out of the way, market and economic pressure as well as policy uncertainty shifted to the ‘gold bloc’ economies. For investors, it became a matter of when, rather than whether, the gold bloc economies would be forced to respond.
Lesson 3: Early movers benefited at the expense of the gold bloc, a ‘beggar-thy-neighbor’ outcome: From an economic standpoint, the sharp improvement in competitiveness of the early movers stood them in good stead against the gold bloc economies who stuck to the regime. Exhibit 1 shows that the UK and the Scandinavian economies saw a significant improvement in industrial production by 1935, whereas the ‘gold bloc’ economies (France and Germany – even though the latter employed capital controls) suffered. By the time the gold bloc economies capitulated, they had lost significant ground on this front to the early movers.
Could it happen again? Like any historical precedent, there are differences and similarities that must be accounted for.
What’s different this time? Unlike the Gold Standard era, most major currencies are now part of a flexible exchange rate regime, which should make such large currency moves less likely. Further, extreme tail risks that might well have precipitated such dramatic policy responses only a few years ago have also receded.
What’s similar? Domestic origins and ‘beggar-thy-neighbor’ effects: Even though policy-makers battled using exchange rates, the events of the 1930s had their origins in domestic issues. As mentioned above, it was painfully high unemployment in England that led sterling off the Gold Standard. The competitive devaluations that followed were also reactions by policy-makers to protect their domestic economies.
Similarly, it is the domestic agenda that could drive competitive depreciation today. In this vein, the desire of Japan’s policy-makers to revive investment in their export-oriented economy likely means that the yen will likely play an important role. However, since global demand is likely to remain sluggish, a revival of Japan’s export sector on the back of yen weakness is likely to eat into the market share of other exporters – something that could well invite measures to curb significant weakening of the yen. These negative spillovers are identical in nature to the ‘beggar-thy-neighbour’ policies of the 1930s.
If it did happen, what could an improbable but not implausible sequence of events look like?
In what follows, we create a plausible sequence using events that have both a reasonable probability of occurring and are already on investors’ radar screens:
There isn’t much in the ‘timeline’ above that is news, yet the combination serves well to illustrate how a currency war could plausibly play out.
- The starting point: Japan’s policy-makers initially follow a concerted plan of reflating the Japanese economy, with a weak yen as an important pillar of strengthening the export sector.
- Further easing from the major central banks... The ECB and/or the Fed ease further due to a deterioration in financial conditions. In the case of the euro area, euro strength or an idiosyncratic increase in risks might be responsible for a tightening in financial conditions. In the US, the obvious candidate is the risk surrounding the fiscal cliff and the debt ceiling confronting the US Congress.
- ...and/or capital controls from EM economies: Uncomfortable with the combination of further capital inflows and yen weakness, some AXJ and LatAm economies impose capital controls.
- Japanese policy-makers react to yen strength: In order to ensure export competitiveness, Japanese policy-makers take further measures to weaken the yen.
Where are we now?
The key variable in the sequence of events above is the reaction of Japan’s policy-makers. If a weaker yen is indeed an integral part of their plans and if they have a strong intent to make sure it remains so, the risk of a currency war is higher now than it has been in the past. Investors have moved beyond questioning whether EM economies will have a response and are now wondering at what point such a response is likely. At the same time, near-term risks in the US and euro area economies remain in play, as does the prospect of prolonged or even enhanced monetary stimulus.
In the EM world, Japan’s export competitors in AXJ could respond with some combination of verbal intervention, FX intervention, capital controls and, with a much lower likelihood, policy rate cuts. In the particularly interesting cases of Korea and Taiwan, our economist Sharon Lam believes that verbal intervention (already under way to some extent), intervention in the foreign exchange markets and capital controls represent the most likely policy reactions. Rate cuts at a time when both economies are already expanding may serve to accelerate domestic growth and perversely cause even more capital inflows and currency appreciation rather than depreciation. For moderate moves in the yen’s value, the effects on China are likely to be limited since it does not compete head-to-head with Japan’s high-end electronics and car exports. However, in a currency war situation, the slow-moving USDCNY exchange rate may make restoring competitiveness tricky.
