Sunday , September 22 2019
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Tag Archives: GBP

Jump in Yields Didn’t Derail Equity Rally While Sterling Rallies Ahead of the Weekend on (misplaced) Brexit Optimism

The most striking thing about last week's price action was the surge in US yields.  The 10-year yield jumped about 34 basis points, the most in three years and returned to levels not seen since August 2 (1.90%).  A deluge of investment-grade corporate bonds and US Treasuries ($78 bln auctioned to lukewarm reception), coupled with an acceleration of core CPI (highest in 11 years), optimism on the trade front, and Mnuchin's insistence on pushing forward with an extra-long bond, (50, and...

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Brexit Update

The October 31 deadline for the UK to leave the EU is less than 100 days away.  The new Prime Minister is beginning to convince others that that UK will, in fact, leave at the end of October.   PredictIt.Org shows the odds of the UK leaving has risen to almost 50% from about a 33% chance a month ago.   Here is a summary of where the situation stands and some key dates going forward.   1.  Boris Johnson handily won the Tory Party leadership challenge and succeeded May.  He quickly...

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Sterling Weakness Punctures Subdued Session

Overview: Summer in the northern hemisphere contributing to the subdued activity in the global capital markets. The MSCI Asia Pacific index stalled after a four-day advance, with Japanese, Chinese, and Australian equities offsetting gains in Taiwan, South Korea, and India.  Europe's Dow Jones Stoxx 600 is flattish, struggling to extend its three-day rally.  US shares are also little changed after the S&P 500 rose for the fifth consecutive session yesterday to new record highs.  It...

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What Kind of Currency Bounce is This?

Overview:  It seems clear that the world's two largest economies slowed before the tariff truce ended.  Many investors believe that the tariff truce helped stop the equity market meltdown through most of Q4 18.  The net result of weaker stocks and lower bond yields seems reasonable.  The dollar is an anomaly. It began off strong yesterday.  The euro slid to a new 18-month low.  Sterling approached $1.26, which it has not seen since the flash crash. The Dollar Index made a new since May...

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Bloomberg, Greeks and the Crude Oil Market

In November 2018, Bloomberg published an article entitled Two Words That Sent The Oil Market Plunging: Negative Gamma.  The article opens with this paragraph: As oil suffered its biggest one-day slump in three years, it wasn’t OPEC or President Donald Trump that was shaking the market. Instead, trading desks were abuzz with chatter of “negative gamma.” The article then continues by saying that this “obscure concept begins on the options desks of Wall Street” and includes an explanation...

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April Monthly Currency Outlook

Poor economic data and soft inflation saw several central banks, including the Federal Reserve and European Central Bank, take a dovish turn in March. Contrary to expectations that interest rates would rise as the G3 central banks were no longer adding to their balance sheets on a combined basis. The sharp drop in interest rates and the flattening of curves in March is one of the key factors shaping the investment climate. The fall in yields has occurred even as oil prices...

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Equities Bounce While Bonds Pullback to End Q1

Overview:  The global growth scare may be subsiding.  It had been fanned by the ECB and Fed statements and projections.  Poor US jobs growth reported in early March and the poor flash EMU PMI late in the month contributed.  The slowdown in China and the flurry of measures to combat it also had a role.  The economic soft patch, late in the business cycle, spooked investors and policymakers but better data has already begun, and more is likely in the coming days.  These...

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Brexit Uncertainty Deepens as Parliament is Divided, while Turkey’s Short Squeeze Falters

Overview:  The lurch lower in global interest rates continue.  The US 10-year yield is at new 15-month lows, five basis points through the average effective Fed funds rate.  Late yesterday, it appeared that 10-year German Bund yields slipped below similar Japanese government bond yields for the first time since  Q4 16, but when the JGB market opened, it the 10-year JGB yield fell a couple more basis points to minus 10, the most negative since August 2016,  The 10-year Bund...

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Global Bond Rally Continues, Greenback Remains Firm

Overview: The US 10-year yield is trading below the Fed funds target.  The two-year yield is trading below the lower end of the Fed funds target range.  A warning by New Zealand that the next rate move could be a cut sent New Zealand and Australian yields to new record lows.  In Japan, the 10-year yield slipped below the overnight unsecured call rate.  Benchmark yields in Europe are mostly lower, with the yield on the 10-year German Bund is slumping to new three-year lows...

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Cool Video: Bloomberg–Sterling and the Euro

I joined Shey Ann and Amanda Lang on the Bloomberg set to talk about sterling and the euro.  The media makes it sound like there was a coup in the UK and Parliament has taken control of Brexit.  This is an exaggeration. The House of Commons did secure tomorrow to have "indicative votes" on the different alternatives.  These votes are not binding on the Prime Minister who has already indicated some alternatives that she will not accept. May's brinkmanship tactics were to...

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