Monthly Archives:

February 2009

Government bonds – when a safe haven may not be not a safe haven

We first talked about cracks appearing in Euroland in June, and expanded this to include emerging market government bonds in October.  Over the past few months, the trend of rising sovereign default risk has accelerated, and particularly in Europe where we’ve seen downgrades to the sovereign debt of Greece, Portugal and Spain.  It’s probably a matter of time until the UK follows.   In today&#82…

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I.O.U.S.A. – a quick competition

The team has just watched I.O.U.S.A., the film about the future American disaster brought about by unbalanced government budgets (Dick Cheney: “Reagan proved deficits don’t matter”) and, in particular, unfunded Medicare and Social Security liabilities. 

We’re giving away our copy of the DVD.  To win it, send your answer to the following question to  The first correct…

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Are the bond vigilantes vigilant enough?

On the day that the Bank of England started its Quantitative Easing (QE) regime with the purchase of £340 million of commercial paper under the Asset Purchase Facility, it’s worth remembering why our blog is called Bond Vigilantes, and ask ourselves whether we need to be baring our teeth a little more.

The term Bond Vigilantes dates from the bond market’s aggressive response to President Clinto…

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UK deflation update

Most of the press coverage of the Bank of England’s inflation report centred around Mervyn King’s comments that the UK was in a ‘deep recession’.  That’s hardly controversial any more – for me, more interesting was the fan chart depicting the Monetary Policy Committee’s best collective judgement of where inflation is heading in the next three years.

The attached chart shows how the BoE’s inflat…

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Leveraged loans – an update

It’s been a very long while since the leveraged loans team last did anything on the blog, so here’s an update of where we see the market.

The first thing to point out is that while high yield bonds have started the year with a 10% rally (perhaps making up for the lack of a ‘January effect’ last year!), loan returns have been broadly flat. For the past 18 months, the loans market has been domina…

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Sub Zero?

Yesterday the Bank of England cut rates by 0.5% to the new record low of 1%. The problem that the BoE now faces is that it’s reaching the end of its effective use of traditional policy. Theoretically rates could be set below zero at a negative rate, by charging banks to deposit their cash. However, faced with a negative rate on savings, banks and individuals would simply invest in a safe, and s…

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Letter from New York

Perhaps we shouldn’t have expected to come away in anything but a deep depression from last week’s research trip to see strategists and economists at Wall Street’s investment houses, after all this is the epicentre of the job losses and zero bonuses.  At times though, there was a real background hum of anxiety – about their own personal prospects, about the economy and about the future of banki…

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Crashing US Auto Sales

US auto sales for January came in below estimates at a seasonally adjusted annualised rate (SAAR) of 9.57m units. The figure, the lowest since 1982 was down from 15.4m last year and saw a dip below the psychologically important 10m reading. Whilst the European and Asian manufacturers were hurt; the US big three, GM, Ford & Chrysler were once again the notable underperformers witnessing their  s…

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