However, even as we discuss AXJ, let us not forget that other parts of the EM world are also concerned about currency appreciation. For all the talk about potential policy action in AXJ, we have already seen some of it come out of Latin America. In contrast to AXJ, Latin America is slowing, which puts rate cuts firmly on the agenda. Indeed, Colombia’s recent rate cut was likely influenced by the peso’s strength. Luis Arcentales, our Mexico economist, believes that concerns about the currency war have also probably been an influencing factor in Banxico’s u-turn towards a dovish stance from a hawkish one just a few weeks ago. In an innovative twist to the usual FX intervention, Peru has announced that it will buy back its international bonds and issue ones denominated in its domestic currency instead. Even Chile, one of the most advanced and stable EM economies, is discussing structural reforms to address the strength of its currency.
In summary, while a currency war is not our base case, the new-found commitment of Japan’s policy-makers does raise the risk of retaliatory action to keep the yen weak, and brings us a step closer to a currency war. The experience of the 1930s suggests to us that such large currency crises are likely triggered by domestic issues, and that they do create distinct winners and losers. EM policy-makers are already gearing up to make sure they remain on the winning side, but the balance of power for now rests with Japan.
Newbie
Have the currency wars begun?
CARACAS: Venezuela said Friday it is devaluing its currency by 32 per cent against the dollar on the orders of cancer-stricken President Hugo Chavez, in part to trim a bloated budget deficit.
The bolivar will go from 4.3 to 6.3 to the dollar at the official exchange rate. The move was announced at a press conference by Planning and Finance Minister Jorge Giordani. He said it will take effect on Wednesday.
The goal is to "minimize expenditure and maximize results." One effect of a devaluation is to make a country's exports cheaper and thus more enticing to buyers.
But another effect is to cut the deficit, which in Venezuela last year was estimated to be nearly 10 per cent of GDP.
The economy grew 5.5 per cent last year and inflation was 20 per cent. That was down seven points from the previous year and hit the government target, but was still the highest official inflation rate in Latin America.
Venezuela is South America's largest oil exporter and has the world's largest proven reserves. Its oil transactions are dollar-denominated, so the bolivar-value of those sales will now be higher, boosting state revenues on paper.
The change had been widely expected by analysts and business leaders since last year. This is Venezuela's fifth currency devaluation in a decade.
But a side effect of the new one will be higher inflation, economists warned.
Giordani said the government would honour dollar purchase requests made before January 15 requests at the old exchange rate.
Chavez is convalescing in Cuba, where he underwent a fourth round of cancer surgery on December 11.
Vice President Nicolas Maduro, who visited Chavez this week, said at the same press conference Friday that Chavez is concerned about the Venezuelan economy and called for a "major effort" to maintain its pace of growth.
Chavez established currency controls in 2003 and the government sets the rate to curb capital flight.
But the existence of a strong black market for the dollar shows the continuing desire for hard currency.
Economist Jesus Casique warned the devaluation would have a major inflationary side effect and the government should not see it as the main tool for trimming the deficit.
Rather, it should take other steps such as clearing away red tape that makes it hard for business to obtain dollars and encouraging Venezuelan non-oil exports.
"The measure should come hand in hand with others," Casique said.
Out on the street, there was little enthusiasm for the devaluation.
"This is bad news," said businessman Jorge Martinez, walking past the Venezuelan central bank with his wife. "We have been number-crunching because in a month we are going to travel to Spain, and now we do not have enough money."
- AFP/xq
Newbie
They had already began in 2010. For the latest example before Venezuela, you had ECB president Mario Draghi talking down the EUR without actually doing anything.
Newbie
Job Openings in U.S. Dropped in December From Four-Year High
By Alex Kowalski - Feb 12, 2013
Job openings in the U.S. dropped in December from a more than four-year high, showing further progress in the labor market will be slow to develop.
