The last pillar?
Global bond rout deepens on US fiscal worries
Agreement in Washington on a fresh fiscal package has set off dramatic rise in yields of US Treasuries and bonds across the world, threatening to short-circuit any benefits of stimulus. The bond rout raises concerns that the US authorities may be losing control over events.
By Ambrose Evans-Pritchard 8:03PM GMT 08 Dec 2010
The yield on 10-year Treasuries – the benchmark price of money worldwide and the key driver of US mortgages rates – has rocketed to 3.3pc, up 35 basis points since President Barack Obama agreed on Monday to compromise with Senate Republicans on tax cuts.
The Treasury sell-off has ricocheted through the global system, triggering bond sell-offs in Asia, Europe and Latin America. Japan’s finance ministry braced as borrowing costs on seven-year debt jumped by a sixth in one trading session, while German Bunds punched through 3pc.
And here they go boosting their foreign reserve holdings of gold to help shield their billions of dollars
CIGA LAS, Lisbon
GCC urged to boost gold reserves
Last Updated: Dec 9, 2010
GCC states should boost their foreign reserve holdings of gold to help shield their billions of dollars of assets from turbulence in global currency markets, say economists at the Dubai International Financial Centre Authority (DIFCA).
Diversifying more of their reserves from US dollars to the yellow metal would help to offer central banks in the region higher investment returns, said Dr Nasser Saidi, the chief economist of DIFCA, and Dr Fabio Scacciavillani, the director of macroeconomics and statistics at the authority.
“When you have a great deal of economic uncertainty, going into paper assets, whatever they may be – stocks, bonds, other types of equity – is not attractive,” said Dr Saidi. “That makes gold more attractive.”
Declines in the dollar during recent months have dented the value of GCC oil revenues, which are predominantly weighted in the greenback.
Gold prices rose to a record high before falling back this week as the dollar strengthened.
Longer term, gold could play a more important role in the global monetary system as the shift from developed world to emerging markets intensified, the two DIFCA economists said in a report published yesterday.
The dollar’s position as the leading reserve currency was likely to diminish as US dominance of the world economy dwindled
The “fat lady” is singing sir.
You are right. Here’s a little advice:
Sell the rallies short using a French Curve short term.
Buy to cover using the same tool.
This could be an occupation for the next 10 years minimum.
Be professional and wait for the trade to come to you.
30-Year Bond Gets Surprise Demand; Treasurys Rally
Published: Thursday, 9 Dec 2010 | 1:09 PM ET
By: Reuters and CNBC.com
Investors showed surprisingly heavy demand for 30-year bonds Thursday, despite fears that Treasury yields were ready to take off as the market tired of the barrage of supply.
The $13 billion sale drew a high yield of 4.41 percent, about 0.05 percentage points below expectations. The bid-to-cover ration, which measures how much is bid for each dollar auctioned, came in at 2.71, above the recent average of 2.66.
Treasury prices rallied after the results were released, sending the 30-year yield to 4.39 percent after a rally that marked the biggest since the fall of Lehman Brothers in September 2008.
The benchmark 10-year Treasury note spiked up 20/32 higher in price to yield 3.19 percent, down from 3.27 percent late Wednesday, while the 30-year bond was 29/32 higher after trading around even just prior to the auction.
Thursday’s auction is the last part of this week’s $66 billion in coupon-bearing supply.
Jin Sinclair’s Commentary
Because of the extension of the Bush Tax Cut? You have to be kidding.
This is the final pillar on gold as the debt rating of the currency of the US dollar becomes devalued by market forces.
Market forces beat any rating agency.
This is a market readjustment of the credit rating on the USA Inc.
If the 35 year uptrend line of the US long bond bull market dies, so does the dollar.
When gold ran into 1980, the yield on the 10 years was 14 7/8%.
Gold will trade at $1650 without any doubt.
US Treasuries hit by biggest sell-off in two years
By Richard Milne in London and Michael Mackenzie in New York
Published: December 8 2010 20:23 | Last updated: December 8 2010 22:18
US Treasuries suffered their biggest two-day sell-off since the collapse of Lehman Brothers, following a torrid month that has seen borrowing costs for western governments soar.
Germany, Japan and the US have all seen their benchmark market interest rates rise by more than a quarter in the past month while the UK’s has risen by nearly a fifth.
“You could argue that we are at a new stage where the global cost of capital goes higher and higher,” said Steven Major, global head of fixed income research at HSBC.
The yield on 10-year US Treasuries hit a six-month high of 3.33 per cent on Wednesday, up 0.39 percentage points from Monday and 1 percentage point higher than its October low. Japanese five-year yields also rose the most in two years, while Germany’s benchmark borrowing costs hit 3 per cent. “People are getting out of the market and moving to the sidelines, feeling shellshocked at the speed of the rise in yields,” said David Ader, strategist at CRT Capital.
US 10-year yields have risen by about 0.76 percentage points since November 8, those of Germany by 0.62 percentage points, the UK by 0.53 percentage points and Japan by 0.29 percentage points as the prices of the bonds has fallen.
Yields are still relatively low compared with long-term trends but investors are starting to fret that they could continue to move sharply higher. “Yields at this level are clearly unsustainable,” said Paul Marson, chief investment officer at Lombard Odier, the Swiss private bank.