Bond Traders Plot Escape From Negative Yields

Posted by Forexsq 165 days ago (
img In the negative-yield vortex that is the European bond market, investors are discovering just what lengths they’re willing to go to generate returns.

Norway’s $870 billion sovereign wealth fund said this month that it added Nigeria and lifted its share of lower-rated company debt to the highest since at least 2006. Allianz SE, Europe’s biggest insurer, is shifting from German bunds to bulk up on mortgages. JPMorgan Asset Management is buying speculative-grade corporate debt to boost returns.

With the European Central Bank’s fight against deflation pushing yields on almost a third of the euro area’s $6.26 trillion of government bonds below zero, even the most risk-averse investors are taking chances on assets and regions that few would have considered just months ago. That’s exposing more clients to the inevitable trade-off that comes with the lure of higher returns: the likelihood of deeper losses.

“We are wandering into uncharted territory that’s subject to uncertainty and m

Why the ECB is Finally Buying Bonds

Posted by Forexsq 179 days ago (
img It’s the new conventional wisdom: When all else fails to make economies grow, create new money and buy government bonds. That’s the formula dubbed quantitative easing, or QE. Most economists think it helped keep the U.S. and the other countries that used it – Japan and the U.K. – from tumbling into a catastrophic depression. Could it work in Europe, too? It’s difficult for the 19-nation euro area to do the same thing, partly because of different interpretations of European Union rules, and partly because of concern it could undermine efforts to push governments to do more to revive their economies. But now that the European Central Bank has exhausted most other options, it’s pressing ahead with full-blown QE.

The Situation

The central bank began buying government bonds on March 9, six years after the U.S. embarked on QE. Europe’s fragile recovery is lagging the rest of the world and a drop in prices is threatening to make things worse. President Mario Draghi overcame German-led

The perfect market storm: brace yourself for two bull markets to slide at once

Posted by Forexsq 180 days ago (
img Are you – and your portfolio – prepared for a perfect market storm? Because there is a risk that a tempest may be on its way, one for which we’re woefully unprepared.

The latest piece of evidence arrived Friday, when the Labor Department announced that in spite of the deep chill that gripped a large part of the country during February, US companies managed to create 295,000 jobs during the month. That figure dwarfed the forecast by economists that employers created only 240,000 jobs while it helped send the US dollar to its highest level in 11 years.

And it’s that movement in the dollar that’s important to watch. The reason behind the greenback’s gains is one of the reasons you might want to ready the same kind of emergency preparedness plan for your portfolio that you have in place for, say, a hurricane or other natural disaster. Because being prepared is half the battle.

The fact is that we’re enjoying what are likely to be the final moments of the “Goldilocks market”. In t

ECB Ready to Buy Bonds as Draghi Signals Inflation Goal in Reach

Posted by Forexsq 183 days ago (
img Mario Draghi primed investors to be ready for the European Central Bank’s first bond-buying salvo on Monday as he signaled officials are convinced the measure will succeed in choking off the threat of deflation.

Six years after the Federal Reserve began its own quantitative easing program, the ECB’s Governing Council committed to begin asset purchases next week that will amount to 60 billion euros ($66 billion) a month, its president told reporters in Nicosia. He also unveiled forecasts showing higher economic growth with an inflation outlook that puts the ECB on track to reach its inflation goal of just below 2 percent.

The ECB will buy assets “in any case until we see a sustained adjustment in the path of inflation” toward the ECB’s aim, Draghi said at a press conference in the Cypriot capital on Thursday. The “measures will contribute” to achieving that goal, Draghi said.

Draghi’s push to lead the 19-nation currency bloc into a new monetary-policy era by embarking on QE ad

A no-brainer to get out of European bonds ?

Posted by Forexsq 184 days ago (
img Europe's government bond market may have received a new lease of life from anticipation of quantitative easing in the region, but for some strategists, it's time to eye an exit.

The benchmark 10-year Bund yield, which moves in the opposite direction to the price, has fallen 14 basis points to around 0.37 percent since the European Central Bank (ECB) said in January that it would pump 60 billion euros ($67 billion) a month into the region's economy via a bond-buying program to boost growth.

That asset-purchase programme, also known as quantitative easing, is due to begin this month.

"If you just look at the levels of yields it almost seems like a no-brainer (to be underweight German Bunds)," Valentijn Van Nieuwenhuijzen, head of strategy multi-asset at ING, told Fxstay on Wednesday.

"We have reached extreme or overbought levels and with everything we are seeing in the European economy, the likelihood is increasing that yields are unlikely to fall much further."

