S&P placed Brazil’s foreign currency ratings (BBB-) on negative outlook yesterday, only one small step away from junk. S&P’s negative outlook implies that there is a probability higher than 33% that Brazil’s rating will be subject to a downward revision in the next 18 months. According to the statement, S&P “could lower the ratings if there were further deterioration in Brazil’s external and fi…Read the article
The Euro Summit meeting in Brussels that took place a couple of weeks ago seems to have finally provided some temporary closure to the Greek debt crisis. The dreaded Grexit scenario was avoided (at least for the moment) and the Greek government was able to repay its arrears to the IMF and the ECB using the €7.2 billion bridge loan provided by the European Council. Looking ahead, this short term…Read the article
It has been difficult to filter through the noise of the Greece situation these past few months. But when you stop and have a look at the economic backdrop, things don’t look as bad as some of the alarming headlines might have you believe. Some significant economic headwinds have turned into tailwinds, which will likely drive European growth for the next 18 months.1. The Euro
In April, the Eu…Read the article
Here are a few quick thoughts about things that happened last week.
First, the UK election and the failure of the opinion polls. Ahead of the General Election we met with several of the big opinion pollsters, and even ran a Bond Vigilantes x Politics event featuring Anthony Wells of YouGov. Without exception they highlighted how unusual it was that, whilst the Conservatives appeared to be neck …Read the article
It has been a while since we have discussed the economics of the single currency, but once again the issue of its suitability for all its members is at the forefront of economic concerns, as Greece faces some difficult decisions.
The financial crisis has taught us a number of lessons: fiscal policy works, monetary policy works, better regulation is beneficial for the financial sector, confidenc…Read the article
As the old adage goes, markets don’t like uncertainty. And yet in just under two months we have a UK election, about which the only degree of confidence that anybody has is that the UK will have a second successive hung parliament – the key question is whether the UK ends up hung to the left, or to the right, or we get a potentially painful outcome somewhere in between.
So we thought it worthwh…Read the article
Have you seen the film The Day After Tomorrow? The one where U.N. officials foolishly ignore climate scientist Jack Hall (Dennis Quaid) and a super-storm plunges New York into a new Ice Age? Well it was colder than that last week when Mike and I made a research visit over there. With wind-chill it was a billion below. I was only able to survive by laughing at Mike forgetting to wear a hat and g…Read the article
Picture the scene: a meeting room, 40 floors up, plate glass floor-to-ceiling windows with views of central London in the background. At the polished mahogany table sits Hans Schmidt, the CFO of a major consumer global goods company. In walks Chad “Ace” Jefferson III, the latest in a long line of investment bankers assigned to cover his company. Behind Chad follows an entourage of five impeccab…Read the article
The German government can theoretically borrow at negative yields if it were to issue short maturity debt today. Longer maturity debt is also yielding a record low amount. Could the collapse in yields be a blessing for Germany and Europe? Two economists at the International Monetary Fund (IMF) seem to think so. Indeed, the German government’s narrow-minded pursuit of the “black zero” (a balance…Read the article
As we started 2014 the US Treasury market was expecting 10 year yields to be at 4.13% in a decade’s time. This 10 year 10 year forward yield, derived from the yield curve, is a good measure of where the bond market believes yields get to if you “look through the cycle”, and disregard short term economic trends and noise. I wrote about it here and suggested that we were approaching the top of th…Read the article