Not a lot of market moving items of late
25/03/09 21:35
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Interestingly, and troublingly the 10-year TIP bond spread rose further to 1.36% - its highest level since early February. A further modest rise would see it at its highest level since September last year.
Not a lot of market moving items of late, but some as a matter of interest
PBOC Governor Zhou yesterday called for a new international currency to replace the role of the US dollar as reserve currency. Zhou argued that the crisis "calls for creative reform of the existing international monetary system towards an international reserve currency with a stable value, rule-based issuance and manageable supply, so as to achieve the objective of safeguarding global economic and financial stability." Presumably Zhou wishes there was some other abundant reserve asset that China could buy other than the US dollar. The problem with Zhou's suggestion however is that major countries would not find it appealing to issue in another currency due to exchange rate risk as government expenses and tax revenue are denominated in the local currency. Accordingly, the supply of assets in such a new reserve currency would remain thin. The market has correctly interpreted Zhou's comments as a reflection that China desires to buy less Treasuries and whether China likes it or not the only way to do that is to intervene less in the FX markets. Accordingly, the market is now pricing in some CNY appreciation over the next 12 months. It is a futile proposition and has warranted attention only because of the source. One only has to look at the complexities arising in Eurozone to realize it is a proposterous suggestion. This news that makes the papers today will be used to wrap fish and chips tomorrow.
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Interestingly, and troublingly the 10-year TIP bond spread rose further to 1.36% - its highest level since early February. A further modest rise would see it at its highest level since September last year.
Not a lot of market moving items of late, but some as a matter of interest
PBOC Governor Zhou yesterday called for a new international currency to replace the role of the US dollar as reserve currency. Zhou argued that the crisis "calls for creative reform of the existing international monetary system towards an international reserve currency with a stable value, rule-based issuance and manageable supply, so as to achieve the objective of safeguarding global economic and financial stability." Presumably Zhou wishes there was some other abundant reserve asset that China could buy other than the US dollar. The problem with Zhou's suggestion however is that major countries would not find it appealing to issue in another currency due to exchange rate risk as government expenses and tax revenue are denominated in the local currency. Accordingly, the supply of assets in such a new reserve currency would remain thin. The market has correctly interpreted Zhou's comments as a reflection that China desires to buy less Treasuries and whether China likes it or not the only way to do that is to intervene less in the FX markets. Accordingly, the market is now pricing in some CNY appreciation over the next 12 months. It is a futile proposition and has warranted attention only because of the source. One only has to look at the complexities arising in Eurozone to realize it is a proposterous suggestion. This news that makes the papers today will be used to wrap fish and chips tomorrow.
Read More...
Jim Rogers Interview
22/03/09 22:23
Hello Traders
For your continuing education on what is transpiring in the financial markets, please view a recent interview with Jim Rogers.
Chris Lori, CTA
For your continuing education on what is transpiring in the financial markets, please view a recent interview with Jim Rogers.
Chris Lori, CTA
Federal Reserve's surprise move hurts dollar
19/03/09 15:06
The dollar was hurt overnight as the market continued
to react to yesterday's surprise move by the Federal
Reserve, forcing adjustments in positioning. Debate
on the precise nature of the Fed's actions will rage
on but the immediate perception of balance sheet
expansion and quantitative easing in a broader sense
is forcing the greenback lower for the time being.
Risk sentiment overnight was quite buoyant, as major
European indices are higher, clearly boosted by Wall
Street's strong gains. The dollar was under pressure
throughout the session, trading in a 1.3416-1.3535
range against the euro, and USDJPY traded in the
range 95.27-96.62.
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USD Weakened On Rumors
08/03/09 21:59
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The US dollar weakened on Friday against the euro, gbp and other majors on rumors that non farm payrolls would be close to 1M! We have no clue who starts these types of rumors, and more, who believes in them to the point of driving price to material change. Albeit, liquidity was thin at the time which can cause for easy shift of flows for those dealing for commercial purposes. The rise in long-term yields is curious as it has occurred against a backdrop of falling long-term inflation expectations, suggesting either a rise in real yields or a rise in the risk premium on US Treasury bonds. This can be interpreted as a hint for inflation in the distant future, which is less likely. Read More...
