Almost everything's easy with hindsight, but hardened cynics really should have seen this coming

Friday 28th September 2018 ref :- " Italy hikes deficit goal, defies EU and rattles markets " , Reuters Markets Was it really that obvious ? Well yes, probably .... Italy's government is a coalition of two populist parties, populist being the operative word. The Five Star Party (Luigi Di Maio) had promised an increased basic wage and earlier retirement for all, whilst The League (Matteo Salvini) had wooed supporters with pledges of tax cuts. That's a costly mix of policy, and since the raison d'etre of those populist politicians is to be seen to cater for the Italian people rather than adhere to strictures passed down from the EU elite, it was never very likely that those promises would be

The Fed today, Italy's budget tomorrow : One's a racing certainty, the other ..... well, not

Wednesday 26th September 2018 The Fed today, Italy's budget tomorrow : One's a racing certainty, the other ..... well, not so much ref :- "Fed Dots to Harden Views for December Move : Decision-Day Guide" , Bloomberg Markets One of the talking heads on some financial media station or other this morning let us know that he "wasn't expecting any surprises from the Fed" . Is that what they call a tautology, or just a case of stating the bloomin' obvious ? It doesn't really matter .... the Fed Open Market Committee (FOMC) announce their latest decision on monetary policy later today (2.00pm NYT), and we know what the talking head means. Expectations of a 25 basis point hike in the Fed Funds rate

US Yields UP, but Dollar DOWN ..... not only is it counter-intuitive, it's also a bit of a worry

Monday 24th September 2018 US Yields UP, but Dollar DOWN ..... not only is it counter-intuitive, it's also a bit of a worry ref :- " Dollar Break With Yields Promps Concern U.S. Has Funding Issue " , Bloomberg Markets We talk about yield spreads quite a lot .... well, doesn't everybody. Somewhat to our surprise (embarrassment ?) we note that we haven't specifically mentioned the US / Germany 10yr spread for quite a while. That's probably a bit remiss of us, bearing in mind that at over 260 basis points the gap between what you can earn on a 10yr US Treasury Note (say 3.07%) and a 10yr German Bund (0.46%) is at its widest since the late 1970s and 1980s. Back then US inflation was about 3% hig

Another false dawn, or the real Mc Koy? Yields above 3.00%...

ref :- "Treasuries Sell Off as Investors Assess Tariffs" , The Wall Street Journal, Markets So what are we to believe ? The 3% yield on the US 10yr Treasury has long been touted as a hugely significant level for investors, both and technically and psycologically. An upward break through that barrier was supposed to point the way to (much) higher yields. In April, the 10yr yield nudged above 3% but failed to follow through. In May it charged through once more, trading as high as 3.11% before falling back again below 3% and severely disappointing the many high-profile bond market bears who were thinking that their time in the sun had come again. (Remember : as bond prices rise, yields fall ...

It ain't necessarily so ..... the yield curve, inversion and recession

ref :- "How central banks distort the yield curve's predictive power" , Megan Greene of Manulife Asset Management in the Financial Times 4/9/18 We should apologise for taking so long to get to this piece ..... it was just that kind of week last week. Still, it's easily accessible online (just Google the title) and of course remains as pertinent as ever. It's certainly not aimed at gnarled professionals, but in taking us all the way from what the yield curve represents to why what's going on right now may be a bit different to what's gone before, it'll have something for both newcomers and hopefully those who have been around a little longer. We know that in the normal way of things the yield

It's like a duel with blindfolds ...... Why the trade conflict may not get better anytime soon

ref :- " US and China's trade battle is based on false assumptions " , GLOBAL INSIGHT by Tom Mitchell, The Financial Times The US administration has picked fights on trade issues with a lot more nations than just China .... right at this moment Canada springs to mind as talks resume today on whether it will be part of the expanded new deal with the US and Mexico. The atmosphere between Washington and Brussels is hardly the healthiest either, but the biggest battle in what is arguably now a genuine trade war (potentially the worst since the 1930s) is being fought between the two largest economies on the planet. Its very size alone is enough to make it the single most important issue in this w

It could all come down to a simple question of whether you believe them or not ....

ref :- General It may be the Labour Day holiday in the States today, but that doesn't mean that there's nothing going on. Quite the opposite in fact, though the main topics in the Monday morning round-ups are much the same as they were last week. At one level they've all moved on a stage, but since the developments in all three stories that we're looking at revolve around the words of not entirely impartial politicians, it would be unwise to invest too much faith in their comments. Still, inevitably markets DO instinctively react to what the things they hear and read even if their significance proves to be worth no more than a knee-jerk reflex. So, with the enormous caveat that we are not at

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