Central Tendencies

Thursday, February 18, 2010

The last 24 hours have been replete with news from central banks, with minutes from the BOE/ Fed and a policy announcement from the BOJ. The first and the last were relatively uneventful; the BOJ was utterly unchanged while it seems as if Merv the Swerve's colleagues are beginning to wonder if marginal changes to the QE program are really worth the bother.

The Fed minutes seemed to provoke a bit more interest, however, given that it seems as if some FOMC voters would like to start flogging some of their veritable Everest of securities in relatively short order. This put the cat amongst the pigeons slightly, causing both Treasury and LIBOR yield curves to steepen, and opens the prospect of ongoing interest and volatility surrounding future Fed meetings, given that no decision was reached on security sales in January (but one might well be taken by mid-year.)

Given the focus in this space (and in the comments) on fixed-income recently, a commenter suggested that Macro Man open up the polls to query reader views on a variety of bond-y matters. Today, he's happy to oblige. Readers are encouraged to answer the following few questions- hopefully the formatting won't be screwy this time.

(On this one, note that the "less than 200 bps") answer has gone AWOL...if that's your view, please note in the comments.)

Posted by Macro Man at 8:49 AM  


Favourite govyy bond market - well it should be my least unfavourite I suppose. Something semi-EM but not fully EM - Singapore springs to mind. But all govvy bond markets seem expensive to me as stimulus is withdrawn. That stimulus withdrawl is liquidty, not necessarily monetary policy

Nic Barnes said...
9:34 AM  

Nic would have to agree - Malaysia ain't too bad either. Indo is too commods heavy though and lets face it, they just locked up their anti corruption watchdog head so Indo is still somewhat like the Indo of 2002 I remember visiting for the first time.

Nemo Incognito said...
9:55 AM  

Australia is tempting too.

In Japan the dilemma for individual investors was how to take in current income with bond yields at 1%. They really had no good choices, still don't. Not so in the rest of the world, and I wonder how long that can last.

Steve said...
10:19 AM  

Aussie 10 year. Forward strips way too bullish on rates. Politicizing to reduce government spending. Inflation just not as issue without wage inflation. The banks are going to get so jammed full of govvies under capital adequacy provisions they are going to scramble for them. The highest allocation towards equities in the developed world from local investors currently.

Bruce said...
10:21 AM  

It would be great to see a summary of the accuracy in these surveys in the past.

Cheese said...
10:58 AM  

The banking dead pool survey was pretty spot on....surverys of market direction have been mixed, I think, at best, given the generally equity-bearish tilt of the respondents.

Macro Man said...
11:11 AM  

ALso note that the "<200 bps" response on the curve survey has gone AWOL, so if you expect that degree of flattening please note it here.

Macro Man said...
11:12 AM  

Favourite govvy market would be Greece! :-)

astrangetrader said...
12:30 PM  

If you fear a double dip coupled with a trade war, Singapore may not be a good choice : The country GDP would nosedive as it is very exposed to trade and the government would then fight deflation through depressing the fx rate. Don't forget that the government is, amongst other things, a big hedge fund who is short SGD bills and bonds (around 100% of GDP) and long every other asset in the world, and that the Singapore population is mainly long real assets through real estate.

Charles said...
12:53 PM  

Least despised government bond market? That would be Switzerland.

Anonymous said...
1:07 PM  

Aussie 10y is a good call. They will have their housing market debt crash - it is only a matter of time. we don't hear a lot about this but Steve Keen is all over it.

Flattening to 200 bps is possible, but since this would be unhelpful to banks, I assume it would be resisted by the Fed (by printing) and Treasury (by issuance at the long end). We are truly in government arb now, so far away from free markets, if they ever really existed.

If anyone voted for JGBs can they explain the vote?

leftback said...
3:42 PM  

Fave gov bonds are California's. Yeah, they're punk, but I get such a fat tax subsidy on 'em it isn't even funny. Running untaxed money, though, I went with the herd and voted Bunds.

wcw said...
4:33 PM  

Check out the yuan today if you haven't already. Talk about moving against the crowd!

Steve said...
4:58 PM  

how can anyone not like Canadian bonds here? Would much rather own those than levered-to-trade-and-assets Singapore and addicted-to-Mrs-Watanabe-financing Australia. im keenly watching 5y5y CAD inch up to 5%

Anonymous said...
6:16 PM  

A close at 4.80% on the 30y would be the highest since before Lehman. Showing, obviously, that the US and world financial system is more stable now* than it was before Lehman collapsed.... right?

* Enable snark detector here.

leftback said...
7:23 PM  

Got to agree on the Aussie 10-yr, though I still like Long-end treasuries myself.

Our Man in NYC said...
9:12 PM  

WOW. Discount rate hike after the close with expiration tomorrow.... Night of the Long Knives?

Bloody hell, MM, what do you make of all this lot? As if that wasn't shocking enough, David "The Dog" Ngog has scored at Anfield...!!!

leftback said...
9:46 PM  

Looks like another round of bait and switch from America's central planners. Less than $90bn currently financed at the discount window. If there's one thing a central bank can be trust to do, that's be dishonest and try to trick the market. Raising rates into Obama's re-election would be a big faux pas.

Ouzo Man said...
10:01 PM  

Tricky evening in prospect for gold bugs and dollar shorts. Might see a return of the Clavadista d'Oro™ in the morning.

leftback said...
10:07 PM  

We already saw the Clavadista d'Treasuries...

Anonymous said...
10:18 PM  

Woooosh, and I thought the SNB were sneaky.
You were only talking about flatteners yesterday ;)

Nic said...
10:23 PM  

It's going to be a bit uncomfortable over breakfast at the Watanabe household if she's long AUD:USD again.

leftback said...
10:39 PM  

Leftback, I wouldn't be so sure about an australian property debt crash, residential housing in Australia is laregly undersupplied and this margin is growing due to a combination of strict local development legislation and the lack of quality/licenced builders and tradesmen. Combine this with the health of our economy, our banks' stricter lending criteria, a competent central bank (well more competent than some..), and a general shift towards the development of lower end, higher density housing of greater affordability, i think you'll find if anything that Australia's housing debt market should be quiet comfortable in the next 10 years..

Anonymous said...
5:34 AM  

2/10's sub 200 and 2/30's sub 300bp's....I've had both on as core strategic positions and almost today reached my threshold of pain but thankfully held on. Given the performance of the bond in Asian trade and current flattening coming off of historic wides I have to imagine there's a lot of trapped positions out there who will shortly be feeling the screws tighten if this can persist. Does today's dr rate hike bring forward the eventual ff hike pricing?
p.s. the other greatest flamingo out there right now is copper imo..

Anonymous said...
5:51 AM  


steve keen has some good soundbites but he has an unbelievably poor track record on housing..... hes basically been bearish fot the last 12 years or so

is it expensive down here ? yes. has it always been....well....yes

aussies are pretty unsophisticated, when stocks go down they buy property

Anonymous said...
7:07 AM  

How did I know we were in a housing boom? When there never seemed to be enough inventory for buyers and you couldn't get a good builder for love nor money.
Just saying ...

Anonymous said...
7:21 AM  

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