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The US dollar weakened on Friday against the euro, gbp and other majors on rumors that non farm payrolls would be close to 1M! We have no clue who starts these types of rumors, and more, who believes in them to the point of driving price to material change. Albeit, liquidity was thin at the time which can cause for easy shift of flows for those dealing for commercial purposes. The rise in long-term yields is curious as it has occurred against a backdrop of falling long-term inflation expectations, suggesting either a rise in real yields or a rise in the risk premium on US Treasury bonds. This can be interpreted as a hint for inflation in the distant future, which is less likely. Read More...
CAD Weakness No Surprise
03/03/09 23:59
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CAD Weakness No Surprise
Investors appear to be fatigued of Bernanke and Geithners chatter as little hope is drawn from the words of the authorities. It is no surprise to us, as we have been of the view that no stimulus resist the untold market forces. At least this his what has been repeatedly professed in Pro Traders Club. Bernanke's testimony largely mirrored his previous remarks from a week ago, though he did express more frustration with the way a major insurer operated prior to a government rescue. And he is surprised because? He also said the US may need to expand the size of the $700bn bank rescue fund depending on the results of the upcoming bank stress tests. We see this as a likely event, which will place more strain on the equities markets and further support USD. Geithner's testimony on the federal budget proposal echoed a similar sentiment, as he said that efforts to stabilise the financial system could cost more than the $250bn in the Financial Stability Plan. Both Bernanke and Geithner also indicated more stringent oversight and regulation of financial institutions could be likely going forward. As we have been reminded of frequently in Pro Traders Club, this will tighten credit even further and disable fund managers from taking on the excessive leverage as they had in the past which propped up equities to their highs. As such, we will not see the recent highs again for years to come, but that’s another story. Back to FX. Meanwhile, press reports suggest the Obama administration is starting to provide more details on a potential "bad bank" structure under the Financial Stability Plan.. The Fed announced that the Term Asset-Backed Securities Loan Facility (TALF) would be launched today, and that new securitizations would be funded by the facility beginning March 25, 2009, lasting until at least December 2009. The launch of TALF is anticipated to help ease credit markets closer to normalcy. In other news, economic data disappointed, with pending home sales down 7.7% m/m (cons -3.5%, prior 6.3%) and lower vehicle sales.
Read More...
View our Workshops page for the latest details on our upcoming workshops.
CAD Weakness No Surprise
Investors appear to be fatigued of Bernanke and Geithners chatter as little hope is drawn from the words of the authorities. It is no surprise to us, as we have been of the view that no stimulus resist the untold market forces. At least this his what has been repeatedly professed in Pro Traders Club. Bernanke's testimony largely mirrored his previous remarks from a week ago, though he did express more frustration with the way a major insurer operated prior to a government rescue. And he is surprised because? He also said the US may need to expand the size of the $700bn bank rescue fund depending on the results of the upcoming bank stress tests. We see this as a likely event, which will place more strain on the equities markets and further support USD. Geithner's testimony on the federal budget proposal echoed a similar sentiment, as he said that efforts to stabilise the financial system could cost more than the $250bn in the Financial Stability Plan. Both Bernanke and Geithner also indicated more stringent oversight and regulation of financial institutions could be likely going forward. As we have been reminded of frequently in Pro Traders Club, this will tighten credit even further and disable fund managers from taking on the excessive leverage as they had in the past which propped up equities to their highs. As such, we will not see the recent highs again for years to come, but that’s another story. Back to FX. Meanwhile, press reports suggest the Obama administration is starting to provide more details on a potential "bad bank" structure under the Financial Stability Plan.. The Fed announced that the Term Asset-Backed Securities Loan Facility (TALF) would be launched today, and that new securitizations would be funded by the facility beginning March 25, 2009, lasting until at least December 2009. The launch of TALF is anticipated to help ease credit markets closer to normalcy. In other news, economic data disappointed, with pending home sales down 7.7% m/m (cons -3.5%, prior 6.3%) and lower vehicle sales.
Read More...