Record sell off in European bunds

Short dated European bonds experienced a huge sell off last Thursday, after Jean-Claude Trichet surprised the market by stating that the ECB is now on ‘heightened alert,’ interpreted by many to mean a rate hike is very much on the cards next month. The yield on two year German bunds jumped by 29 basis points, or 0.29%, which was easily the biggest daily jump in 2 year bund yields since the inde…

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Letter from New York

 Stefan and I have just got back from a trip to visit our counterparties in New York. The mood is almost universally gloomy with – predictably – housing and gas prices the dominant themes. The TV news channels run an almost constant stream of features on the cost of motoring (a gallon went through the $4 mark for the first time at the weekend, up from $3.10 a year ago, a 30% rise), with intervi…

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US housing crash now worse than during the Great Depression

US data released last week showed that US house prices fell by 14.4% in the year to the end of March (this is the S&P/Case-Shiller Composite-20 Index, which the market tends to focus more on – the S&P/Case-Shiller Composite-10 Index was down 15.3%). The track record of these indices is not very long though – the composite-20 index goes back to 2000, while the composite-10 index began in 1987. S…

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S&P thinking about downgrading Moody’s

The ratings agencies are at it again. Yesterday, S&P (the largest credit ratings agency) announced that it has placed Moody’s (its biggest competitor) on credit watch negative. S&P cited one of the reasons as being the computer bug that is believed to have resulted in Moody’s accidentally giving AAA ratings to some Constant Proportion Debt Obligations (CPDOs), a form of structured credit. Accor…

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Northern Rock’s recovery plan doomed?

A great quote today from Northern Rock’s chairman, as reported here on Bloomberg : “If house price were to decline 5, 10 or 15 percent, that would seriously impede fulfilling the [recovery] plan”

UK Housing Minister Caroline Flint’s Cabinet briefing notes as at 13th May, as shown here : “Given present trends, [houses] will clearly show sizeable falls in prices later this year – at best down 5 p…

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Japanese economy booming? Perhaps not, because it’s a leap year

Figures announced on Friday showed that Japan’s economy grew at a headline-grabbing annualised rate of 3.3% in the first quarter of this year, way ahead of expectations of 2.5%. Commentators have focused on strong export growth, although one reason for the surprise may be because the Japanese don’t adjust their growth figures for leap years. The Japanese aren’t the only ones not to adjust for l…

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Sainsbury’s (2%) vs the Office of National Statistics (6.6%) vs the Daily Mail (15.5%). Fight! Fight! Fight!

What is the real level of food price inflation? Are the official numbers released by the Office of National Statistics (ONS) understated? Well the ONS is under attack from both sides. On one front there’s J Sainsbury’s CEO, Justin King, who yesterday claimed that the official food inflation annual number of 6.6% is way too high. Real food inflation, he said, is just 2%. The discrepancy comes be…

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What level of inflation is the UK bond market pricing in?

It was announced yesterday that UK consumer prices climbed 3.0% in April from a year earlier, ahead of expectations of 2.6% and a big jump from 2.5% recorded in March. The Bank of England today said that the inflation rate is likely to breach the 3% maximum limit for “several quarters” and that there could be a “number” of letters to the Chancellor explaining why inflation has breached this 3% … Read the article

Scylla, Charybdis & the Horse Latitudes

Scylla & Charybdis were two sea monsters living on opposite sides of the Strait of Messina posing a very serious threat to passing sailors of the day. Avoiding one typically meant taking great risk passing too closely to the other. The phrase, believed to be the progenitor of the phrase ‘between a rock and a hard place’ is where the European Central Bank finds itself today; presiding over incre…

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Boris Johnson, and M&G’s fixed income teleconference

Richard is talking through recent goings on in fixed income markets on Monday May 12th at 10am. If you are interested then you can register here.

And for something completely unrelated, this clip reappeared in my inbox recently. If you missed it the first time around, it’s from an England vs Germany legends football match that took place in 2006. Watch the new Mayor of London attempt to disposs…

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