Monthly Archives:

January 2012

The ECB’s bazooka has hit the target

The ECB finally realised it had no choice and fired its bazooka in December.  The impact has been huge.  Two year Italian government bond yields have more than halved from the high of 7.5% seen at the end of November. Many hedge funds who were betting on Italian government bonds selling off have either changed views and taken profits or have been stopped out of their positions as the market has…

Read the article

Three handles

Last week conventional gilts of all maturities briefly traded – but failed to close – below the 3% level. The continuation of the gilt bull market has now reached an important psychological level, with the ascendant bulls seeing a 3% yield as a barrier to be overcome before the yield continues to grind lower, while the gilt bears are hoping that the 3% yield barrier (the 3 percent handle) will …

Read the article

The hot money has flown south to Australia for the winter, but will it fly back in the summer?

On Friday we had a Dumb and Dumber moment in the office when a colleague for a few seconds thought that Australia had lost its AAA rating.   The error was quickly realised (it was Austria that was downgraded) and Australia kept its AAA rating across the board that it has had with Moody’s and S&P since 2002 and 2003 respectively (although Fitch only upgraded Australia’s foreign currency rating t…

Read the article

Für einen deutlich schwächeren Euro müssten die Renditen auf deutsche Staatsanleihen sehr weit in negatives Terrain fallen. Das könnte leicht passieren.

This post was originally published on 11.01.12 in English and has been translated for our German readers.

2011 hat der Euro gegenüber dem US-Dollar 3,2% verloren. Nach allem, was 2011 in Europa passiert ist, sind viele überrascht, dass der Euro nicht schwächer abgeschnitten hat. Zahlreiche Kommentatoren rechnen für 2012 mit einer deutlichen Schwächung des Euro.

Wie es bei Wechselkursen meistens…

Read the article

German government bond yields may need to get very negative for the euro to weaken much further. And it could easily happen

In 2011 the euro underperformed the US dollar by 3.2%.  Given everything that’s occurred in Europe, many people have been surprised that the euro has not been weaker, and numerous commentators continue to call for a much weaker euro in this calendar year.

As usual with FX rates, most of the euro’s behaviour versus the US dollar can be explained by changes in expectations of short term interest …

Read the article

France now yields more than EFSF. Hmm

France has started wobbling again recently.  France 10 year government bond yield spreads over Germany have blown out from just under 100 basis points at the beginning of December to 150 basis points today, although this is still a bit below the wides of 190bps in mid November.   Maybe people have woken up to the likelihood of France losing its AAA status, or the probability that France is goin…

Read the article

The US: living in a lower population growth environment

The 2000s were the slowest decade of population growth in the US since the Great Depression. The first set of state population counts for 2011 revealed that there has been no change to this trend. The US experienced the lowest annual population growth rate in 2010-11 since 1945.

William H. Frey concludes that the weak labour market in the US appears to have slowed down immigration to the US and…

Read the article

Happy Hogmanay – would an independent Scotland still be rated AAA? And might the rest of the UK get downgraded too?

Happy Hogmanay – an independent Scotland looks AAA on the back of an envelope (as long as it gets all of the oil and none of the banks!), but would probably get rated lower.  UK to get downgraded on uncertainty?

We’ve obviously been thinking a lot about the break-ups of currency areas lately, and it got us thinking about an Optimum Currency Area closer to home.  What would happen if the UK brok…

Read the article