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Help me undload your junk, China says

June 29th, 2009

June 29 (Bloomberg) — Treasuries rose for a third day, with 10-year yields touching the lowest in a month, amid a rush by investors to U.S. dollar assets as the quarter and month come to an end. Yields fell after Chinese central bank Governor Zhou Xiaochuan said his country is sticking with its foreign-currency reserve policy for now. Purchases of U.S. debt by foreign buyers are helping limit the first-half losses for Treasuries that have been the biggest in at least three decades…–

http://www.bloomberg.com/apps/news?pid=20601103&sid=avpFeSwNSUWM

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If pigs had wings

June 29th, 2009

June 29 (Bloomberg) — Strategists who came closest to predicting the dollar’s value against the euro so far this year see it strengthening as much as 17 percent in the second half as the U.S. recovers from the recession faster than Europe…– http://bloomberg.com/apps/news?pid=20601170&sid=abVRzOIqXuBs

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Wishful thinking

June 29th, 2009

June 29 (Bloomberg) — Wall Street’s largest bond-trading firms say the worst may be over for investors in Treasuries after government securities posted their biggest first-half losses in at least three decades. The 16 primary dealers, which trade directly with the Federal Reserve and are obligated to bid at Treasury auctions, forecast the benchmark 10-year note yield will finish the year little changed at 3.58 percent, after rising from 2.21 percent at the end of 2008, according to a survey by Bloomberg News…–

http://bloomberg.com/apps/news?pid=20601087&sid=avun0IcdZoXo

Comment: Wishful thinking has become paramount. Facts and logic are out, fiction and daydreams are in.

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High risk outlook

June 24th, 2009

June 22 (Bloomberg) — Analyst forecasts about the dollar have become the most scattered in two years, driving up foreign- exchange price swings and increasing risks that trading strategies and corporate hedges will backfire…” — http://www.bloomberg.com/apps/news?pid=20670001&sid=aLaIb.6J8xFc

Comment: It’s high time our “Cash and Currencies Report” gets started. We’re only a short time away from launching “The Continental Economics Cash and Currencies Report”.

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Showdown for the Greenspan put

May 30th, 2009

Bailout economics – two decades of monetary excesses

1987 Stock market crash
1988-90 Savings and Loan crisis
1990 Stock market “mini-crash”
1990-91 Gulf War I
1990-91 US mini-recession
1994 Mexican peso crisis
1997 Asian financial crisis
1998 Russian debt crisis
1998 Long-term Capital Management collapse
1999 Y2K liquidity crisis
2000 NASDAQ collapse (dot.com bubble)
2001 US recession
2001 9/11 terrorist attacks
2003 Gulf War II
2003-2004 Deflation scare
2005 Housing froth
2007 Beginning of housing crash
2007 Financial market “freeze”
2008 Stock market crash
2008 Year of the mega bailouts
2009 Financial crisis turns into economic crisis

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The start of the beginning

May 28th, 2009

Breaking News
•Treasury Yield Curve Steepens to Record as Sales of Government Debt Surge

•Shares in U.S. Tumble on Rise in Treasury Yields, Monsanto Profit Outlook

•Bernanke Suffers Setback in Housing Revival as Mortgage Bond Yields Climb

•Japan 10-Year Bond Yields Jump to Six-Month High as Supply to Swamp Demand

http://www.bloomberg.com/index.html?Intro=intro3

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Bailout bubble

May 22nd, 2009

“As the Federal Reserve throws more and more money at the economic crisis and holds interest rates down at historic lows, it could be inflating a devastating ‘bailout bubble,’ Gerald Celente, director of Trends Research Institute, told CNBC…
Read article and watch video

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Buyer (of US treasuries, that is) beware

May 15th, 2009

BBC News

Japan ‘would avoid dollar bonds’
Japan’s opposition party says it would refuse to buy American government bonds denominated in US dollars, if elected.

The chief finance spokesman of the Democratic Party of Japan, Masaharu Nakagawa, told the BBC he was worried about the future value of the dollar.

Japan has been a major buyer of US government bonds, helping the US finance its Federal budget deficits.

But, he added, it would continue to buy bonds only if they were denominated in yen - the so-called samurai bonds.

“If it’s [in] yen, it’s going to be all right,” Mr Nakagawa said in an interview with the BBC World Service.

“We propose that we would buy [the US bonds], but it’s yen, not dollar.”

However observers say that, while the move would be a remarkable policy shift, it was unlikely that Mr Nakagawa’s party will win the forthcoming election, due before mid-September, despite the unpopularity of the ruling Liberal party.

Risk

Such yen-denominated bonds would mean that America, rather than Japan, would be exposed to the risk of future falls in the value of the US currency.

Mr Nakagawa’s demand echoes doubts about the future of the dollar expressed earlier this year by the Chinese Premier and the governor of China’s central bank.

Both China and Japan have run large trade surpluses with the US for many years and have tended to invest the dollar surpluses in safe US Treasury bonds.

But both countries are worried that the value of these foreign exchange holdings could be jeopardised by a fall in the dollar.

Beijing, for example, has said it will issue its own bonds to fund any further lending to the International Monetary Fund and is believed to be diversifying out of dollars and into euros.

Japan faces a particularly difficulty because unlike China, its currency has been floating freely on international markets and the fall in the value of the dollar, relative to the yen, has hit Japanese exporters hard.

However a rapid exit from holding dollars would weaken the US currency further, making Japanese exports even more expensive in the US.

This means that any decision to switch to samurai bonds would have to be carefully managed so as to not exacerbate the situation, economists say.

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Stress test

May 5th, 2009

WASHINGTON (Reuters) – About 10 of the 19 largest U.S. banks being stress tested will be instructed by regulators to raise more capital, according to a source familiar with official talks.

The banks have been negotiating with their regulators about the depth of their capital needs, should the recession prove to be deeper and longer than anticipated. Markets have been anxiously anticipating the results, which will differentiate the strongest banks from those still expected to sustain considerable credit losses.

Full text

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Chrysler files for bankruptcy

April 30th, 2009

WASHINGTON – Chrysler will file for bankruptcy after talks with a small group of creditors crumbled just a day before a government deadline for the automaker to come up with a restructuring plan, two administration officials said Thursday.–

http://news.yahoo.com/s/ap/us_chrysler

Comment: The world has become a boring a place where more and more of those things happen that are expected to happen.
Antony Mueller

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continentaleconomics.com Blog

Help me undload your junk, China says

If pigs had wings

Wishful thinking

High risk outlook

Showdown for the Greenspan put

The start of the beginning

Bailout bubble

Buyer (of US treasuries, that is) beware

Stress test

Chrysler files for bankruptcy

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