In fact,

Bonds Rise With Stocks on Stimulus Bets as Gold Advances

Posted by Forexsq 190 days ago (
img Government bonds rallied around the world, with yields on seven-year German notes below zero for the first time, and global stocks rose to a record amid speculation policy makers will bolster measures to support growth. Metals climbed and U.K. natural gas extended gains.

Germany’s January 2022 notes yielded minus 0.01 percent at 7:18 a.m. in New York and Treasuries advanced for a fifth day. The MSCI All-Country World Index added 0.2 percent and Standard & Poor’s 500 Index futures rose 0.1 percent. A gauge of Chinese stocks climbed to a four-week high after Premier Li Keqiang called for more active fiscal policy. Gold increased 1.1 percent and copper headed for its biggest monthly advance in 2 1/2 years. U.K. gas futures rose for a third day as a fuel-payment dispute between Russia and Ukraine worsened.

Governments and companies are borrowing at record-low rates while stocks are rising after Federal Reserve Chair Janet Yellen damped concern of an imminent interest-rate increase t

Greek bond yields inch up as investors await crunch debt talks

Posted by Forexsq 200 days ago (
img Greek bond yields inched up on Monday but investors remained cautiously optimistic that Athens would reach a new debt deal with its European partners at talks later in the day.

With Greece's current bailout due to expire on Feb 28 and deposits flowing out of the country's banks, talks between the anti-austerity government and its creditors are crucial - possibly for the future of the whole euro zone.

The European Central Bank may have little choice but to halt emergency funding for Greek banks if the stalemate cannot be broken, a move that could see Athens barrel out of the currency bloc.

Economists surveyed by Reuters last week gave a one-in-four chance of Greece leaving the currency area in 2015. This was the highest probability collected by Reuters polls - even those taken during the depths of the debt crisis between 2011-2012.

But even though it remains far from clear that there will be any breakthrough on Monday, in recent sessions bond and stock markets have moved ba

Investors Are Jumping Back Into Junk Bonds

Posted by Forexsq 205 days ago (
img Less than two months after fleeing junk bonds amid a plunge in oil prices, investors are embracing riskier company debt.

After pulling more than $16 billion last year, investors have poured $4.97 billion into U.S. high-yield mutual funds and exchange-traded funds since December, according to Lipper. BlackRock Inc.’s junk-bond ETF, the largest of its kind, has seen inflows during each of the last 13 days, the longest streak of deposits in more than two years.

Junk bonds are benefiting from demand for higher-yielding assets as the European Central Bank’s new round of bond purchases pushes yields on more than $1.7 trillion of debt worldwide below zero. The resurgence is sending down borrowing costs for speculative-grade borrowers and reopening a new-issue market that all but shut at the end of the year as oil tumbled below $45 a barrel from more than $107 in June. A rebound in crude has also boosted risk appetite.

“With rates getting so low, you look at high-yield and it doesn’t

Why Apple and Microsoft Are Selling Bonds

Posted by Forexsq 206 days ago (
img Why should having billions of dollars in cash stop you from borrowing more?

That appears to be the logic at top-rated companies like Microsoft Corp. and Apple Inc. They’re selling bonds at an accelerating clip, locking in cheap interest rates for as long as 40 years.

“The cost of capital that you’re paying is so obscenely low that there’s no reason not to” borrow, said Jody Lurie, a corporate credit analyst at Janney Montgomery Scott LLC in Philadelphia. Corporate treasurers are wondering: “When is this wonderful market situation for these higher-rated credits going to end?”

Microsoft, one of a handful of U.S. companies with top AAA credit ratings, sold a record $10.8 billion of bonds Monday. The 40-year portion of the offering pays an annual interest rate of 4 percent. The Redmond, Washington-based company had $6.4 billion of cash and cash-like securities on its books as of year end.

And Apple, which had a whopping $19.5 billion of cash stashed away at the end of December

Greek Bonds Rise for First Time in 5 Days on Hint of Compromise

Posted by Forexsq 206 days ago (
img Greek government bonds advanced for the first time in five days on speculation Greece and its international creditors are moving toward an agreement that will help ensure the nation isn’t left short of funds.

The advance pared a slump on Monday that pushed three-year yields up by the most since 2012. Greek stocks rose for the first time in four days. The nation’s Finance Minister Yanis Varoufakis is due to meet with his 18 euro-area counterparts on Wednesday to propose a short-term funding program.

Varoufakis told lawmakers in Athens on Monday that Greece will implement about 70 percent of reforms already included in the current bailout agreement and pursue more overhauls with the Organization for Economic Co-operation and Development. He is also seeking a bridge agreement, which will allow Greece to revise current bailout conditions and negotiate a new program.