The number of positions waiting to be filled fell by 173,000 to 3.62 million, the fewest since September, from a revised 3.79 million the prior month that was the most since May 2008, the Labor Department said today in a statement. Hiring and firing also cooled.
More work opportunities would help reduce a jobless rate that’s been either 7.8 percent or 7.9 percent since September, and hearten Federal Reserve policy makers who say unemployment is too high. A Labor Department report earlier this month showed employers took on 157,000 workers in January, the fewest in four months.
“The labor market is improving, but certainly not at a robust rate,” said Russell Price, a senior economist at Ameriprise Financial Inc. in Detroit. Price is the best forecaster of payroll growth in the past two years, according to data compiled by Bloomberg. “We’re still going to see that relatively modest pace of advancement in the first part of 2013 as businesses wait to see how the adjustments with payroll taxes and spending cuts affect the economy.”
Stocks were little changed as investors watched earnings before President Barack Obama’s State of the Union address. The Standard & Poor’s 500 Index rose less than 0.1 percent to 1,517.9 at 10:45 a.m. in New York.
Payroll Gains
Today’s report helps illuminate the dynamics underlying the government’s monthly employment figures. Payrolls increased by a revised 196,000 workers in December and 247,000 the month before, the Labor Department said Feb. 1. Revisions added a total of 127,000 jobs to the count in the last two months of 2012.
The number of workers hired in December dropped to 4.19 million from 4.4 million, pushing the hiring rate down to 3.1 percent from 3.3 percent, according to today’s report.
Six of seven major industry categories showed a drop in job openings in December, led by professional and business services, which had a 92,000 decrease in jobs available. Trade and transportation followed as retailers sought less help.
Construction was the only category to show an increase, with job openings rising by 3,000 to 92,000.
Fewer Separations
Total separations, which include firings and those who leave their jobs voluntarily, decreased to 4.07 million in December from 4.22 million. That drove the separations rate down to 3 percent from 3.2 percent in November.
Of those, 2.16 million people quit their jobs in December, down from 2.18 million in the prior month.
In the 12 months ended in December, the economy created a net 1.8 million jobs, representing 51.8 million hires and about 50 million separations, today’s report showed.
Home Depot Inc., the largest U.S. home-improvement retailer, is among companies stepping up hiring. The largest U.S. home-improvement retailer, said it plans to add more than 80,000 temporary workers ahead of its busiest season, about 14 percent more than a year ago, as a housing rebound spurs spending on remodeling and landscaping. Rival Lowe’s Cos. is boosting seasonal hiring by 13 percent.
Considering the 12.2 million Americans who were unemployed in December, the figures indicate there were about 3.4 people vying for every opening, up from about 1.8 when the recession began in December 2007.
Jobless Rate
Job generation in 2012 was strong enough to bring the U.S. unemployment rate down 0.7 percentage point to a four-year low of 7.8 percent in December. Employment picked up in the last three months of the year, when payrolls expanded by 603,000 workers.
A possible slowdown in consumer spending and government cutbacks threaten to impede further progress in the labor market. Payroll growth in January was the weakest in four months, and households this year will see their paychecks reduced by higher payroll taxes while Congress debates whether to slow the growth of federal outlays.
Fed officials are waiting until the outlook improves before they tighten monetary policy. The central bank’s Federal Open Market Committee said in December it would hold its benchmark lending rate near zero as long as inflation isn’t forecast to rise more than 2.5 percent in one to two years and unemployment remains above 6.5 percent.
Fed’s Focus
“With employment so far from its maximum level and with inflation currently running, and expected to continue to run, at or below the Committee’s 2 percent longer-term objective, it is entirely appropriate for progress in attaining maximum employment to take center stage in determining the committee’s policy stance,” Fed Vice Chairman Janet Yellen said yesterday during a speech in Washington.
Yellen also said she believes high unemployment is the result of too little demand rather than a mismatch of workers’ skills with the needs of employers. The economy faces hurdles including low income expectations by households and fiscal restraint, she said.
