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US treasury

Is bond market price action looking a bit like 1993-94? And the timing of fairytale 100 year bond issues.

1993 was a golden year for US Treasury investors, with 10 year yields falling from 6.7% at the start of the year to 5.3% by its end.  It felt like nothing could go wrong – and inflation had even fallen throughout the year from 3.3% to 2.7%.  Yet on 4th February 1994, the Fed hiked rates by 0.25%.  And they hiked again in March, by 0.5% in May and August, and a further 0.25% in November.  The an…

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A chart that may make you nervous if you’re long of government bonds

Government bond investing used to be about analysing and assessing economic data.  Judging by the last few months, not any more.

At the beginning of June, I argued here that US economic data was a horror show and was falling off a cliff, and bond investors (and risk assets generally) seemed not to have noticed.   The chart I posted back in June stoked quite a bit of reaction, with the main poin…

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Bernanke calls for a 4% inflation target

Well sort of.  It hasn’t got a lot of attention in the bond markets, but this week both Jon Hilsenrath in the WSJ, and subsequently Paul Krugman in the NYT have revisited Ben Bernanke’s paper Japanese Monetary Policy: A Case in Self-Induced Paralysis.  Bernanke wrote this in 1999 as an academic at Princeton University.  In it he calls on the Bank of Japan to set a “fairly high” inflation target…

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Volcker Rules, OK for Bank Bondholders?

Guest contributorJeff Spencer (Financial Institutions Credit Analyst, M&G Credit Analysis team)

In an attempt to reduce risk-taking at financial institutions, yesterday President Obama announced a proposal to bar banks from engaging in proprietary trading activity that was unrelated to customer business. He also advocated that banks be stopped from owning or investing in hedge funds or priva…

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US Treasuries : the last asset bubble?

I enjoyed this article, entitled “The Last Asset Bubble“.

US treasuries have enjoyed an incredible rally, returning 11.2% since the end of June. This has been driven by the sub-prime debacle and the Fed’s decision to cut rates from 5.25% to 3%.

Treasuries have also been supported by panicked investors fleeing from other AAA asset classes that are no longer AAA in any real sense of the word. The…

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