“We think there is room for optimism given these proposals,” said Richard McGuire, head of European rates strategy

Apple's timing on bonds: Perfect

Posted by Forexsq 212 days ago (
img The tech giant raised $6.5 billion Monday by selling its bonds on Wall Street. It's a huge sum for any company, but the move is especially notable because Monday was the day interest rates on U.S. bonds hit rock bottom -- the lowest level since May 2013.

Apple's finance team might as well belong to the genius bar given the company is paying interest rates as low as 1.55% on its 5-year bond.

"Very few companies can come to market so quickly and get big bond deals like this done so seamlessly," says Marilyn Cohen, CEO of Envision Capital Management, which specializes in bonds. "People are confident in Apple (AAPL, Tech30) as both a stock play and bond play."

The stock hit a new all-time high Wednesday.

Investors who bought Apple's 30-year bond will be paid an annual interest rate of 3.45%. That's a lot lower than the rate many home buyers can get on a 30-year fixed mortgage.

Apple declined to comment, but Cohen notes that Apple is clearly watching interest rates closely a

ECB Bond-Buying Plan Has Investors Questioning How It Works

Posted by Forexsq 214 days ago (
img Mario Draghi’s trillion-euro puzzle is missing some key pieces.

When the European Central Bank president announced a program on Jan. 22 to buy 60 billion euros ($68 billion) of assets a month for at least 19 months to avert deflation, he surprised investors with the size of the stimulus.

He also provided more details than anticipated. Yet analysts poring over the ECB’s statements are finding that several critical points remain unclear.

“The ECB had to present a lot of details right from the beginning as they wouldn’t have been credible without them,” said Johannes Gareis, an economist at Natixis in Frankfurt. “What is missing somewhat is the fine print, which might have quite an impact on the implementation.”

Here’s what the ECB has and hasn’t revealed about Europe-style quantitative easing.

What will the asset mix be?

The ECB’s monthly spending will include its existing programs to buy covered bonds and asset-backed securities. Of the added purchases, Draghi said 12

ECB set to unveil bond plan

Posted by Forexsq 225 days ago (
img The European Central Bank is poised to announce a plan on Thursday to buy government bonds, resorting to its last big policy tool for breathing life into the flagging euro zone economy and fending off deflation.

Market expectations are sky-high for the ECB to unveil a large-scale program of quantitative easing (QE) - printing money to purchase the sovereign bonds - despite opposition from Germany's Bundesbank and concerns in Berlin that this could allow spendthrift countries to slacken their economic reforms.

A euro zone source said on Wednesday that the ECB's Executive Board, which met on Tuesday, has proposed that the bank should buy 50 billion euros ($58 billion) in bonds per month from March.

The broader, 25-member policymaking Governing Council began meeting at 0800 GMT on Thursday to discuss the proposal. ECB President Mario Draghi holds a news conference at 1330 GMT.

"I expect they will deliver, and launch a QE program that will be probably larger than 500 billion (

Treasuries Drop Ends Seven-Day Gain Before Fed Minutes

Posted by Forexsq 240 days ago (
img Treasury 10-year notes fell for the first time in eight days before the Federal Reserve publishes minutes of its December meeting and as investors await an industry survey analysts said will show the U.S. added more jobs.

Thirty-year bonds also fell after yields dropped yesterday to within three basis points of the record low set in July 2012. The minutes will be read for more insight into the meaning of the Fed’s guidance that it will be “patient” when considering the timing of its first interest-rate increase since 2006. Bonds have rallied in the new year, driving down average government yields to records even as the market is pricing in a 59 percent chance of rates rising by September.

“The market is widely divided as to why the Fed added the word ‘patient’ to the statement in December and the minutes today are expected to provide some clues on that,” said Richard Kelly, a senior strategist at Toronto-Dominion Bank in London. “We still believe the Fed is on course to raise in

Global Bond Yields Approach Record Low of 1.29% as Euro Plunges

Posted by Forexsq 242 days ago (
img A gauge of global bond yields approached the all-time low of 1.29 percent as investors sought the safety of debt while the euro tumbled.

Bonds in the Bank of America Merrill Lynch Global Broad Market Sovereign Plus Index had an effective yield of 1.30 percent on Jan. 2. The low was set in 2013 based on data going back to 1996. Yields in Australia and Japan fell to records. Bonds are rallying, pushing borrowing costs lower, and the euro is sliding on speculation the European Central Bank is about to start buying government debt to stave off deflation.

“The ECB is trying to move in to quantitative easing, and that’s helping the bond market globally,” said Hiroki Shimazu, the senior market economist in Tokyo at SMBC Nikko Securities Inc., a unit of Japan’s second-largest publicly traded bank.

The benchmark U.S. 10-year yield was little changed at 2.10 percent at 6:52 a.m. in London, according to Bloomberg Bond Trader data. The price of the 2.25 percent note maturing in November

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