To contact the reporter on this story: Alex Kowalski in Washington at [email protected]
To contact the editor responsible for this story: Christopher Wellisz at [email protected]
Property Newbie
thanks for sharing, starrynight . very nice read about the 1930s currency war .
I took the road less traveled by, and that has made all the difference.” - Robert Frost quotes (American poet, 1874-1963)
Junior
if u enjoy reading this, then u should get the two books The $ crisis and New Drepession by Richard Duncan recommended by cbsh38584thanks for sharing, starrynight . very nice read about the 1930s currency war .
Property Newbie
thanks for sharing.
like cbsh38584 post too.
I took the road less traveled by, and that has made all the difference.” - Robert Frost quotes (American poet, 1874-1963)
Newbie
With stocks pushing to new multi-year highs - seemingly all-in on the Fed's newfound transmission mechanism - the bond market is beginning to quake just a little. 10Y rates shifted quickly through 2.00% today - hovering around 10-month highs - but the question is, just how bad could it get for bondholders if the Fed were to lift their repressing foot of the yield-seeker's throat. While we believe they are missing the circular nature of any Fed implied tightening on stocks (and therefore bonds reflexively), Goldman sees 10Y yields 120-240bps under 'fair' currently thanks to Fed QE efforts - and believes 4.0% yields are on the cards by 2016. Our question - what exactly would HY spreads look like under this 'bullish' scenario? And for the stock bulls - is this just catch-up by bonds or the great rotation so many hope for? And if Goldman believes this - why is their (and their primary dealer friends) holdings of Treasuries so extremely high?
Goldman sees a one-way street to 4% yields by 2017...
as the Fed's footprint knocks 120-240bps off Treasury yields...
Of course, as we noted, this unilateral analysis misses the one big point - that a (belief in the) removal of the punchbowl by the Fed (which is realistically the only way yields will rise this far this fast) would have a liquidity-crushing impact on the difference between equity valuations and fundamentals - and while Treasuries may see volatility rise (from record lows)...
...we suspect safe haven flows (to explicitly more attractive bond yields) will temper the real explosion (and rotation) so many expect.
As we will not go gracefully back to an old normal market any time soon...
We suspect - just as oil will eventually self-regulate the expansion hopes of local economies via energy price margin compression - that treasury weakness will not be seen as hope-for-recovery-driven but an opportunity for better yields as the boomers remain far more risk-averse (especially at almost all-time highs in stocks).
Newbie
Bonds in Conversation : Suffrage of the Snake
by tradehaven It looks like I have a critical audience, so I apologise if you manage find any offensive material in this one (sniff sniff).
The US is nearing the sequester deadline and the sharp spending cuts that could spiral the economy into another recession especially when most of the revenues are going to come in the form of higher taxes.
The FED just bought back another 900 mio of treasuries last night.
We have a currency war of sorts going on (watch for article on the effects on Singapore).
Meanwhile economic data has started to disappoint with GDP numbers out of US, Japan and most of Europe (= G3 =most of global GDP) highly dissatisfactory.
On a bright note, equity markets are at their highs, and pre crisis levels.
How do we make sense of this ?
It means that corporate bonds have not suffered as much as govis during this time as credit spreads have not been affected by interest rate spikes. Yet any economic slow down could bode well for bond holders as it means that the rate hikes that have been priced in to the curve could be delayed. By that, I mean the Government bond holders for an economic slowdown is bad news for equity ? and thus, corporate bonds ?
I have snakes in my head ! And I am caught in the hypnotic glaze of the Cobra. SHOULD I HEDGE OR NOT ?
Table of SGS.
*As of 14 Feb close.
Government bond prices have headed south and we are starting to see some effects on the corporate prices.
*NAJIB TO DISSOLVE MALAYSIA PARLIAMENT `VERY SOON,' BERNAMA SAYS
Thus, Genting prices showing some DISCONNECT. SGX retail issue still trading at 101 to 102 (net of accrued interest) while the wholesale tranche is going under at around 98.00. The 2 tranches are NOT FUNGIBLE so it is not possible to buy the the wholesale tranche to sell into SGX though - pity.
