Phew ! Was it all just a bad dream ? Italy bounces ..... and the EU shatters any remaining illusions

ref :- "Italy Bonds Rise for Second Day as President Waits on Populists" , Bloomberg Markets The answer to the question is : "No, it wasn't a dream .... or if it was, it's likely to be a recurring one." Today sees a second day of recovery after Tuesday's panic over Italy's political crisis. Italian Government Bond (BTP) yields are once again sharply lower, with the 2-year BTP yield having traded as low 0.82 % after that barely believable spike took it as high as 2.90% on Tuesday. The Euro versus US Dollar has touched $1.1720 today -- Tuesday's low was a full 2 cents lower. Just a reaction to an overreaction, or is there some genuinely better news ? Well, a bit of both ..... Tuesday's crazy

"Sell first and ask questions later !" ...... this ain't just nerves, it's PANIC !

ref :- "Italy's deadlock sets the stage for a battle over the Eurozone" , Opinion by Tony Barber, The Financial Times. The trouble with trying to point readers to a particular article or two is that on a morning like this things are moving so fast that they're out of date by the time you've finished reading ...... well, in terms of prices and levels anyway. If you'd been somewhere remote for the long weekend, like the Moon say, you'd be pretty flabbergasted by the market action this morning. Actually, even if you'd stayed a little closer to home and had kept a vague eye on things you'd still be pretty shocked at some of these moves. It's nothing short of a panic scenario out there and invest

The end of a long and not particularly uplifting week ......

ref :- Various It's been quite a ride, and traders in the US and UK will think they probably deserve the upcoming long weekend ..... depending which side of the Atlantic you are, Monday is Memorial Day / the Spring Bank Holiday in those two countries respectively. Those traders might deserve a break but they won't get one ..... not really. The markets never really close these days, and if you're managing any positions in any number of asset classes it would be particularly foolish to take your eye off the ball when things are as febrile as they are right now. By way of a quick run around some of the week's major issues, we'll start with a couple we've been discussing this week : ITALY : La

Turkey's half-hearted bowing to the inevitable .....

ref :- "Currency crisis worsens Erdogan siege mentality" , The Financial Times, International Section What exactly constitutes a "currency crisis" ? Mmmm...... a good question and to be frank we're not sure that there is a simple definition. Whatever the answer is though, we're pretty sure that a 20%+ fall in value in less than a month would qualify, particularly if the relevant powers-that-be seem determined to ignore the most basic economic principles and blame everybody else for their problems. So it is with Turkey ..... A very charitable view on things would be that Turkey is a victim of its own success, but of course that would ignore the fact that the consequences of Turkey's massivel

Italy Part 2 ...... or, when doubt is a good thing .....

ref :- Various We hope that it comes as no surprise that things can move pretty quickly in markets. They moved pretty quickly yesterday .... we'd only just got round to examining what a populist coalition is doing to Italy's markets when further moves meant that our observations seemed a little ..... well, out of date. Remember how we were pointing out that yields on 10yr Italian Government debt (BTPs) had jumped from 1.73% on May 3rd to 2.27% ? They actually hit 2.42% later in the day ..... that's a rise of 64 basis points in two weeks. That crucial Germany / Italy 10yr yield spread, which we noted had moved from 1.26% out to 1.70% over the same time period, traded at 1.89%. It would be fai

Italy and its politics ..... fascinating of course, and for investors more than a little scary.

ref :- "Italy waits to find out who its new Prime Minister will be" , Bloomberg Markets Luigi Di Maio and Matteo Silvini, leaders of the anti-establishment Five Star and the far-right League parties respectively, are off to see Italian President Sergio Matarella today. They need to run the agreed political and economic agenda of their populist coalition past Mr Matarella, and to propose their candidate for the role of Prime Minister. We can assume that in an ideal world both party leaders would want the job for themselves, but having won a considerably smaller share of the vote in March's general election (17% to 31%, though the right-wing block's total share is slightly the larger)), Mr Sal

At the risk of being shallow, a quick spin around some of the many things demanding your attention t

ref :- The Financial Times, Markets and Investing Section Louis Armstrong used to sing about having "so little time, so much to do" ..... we know how he felt. There's really quite a lot to take in this morning, but we'll just point you towards the FT's Markets and Investing Section where not only is there the usual market round-up but also a couple of more detailed articles on subjects much in the news. **** Note, just for good order's sake : The print version of the FT goes to press pretty early, so quoted trading ranges for example may not incorporate later market moves, particularly in the US. **** The most eye-catching market action yesterday was driven by the release of April US Retail

Argentina, its famous 100yr Bond, and a great example of that old MATURITY versus DURATION thing ...

ref :- "It is too soon to mock Argetina's century bond" , The Financial Times, Markets and Investing, 11/5/18 ref :- "How Argentina went from selling 100-year bonds to an IMF rescue in a matter of months" , QUARTZ (qz.com) 12/5/18 Oh dear, it all looked so optimistic, too ..... In June of last year, Argentina sold $2.75 billion of US dollar-denominated bonds with a coupon (interest rate) of 7.125% and a maturity date one full century later in 2117. Argentina has a truly dreadful history in capital markets ...... it has defaulted on its debt no less than eight times over the last two centuries, including the largest ever sovereign default as recently as 2001. With that kind of record, one mig

Crude oil .... and getting your thoughts in order

ref :- "Here's What Oil at $70 Means for the World Economy" Bloomberg Markets Given its importance and our own fascination with the oil market over many years, it comes as a bit of a surprise to be reminded that we've focused very little on its recent journey to higher prices other than to note how its inflationary implications might affect other markets. Probably a bit remiss of us, but now we're at $70 per barrel (actually, $71.47 for WTI and $77.44 for Brent as we write), it might be a good idea to make sure we've got our head around how a new price range is likely to affect economies around the globe. Which is not to say that the oil price is bound to stay around these levels. As ever, t

As if we didn't have enough to worry about .... the dollar and Emerging Markets

ref :- "Stormy weather from the US is creating headwinds for EM economies" , Markets Insight by John Authers, The Financial Times see also :- "In a Dollarized World, a Rising Dollar Spells Pain" , Wall St Journal May 9th 2018 Was there ever a time when the world wasn't lurching from one geopolitical crisis to another, never mind having to cope with several at the same time ? We know there must have been, but it seems an awfully long time ago . Of course it would not be entirely realistic to expect everything to be calm everywhere at any particular point in time, but the proliferation of issues with the potential to dramatically affect the world as we know it, and certainly not just in an eco

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