Category: Bonds

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Iran trade with the US and Europe; Euro area consumer credit growth; Almost 3% coupon on 10-year Treasury bond; US yield curve inversion vs Euro area curve yield inversion

So, the US exits the Iran nuclear deal. The business impact of it?

Not much at all for the US. But a very major impact for Europe.

US exports to Iran
2015 exports were $282 million, 2016 were down to $172 million and 2017 were further down to $138 million

Iran exports to the US
Just $64 million in 2017

European exports to Iran
€10.8 billion ($12.80 billion) in 2017, has grown 10-fold since 2015

Iran exports to Europe
€10.14 billion ($12.02 billion) in 2017, has grown 10-fold since 2015 Continue reading “Iran trade with the US and Europe; Euro area consumer credit growth; Almost 3% coupon on 10-year Treasury bond; US yield curve inversion vs Euro area curve yield inversion”

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Can the US government really cope with rising bond yields?

The US government has around $20.5 trillion in debt and pays around $558 billion in interest payments a year (an effective interest rate of 2.72%).

Bond yields have been rising recently in the US on the back of a strong economy. The 10-year bond yield topped 3% (up 0.66% over the past year) recently, the highest since January 2014. The 2-year bond yield topped 2.5% (up a massive 1.18% over the past year), the highest since July 2008 (Read more here). Continue reading “Can the US government really cope with rising bond yields?”

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US 10-year bond yield over 3% as Greece 10-year bond yield falls below 4%; US 2-year bond yield hits 2.5%

US bond yields have soared recently with the 10-year bond yield hitting 3% today (up 0.66% over the past year), the highest since January 2014. The 2-year bond yield topped 2.5% (up a massive 1.18% over the past year), the highest since July 2008. Meanwhile, the Greece 10-year bond yield was lower than 4%, closing at 3.99% (down 2.45% over the past year), the lowest since 2005. Continue reading “US 10-year bond yield over 3% as Greece 10-year bond yield falls below 4%; US 2-year bond yield hits 2.5%”

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Weekly Overview: ECB sells yet another corporate bond after spotting an error; US Banks report Q1 results; Facebook moves user data from Ireland to the US

ECB sells yet another bond after spotting an error

The European Central Bank (ECB) via Bundesbank has sold yet another bond issued by Telefonica Deutschland a year after it bought it. The bond which was due to mature in 2021 breached an ECB rule that they should not hold bonds that pay a step-up coupon (one that could go up in value if certain conditions are met – in this case if the company was acquired).

This was the fourth time they found an error in 2018 and sold a corporate bond. When this happened a couple of weeks ago, we reported it here and asked how many more errors will the ECB find? Well, it would appear traders have taken notice. The ECB sold this bond just after a sharp fall in the price of the bond, implying traders know what all bonds the ECB has bought in error and is likely to sell. Continue reading “Weekly Overview: ECB sells yet another corporate bond after spotting an error; US Banks report Q1 results; Facebook moves user data from Ireland to the US”

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ECB asks Deutsche Bank to estimate the cost of winding down its investment bank; Spain’s sovereign debt upgrade; Canadian bond yields rising most amongst the G20

The European Central Bank (ECB) has asked Deutsche Bank to estimate the costs of winding down its trading operations. Apparently Deutsche Bank is the first bank that has been asked to run this exercise, but others may follow.

How complex is Deutsche Bank? Continue reading “ECB asks Deutsche Bank to estimate the cost of winding down its investment bank; Spain’s sovereign debt upgrade; Canadian bond yields rising most amongst the G20”

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Crude oil is up 23% over the past year and it has started making an impact; US 3-year bond yields at a 11-year high

Crude oil at $65.5 a barrel is up 23% over the past year and Brent is up some 27% during the same period. Gasoline prices are up 16% over the past year and we aren’t yet in the US driving season (which pushes up the price and begins in July). Continue reading “Crude oil is up 23% over the past year and it has started making an impact; US 3-year bond yields at a 11-year high”

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Apparently, there are days when no one trades some Japanese government bonds; Could China devalue their currency or sell US Treasurys?

Some 80% of 10-year Japanese government bonds are held by the Bank of Japan. And apparently there are days when no one trades those 10-year bonds because there is no point of trading it. Why? Well, because the Bank of Japan has a policy to control yield curves and since they hold majority of it there are hardly any price movements.

But is also claimed that there are days when the 2-year bonds aren’t traded. That is interesting because the Bank of Japan only holds a small proportion of 2-year bonds. How to traders keep their jobs then? They trade bond futures instead. Continue reading “Apparently, there are days when no one trades some Japanese government bonds; Could China devalue their currency or sell US Treasurys?”

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On Equities – Do as they say, not as they do? On Bond Yields – some things from the FOMC minutes

Goldman Sachs computer model warns a bear market is near, but the firm’s analysts don’t believe it (read here). So, if a bear market arrives – they were right (well their computer model was), no bear market – they were still right.

JP Morgan has said investors are ‘overreacting’ and investors should buy the market dip for a big rally ahead (read here). How big? 13%. Which would just about take us back to the highs the market hit at the end of January. Will they do as they say? Who knows.

Meanwhile, 10-year US bond yields have fallen 12 bps (to 2.78%) in the past week since the 0.25% Federal Funds rate target increase. As the Federal Reserve pares back its bond holdings, the US government is bringing more to market, yet yields have been falling.

Here are some interesting things from the FOMC releases (text in italics are our comments), Continue reading “On Equities – Do as they say, not as they do? On Bond Yields – some things from the FOMC minutes”

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The ECB balance sheet is now over 4.5 trillion Euros, some 45% of Eurozone GDP

The European Central Bank (ECB) is by far the biggest holder of European bonds and the biggest (possibly the only) buyer of the weaker Eurozone (Italy, Spain, Portugal and Greece) countries debt.

ECB bond purchases
Asset purchase programme monthly net purchases, source ECB

Bond yields are being held artificially low by the buying programme. Continue reading “The ECB balance sheet is now over 4.5 trillion Euros, some 45% of Eurozone GDP”

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Here are some interesting things you may have missed in the equity, commodity, currency and bond markets

1. Hong Kong’s Hang Seng Index is up 34% over the past year.
2. Tencent Holdings (the owner of WeChat – the WhatsApp equivalent in China and several other things) is up 116% over the last year. It is currently worth over $550 billion and is most valuable social media company (bigger than Facebook).
3. Ping An Insurance (Ping An Insurance Group Company of China Ltd) is now the world’s largest and most valuable insurance company. Its stock is up 110% over the year. Continue reading “Here are some interesting things you may have missed in the equity, commodity, currency and bond markets”