Of the 2013 issues, prices appear to be holding up.
Tata Comm 4.25 02/01/16 Feb-16 101 HDB 1.23 01/30/18 Jan-18 99.55 Goodpack 4.75 01/30/23 Jan-23 99.75 KimEng 1.35 01/28/14 Jan-14 99.99975 HongFok 4 3/4 01/24/18 Jan-18 100.30138 Guthrie 3.7 01/23/18 Jan-18 100.19894 NUS 1.038 01/23/18 Jan-18 99.54 Unicredit 5.5 07/30/23 Jul-23 97.25 Biosensors 4 7/8 01/23/17 Jan-17 101.40048 FNN 3 01/21/20 Jan-20 99.998413 CDL 1.57 01/16/15 Jan-15 n/a ICICI 3.65 01/14/20 Jan-20 99.5 HPL 3 1/2 01/15/18 Jan-18 100.35148 I have nothing to suggest to bond holders right now except that I will be making my near term SGD interest rate calls based on the upcoming Budget and my forecast of the April MPS (monetary policy statement). The only thing I can do now is to write my currency war piece and perhaps make some sense of Singapore's position.
The big picture remains that there is more downside than upside to fixed rate bond prices and risk remains on the longer tenors. Beware too, those on leverage, that funding costs may not remain low forever.
Hedge suggestions - PST US (double leverage short 7-10Y UST) or TBT US (double leverage short 20Y UST). Indirect hedges - SDS US (double leverage short S&P 500), GLD US (long Gold).
And finally, Olam prices. Don't shoot me if they are wrong.
OLAMSP 6 3/4 01/29/18 SGD 94 OLAMSP 6 10/25/22 SGD 91.25 OLAMSP 5 3/4 09/20/17 USD 92.5 OLAMSP 2 1/2 09/06/13 SGD 99.25 OLAMSP 5.8 07/17/19 SGD 93.5 OLAMSP 7 09/29/49 SGD 86 OLAMSP 6 08/10/18 SGD 95 OLAMSP 3 02/25/13 SGD 99.5 OLAMSP 7 1/2 08/12/20 USD 94 OLAMSP 4.07 02/12/13 SGD MATURED !!
Newbie
Starry, most people here will not understand, or rather piece the puzzle pieces together, the stuff you've posted. ZeroHedge is an excellent source of realistic news that the mainstream avoids.
Property Newbie
newspaper like to paint nice nice economy image meh
I took the road less traveled by, and that has made all the difference.” - Robert Frost quotes (American poet, 1874-1963)
Junior
Was away for holiday
just checked, the bond prices have been quite stable this week.
Newbie
Is this the right time to get into bonds... Really verycos don't know where to park my spare funds. Property also cannot buy,
Property Newbie
"don't do anything" is your safest betIs this the right time to get into bonds... Really very
I took the road less traveled by, and that has made all the difference.” - Robert Frost quotes (American poet, 1874-1963)
Lazy Bum
Seriously Roly... this is bad advice"don't do anything" is your safest bet
When you have eliminate the impossible, whatever remains, however improbable, must be the truth
Junior
If you do nothing, your biggest enemy is INFLATION. You have to do something. You cannot spend your life in fear and trepidation of equities. In order to beat inflation, since there are now restrictions on property, you have to educate yourself on equities and allocate at least some of your cash to this. The return on bonds can barely cover inflation at the present time. A few of the bond funds are doing well though. I hear of one that is so successful that it's going to close its doors to investors soon.Seriously Roly... this is bad advice
Newbie
Derek, I agree. I just post, and people have to decide what, if anything, they make of it
Have a good weekend,
Newbie
Werther, it's hard to "teach" you the fundamentals of bonds in a forum, so best that you ask a trusted friend / banker.
