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”

Highlights from April 2018

Here are highlights from April 2018,

Our three most read posts in April 2018

1. Alphabet (the parent company of Google) spent the most as a company on lobbying. Facebook’s spend on lobbying increased 5500% since 2009. They spent most lobbying on changes to … data privacy (Click here to read).

2. This is what has happened to the unemployment rate in the US four to eight months before every recession since the 1940s and why it matters now (Click here to read).

3. Not an April Fools’ Day joke – this really is how the US Dollar has performed against each currency of the world over the past one year (Click here to read). Continue reading “Highlights from April 2018”

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?”

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%”

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”

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”

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?”

Weekly overview: US employment numbers; Bond yields fall globally over the past month; Stock markets volatility

US employers added only 103,000 jobs in March as against 185,000 new jobs expected by economists surveyed by Bloomberg. Jobs have been added for 90 straight months, the longest phase on record. January’s job addition number was revised sharply downward from 239,000 to 176,000. Wage growth was 2.7% which was largely down to tax cuts driven wage rises earlier during the year rather than real wage inflation.

Any addition under 80,000 new jobs a month would cause the unemployment rate to rise. As we covered earlier, unemployment has always hit record multi year lows on an average 6 to 12 months before the start of a recession.

The graphs below might help visualise it better, Continue reading “Weekly overview: US employment numbers; Bond yields fall globally over the past month; Stock markets volatility”

The problem Asset Managers have is that they have money that must be invested

The 10 largest asset managers in the world, a list that includes BlackRock, Vanguard, State Street, Fidelity, Allianz, UBS and JP Morgan Asset Management have some $32 trillion assets under management (at the end of 2017). The entire space of asset managers have around $65 trillion of assets under management.

Fund managers have over $3 trillion of new inflows a year, primarily down to private pensions (governments keep pushing it given the looming state pension crisis). These fund managers get paid as long as they invest the money. There lies the problem – they have to invest it. It isn’t as simple as it sounds. Continue reading “The problem Asset Managers have is that they have money that must be invested”

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”