Monthly Archives:

December 2013

The year of the Snake – 2013 returns in fixed income markets

2013 has offered another injection of both adrenaline and performance to fixed income investors. A rapid sell-off shook emerging markets just before the summer while the Fed was conducting a “tapering yes/tapering no” ballet that lasted for more than six months. European peripheral countries finally came out of recession, although unemployment levels remain alarmingly high. In parallel, global …

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Bundesbank: no deflation in sight. Really?

Today I came across an article in which the Bundesbank took the festive season as an opportunity to discuss if all the Christmas sales discounts are going to turn into a permanent phenomenon for the Eurozone. “No deflation in sight” (in German) concludes that the Eurozone is unlikely to experience continuously falling prices, ie deflation. The Bundesbank does however identify some parallels bet…

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US Treasuries – are we nearly there yet? Maybe we are.

Before we get all beared up about tapering, it’s worth seeing how far we’ve come already, and what the end game should be. The sell-off in US Treasury bonds has already been severe. 10 year yields have risen from a low of 1.4% in July 2012 to nearly 3% today. Most street strategists have yields rising further in 2014, with the consensus 10 year forecast at 3.37% for a year’s time.

But as well a…

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Disinfloyment – the state of strengthening labour markets and falling inflation

Whilst I was listening to Ben Bernanke last night, who announced his decision to reduce the monthly rate of purchases of treasuries and mortgage backed securities by $10 billion per month, it became clear that the time has come to coin a new phrase. With the employment picture improving substantially in the last few months from a very weak point, and with GDP growth moving in a similarly positi…

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A Fed taper is on the table

The FOMC took markets and economists by surprise in September this year when the committee members decided to hold off from tapering and maintain its bond-buying programme at $85bn per month. Three months down the road and the consensus for the December meeting outcome is that the Fed will not reduce the pace of MBS or treasury purchases. Consensus has been wrong before; will it be wrong again …

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Who is to blame for shrinking real wages in the UK? Nobody?

The squeeze on UK consumers through falling real wages has been regarded as a significant factor in the (until recently) anaemic economic recovery.  Employers have taken a good share of the blame for this – but is that fair?  Have employers deliberately kept earnings below inflation as a means of boosting their own profitability, or was this an unintended outcome of upside inflation shocks?

If …

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M&G Bond Vigilantes Christmas Quiz 2013

It’s late this year. Sorry. Here’s the 7th annual Christmas Quiz. 20 questions, and the closing date for entries is midnight on Monday, 23 of December 2013. Please email your answers to us at bondvigilantes@mandg.co.uk.

The winner will get to choose a charity to which we will donate £200. He or she will also get a copy of Morrissey’s autobiography, as will 5 runners up. It’s laugh out loud, you…

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The M&G YouGov Inflation Expectations Survey – Q4 2013

The M&G YouGov Inflation Expectations Survey for November shows that consumers in all countries surveyed expect inflation to rise from current levels in both one and five years’ time. In the UK, short-term inflation expectations fell over the quarter to 2.8%, following recent downward pressure on UK CPI. It may also suggest that the shock from recent increases in utility bills may be fading. Ov…

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The UK’s inflation outlook – the opportunity in inflation-linked assets

With inflation numbers in the UK moving back towards target and deflationary concerns prevalent in Europe, it is worth asking ourselves whether stubbornly high prices in the UK are a thing of the past. Whilst the possibilities of sterling’s strength continuing into 2014 and of political involvement in the on-going cost of living debate could both put meaningful downside pressure on UK inflation…

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Jim Leaviss’ outlook for 2014. The taper debate (watch the data), inflation (where is it?), and it’s a knockout. Merry Christmas!

With many expecting a ‘great rotation’ out of fixed interest assets in 2013, bond investors will, in the main, have experienced a better year than some had predicted 12 months ago. It might not always have felt like it at the time – indeed, over the summer when markets were sent into a spin by the prospect of the US Federal Reserve (the Fed) cutting its supply of liquidity earlier than expected…

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