Monthly Archives:

June 2011

All UK rate hike bets are off

Pound sterling is the weakest currency in the world today and we’ve seen a pretty big gilt rally, with 10 year gilt yields rallying 7 basis points to 3.1% at the time of writing, the lowest yield in seven months. The trigger was the minutes from the last Monetary Policy Committee meeting, where the crucial sentences were ‘current weakness of demand growth was likely to persist for longer than p…

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Who owns sovereign credit default swaps and why it matters

Guest contributor – Tamara Burnell (Head of Financial Institutions/Sovereign Research, M&G Credit Analysis team)

The Bank for International Settlements (BIS) recently released some fascinating data on the country risk exposure of global banks. For the first time we got some insight into not only which banks own Greek and other peripheral European sovereign, bank and corporate debt, but also who…

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Spain in deeper trouble

The last thing that financial markets needed this morning was a wobbly Spanish auction, but that’s exactly what they got. Spain’s borrowing costs have soared, with 10 year Spanish government bond yields jumping a massive 20bps at one point.  On the face of it the auctions looked OK with the 19s covered 2.13 times and 26s covered 2.57 times, but despite the much higher yields on offer, the Spani…

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Corporate credit: might now be a good time to revisit exposures?

Don’t get me wrong, I am not sounding the death knell of the post QE (1) credit rally. But a couple of pretty important and recent developments have got me asking: should I be chipping away at some of the higher beta corporate bonds I own?

Let’s start with the good news. Companies broadly are in fantastic fundamental positions, having responded to the crisis by cutting costs and debt and buildi…

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Food prices expected to remain high and volatile for the remainder of 2011

After Jim’s blog last week on rising food prices, I thought it might be interesting to have a quick look at the latest global “Food Outlook” report issued last week by the Food and Agriculture Organisation (FAO) of the United Nations. By the FAO’s own admission it is a “critical time to evaluate current developments in global food markets”. It does not make for comforting reading.

The FAO note …

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Stockholm syndrome: UK consumers love their supermarkets even as food inflation runs at nearly 2.5 times that in Europe

Why is UK inflation running at a much higher rate than European inflation?  The UK’s CPI is 4.5% compared with 2.7% in Europe.  One answer might be food inflation, a major portion of the overall CPI baskets (11% in the UK, 15% in the Eurozone – add in alcohol and both are a little higher).


The chart below shows that the UK rate of food inflation is systematically higher than that in Europe. …

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US economic data is falling off a cliff

The last month has been a horror show for the world’s biggest economy, and things are getting even worse if data released today is anything to go by.  It seems that almost every bit of data about the health of the US economy has disappointed expectations recently.  US house prices have fallen by more than 5% year on year, pending home sales have collapsed and existing home sales disappointed, t…

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