For me, some of the most important points are:
- "tuition fees" for bonds are expensive - unlike stocks where you can easily just buy $10k worth and learn lessons along the way, for bonds each tranche is SGD250k, and commission in and out is easily 0.2%
- conventional wisdom is that interest rates could start going up in the foreseeable future - if this is the case, the (i) new bond issuances' yield will have to increase (ii) current long-rated bond issuances may / will drop in price to reflect the lower current (unattractive) yield. In short, don't buy long-dated bonds. I personally would not go for anything more than Dec 2015
- if you want to be safe, then assume that you will hold whatever you buy now and hold it to maturity, i.e. you will not sell it along the way for profit or to liquidate your position because you need the cash, etc. With this assumption, then if you are comfortable earning that x% yield till maturity for that bond, then you can consider buying that counter, and not be concerned that the bond prices could drop in the meantime, etc.
- buy decent / good companies' bonds - don't be greedy and go for 9% and then cannot sleep properly at night
- beginners should not leverage up their bond holdings
- beginners probably should not buy perps with no "step up" - step-up means that if the company does not "buy back" the offering after (for example) 5 years, then every year, the yield increases by 1% more. This effectively makes it expensive for the company to keep the issuance in the mkt, and in turn "forces" them to buy it back from you. Come to think of it, beginners should just not buy any perp lah
Is this the right time to get into bonds... Really very
Newbie
Bernanke Says Economy Far From Recovering Full Strength
By Aki Ito - Feb 16, 2013 2:02 AM GMT+0800
Federal Reserve Chairman Ben S. Bernanke said the U.S. economy is far from operating at full strength and reiterated his commitment to record easing.
“With unemployment at almost 8 percent, we are still far from the fully healthy and vibrant conditions that we would like to see,” Bernanke said today at a meeting in Moscow of his counterparts from the Group of 20. “The United States is using domestic policy tools to advance domestic objectives.”
Enlarge image Fed Chairman Ben S. Bernanke
The U.S. central bank has faced criticism from some foreign officials, including Brazilian Finance Minister Guido Mantega, who in October said that its accommodation has weakened the dollar, threatening to fuel a “currency war” of competitive devaluations. The Fed under Bernanke has expanded assets to a record exceeding $3 trillion and pushed down the benchmark interest rate close to zero.
“We believe that by strengthening the U.S. economy we are helping to strengthen the global economy as well,” Bernanke said.
The Fed last month affirmed a plan to buy $85 billion per month in bonds, seeking to foster growth and reduce a 7.9 percent jobless rate. “The Federal Reserve continues to provide accommodative monetary policy in our effort to foster maximum employment and price stability,” Bernanke said.
Since it last cut the main interest rate in December 2008, the Fed has engaged in three rounds of large-scale asset purchases and offered more guidance on its intention to spur growth. Vice Chairman Janet Yellen in October defended the Fed’s policies in Tokyo, saying that emerging nations have the tools to manage excess capital flows.
‘Internal Programs’
Swiss National Bank President Thomas Jordan, who caps the Swiss Franc against the euro, said in Geneva this week he doesn’t see a currency war brewing as “central banks’ monetary policies are internal programs.”
The Standard & Poor’s 500 Index fell 0.1 percent to 1,519.91 at 12:55 p.m. in New York trading, while the yield on the 10-year Treasury note rose to 2.02 percent from 2 percent yesterday.
Bernanke said financial regulation will be “one of the most important topics” of the meeting, reiterating the U.S.’s commitment to implement new banking standards known as Basel III.
“Because we live in a globalized financial system where transactions can take place in any jurisdiction and money flows easily across borders, it is critical that we have consistent financial regimes across all members of G-20,” he said. “We will work with our partners to establish consistent policies on matters such as derivatives reform and the resolution of systemically important financial institutions.”
To contact the reporter on this story: Aki Ito in San Francisco at [email protected].
To contact the editor responsible for this story: Christopher Wellisz at [email protected]
Lazy Bum
Great advice. I myself go for bonds not more than 5 years... and 5% is good enough for me though I can be greedy.
When you have eliminate the impossible, whatever remains, however improbable, must be the truth
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