In this heightened atmosphere of risk aversion, the high yield market as a whole has been far more discriminating when it comes to any poor fundamental performance from individual issuers or sectors. This has led to some large relative moves between certain bonds and sectors within the market. To put it another way, 2011 is turning out to have been a vintage year for stock picking. Those high y…Read the article
Inflation remains a hot topic here in the UK. The latest numbers out last week showed CPI had risen by 5% over the year. This is only 3% above the Bank of England’s target rate. If inflation remains at this rate for the next 5 years, the buying power of £100 today will fall to £78.35. Ouch! The words of John Maynard Keynes immediately spring to mind: “The best way to destroy the capitalist sys…Read the article
Ben and Mike attended a very informative recent lunch featuring two of the top bods at the UK’s Office for National Statistics and hosted by the excellent Alan Clarke (ex BNP Paribas UK economist, now at Scotia Bank). They thought that there could be a great opportunity to share Joe and Pam’s expertise on UK GDP and UK inflation with our blog readers so they phoned ahead and managed to locate…Read the article
People are still wondering what caused the big surge in Italian and Spanish government bond yields back in July that lurched the Eurozone debt crisis into the current very serious phase (eg see here). I suspect that, if anything, the most likely trigger was Moody’s decision to cut Portugal’s rating from Baa1 all the way down to Ba2, a four notch downgrade, on July 5th this year. The junking o…Read the article
Today’s FT launches on the significant headline of record low gilt yields (see here). Within the article it discusses a number of issues from quantitative easing to Bill Gross’ famous quote regarding the UK “resting on a bed of nitroglycerine” (which was something we took issue with at the time as commented here).
However the new revelation for me today was the opinion that “low gilt yields are…Read the article
There’s a very interesting article in the British Airways in-flight magazine this month by Tim Harford, also known as the Undercover Economist in his FT column. In it, he points out that Benford’s Law showed that Greece’s reported macroeconomic statistics could have been dodgy well before we knew that for a fact. Benford’s Law shows that in real-life data, numbers are distributed in a non-ran…Read the article
At the beginning of this year our team sat down and had a collective brain dump about long term big picture themes. To be honest we do this on an intra day basis anyway, but for some reason at the beginning of a calendar year everyone feels the need to have a fresh look at things.
It seems a long time ago now, but in January 2011 the global economy was looking fairly robust. In terms of the…Read the article
Everyone is familiar with the deterioration in US labour market. Figures out today show that the unemployment rate has more than doubled to 9.1% from its pre-crisis low of 4.4% in 2007. The question is how accurately does the unemployment number reflect the true state of the US labour market? To understand this, we need to grasp how the unemployment numbers are compiled.Read the article
We’ve written about War Loan before – it’s a really interesting gilt, and not only because of its history – it was issued during World War 1 with the 1917 advert stating “if you cannot fight, invest all you can in 5% bonds. Unlike the soldier the investor runs no risk.” The “no risk” bit wasn’t strictly true. In 1932 its coupon was “voluntarily” reduced from the original 5% to 3 1/2% – I’ve …Read the article
Today we had one of the biggest ever days of peripheral sovereign bond buying from the SMP (Securities Market Programme), with some banks estimating that over €5bn of peripheral sovereign bonds were purchased via the ECB’s bond buying program in an effort to keep a lid on peripheral sovereign bond yields. About two thirds of these purchases were directed towards Italian government bonds, and It…Read the article