fixed income

how will jankralli end

One warning sign has been an increase in the number of credit ratings being reviewed for possible downgrades. In August, this jumped to 42, the highest level since July 2009, Moody’s said, driven mostly by reviews related to M&A activity. “With the economy in a slow-growth phase, companies are beginning to shift emphasis from conserving cash and cutting costs to increasing pay-outs to shareholders and engaging in strategic M&A activity,” Moody’s said. (FT)

Right here (for a word of mouth) you can agree with the `` Austrians ''. bias in the attitude to risk leads to incorrect allocation of resources and the market does not notice the problem for too long. Then it gets too late. Truth, this is a voluntary decision of the market. One can argue with whether the state initiates this glitch, but the market, due to its irrational rationality, it's always just the market.

"i’m only human"
John Law

About Ukrainian bonds

I'm actually trying to understand here, что William Dudley (NY FED) thinking about QE2. but since such a drunkenness is already driving me in dansk, then I will present a short thought about, what happens in debt markets of questionable quality. this is about Mexico, and about junk and about EM.

что происходит сейчас, only one graph perfectly describes – JNK US (ETF).
from the title it is easy to guess what it is about.

I don't think, what to short. I think, what you don't need to buy.
as well as with treasuries recently.

but about Ukrainian bonds my opinion has not changed since March,
winter will be weak, volatile and fun.

Bunds losing place as eurozone benchmark..

..or simply the usual revaluation of an ordinary vulnerable country in a period of export euphoria..

“A benchmark should be a reference point, a standard against which other assets can be valued and representative of the broader universe in every way. Bunds no longer fulfil those criteria,” he says

Mr Schofield says realised volatility in Bunds is now higher than in most of the other eurozone markets and their yields are significantly out of line relative to the fundamental backdrop – he estimates by about 30 basis points.

“Discounting risk premia using an overly volatile, excessively low interest rate ‘benchmark’ is hugely problematic. In the recent spread widening we estimate this effect to be responsible for up to 50 per cent of repricing.”


Good (bye) buy Dubai

today they are back in the capital market;) в последний раз (I can be wrong) after the placement, the most interesting thing happened;)) No, no parallels. but junk bond shopping scares me (not so much about Dubai, how much in general). though, certainly, rates, then they bet, but nominal. And, By the way, spreads, unlike nominal rates, are not at all at historical lows..

фото отсюда

debt market EM

We all know, that money goes to the debt markets I EM in a system.
There are many reasons for this, so that EM can be traded as an investment grant, not like junk.
But the problem is, that things are going so well for EM debt, that underestimating risk is inevitable.

What will you bet on:
1) the epic fale of France, Britain and the USA;
2) epic fale Argentina, China, Russia finally.

Я бы ни на то, did not put on it, but the probability of the second is incomparably higher.
Quite typical “This time is different syndrome”.
No, I don’t need to short the debt.
Think, that he gets off dumb
way down, but temporarily.

“MS on US default”

IMHO, люди completely miss the point.

Ask Not Whether Governments Will Default, but How.
The sovereign debt crisis is not European: it is global.
And it is not over.

The idea is, that we have a global fiscal crisis.
Global crisis welfare state.

And everyone understands perfectly well that:
* commitments will reduce
* taxes will increase

best case scenario:
* change the system (how?)
* well, or demographics will improve (how?)

debt / GDP is watched precisely because, what is the state's income, this is a function of GDP and this is solvency.
service / income – it's liquidity. and temporary structure of debt.

everyone understands, that in the long term developed states are insolvent (in current conditions).
everyone understands, that in the short / medium term, developed states do not have problems with liquidity.
what are we talking about then? right, about the market. and the market deeply cares what you have with solvency / liquidity.
market, he either panics, either rejoices, or he doesn't care. and it is weakly dependent on indicators.

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