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Global Yield Curves
Yield curves are a snapshot of bond yields of similar credit quality and asset class, ranging from maturities of as little as one month to 30 years.
forget about this freerobot
its an empty shell
next
Economist Dave Rosenberg warns investors to Get a Grip on Reality.
"Double-dip risks in the U.S. have risen substantially in the past two months. While the back end of the economy is still performing well, as we saw in the May industrial production report, this lags the cycle. The front end leads the cycle and by that we mean the key guts of final sales the consumer and housing.
We have already endured two soft retail sales reports in a row and now the weekly chain-store data for June are pointing to sub-par activity. The housing sector is going back into the tank there is no question about it. Bank credit is back in freefall. The recovery in consumer sentiment leaves it at levels that in the past were consistent with outright recessions. Last years improvement in initial jobless claims not only stalled out completely, but at over 470k is consistent with stagnant to negative jobs growth. And exports, which had been a lynchpin in the past year, will feel the double-whammy from the strength in the U.S. dollar and the spreading problems overseas.
Spanish banks cannot get funding and another Chinese bank regulator has warned in the past 24 hours of the growing risks from the countrys credit excesses. A disorderly unwinding of Chinas credit and property bubble may well be the principal global macro risk for the remainder of the year. Indeed, perhaps the equity market finally realized yesterday that allowing China more control to defuse an internal property and credit bubble may well be a classic case of be careful of what you wish for.
The Bond Cycle and Deflation
I was at an event recently where I was able to see two legends among others Louise Yamada and Gary Shilling. Louise made the point that while secular phases in the stock market generally last between 12 and 16 years, interest rate cycles tend to be much longer anywhere from 22 to 37 years; and she has a chart back to 1790 to prove the point! So while all we ever hear is that this secular bull market in bonds is getting long in the tooth, having started in late 1981, it may not yet be over. After all, the deleveraging part of this cycle has really only just begun and if history is any guide, it has a good 5-6 years to go at a time when practically every measure of underlying inflation is running south of 1%.
Double Dip, Anyone?
The data suggests that we are now seeing the consumer sputter with what looks like a very weak handoff into the third quarter. The housing sector is collapsing again. The export-import data are pointing to a sudden deceleration in two-way trade flows. Commercial real estate is dead in the water. Bank credit is in freefall right now.
There is still something left in the tank as far as capex and inventory investment is concerned, but by the fourth quarter, we could well be looking at a flat or even negative GDP print.
Even if we dont get a double-dip recession, economic growth will probably be insufficient to absorb the still-large amount of excess capacity in the system. What that means is that the U.S. unemployment rate will remain high for as far as the eye can see. It also means that inflation and interest rates will remain low for a sustained period of time, and that a stock market priced for peak earnings in 2011 could be in for some disappointment."
Yield Curve as of 2010-06-22
click on chart for sharper imagehttp://2.bp.blogspot.com/_nSTO-vZpSgc/TCEPrM5eCSI/AAAAAAAAItQ/-YkPjOu5N4k/s1600/yield+curve+as+of+2010-06-22.png
The above chart shows Weekly Closing Yields.
The chart does not reflect inflation, inflation expectations, reflation, or an improving economy. It does reflect what one would see after a reflation effort that has failed.
Yet, equities are priced not only for reflation, but for a strong reflation at that. Either stocks or the yield curve is wrong. I suggest you pay attention to the yield curve.
Today, China says Dollar peg is dead and vows yuan flexibility.
China on Saturday said it would gradually make the yuan more flexible, in a gesture that may deflect foreign criticism at next week's G20 summit, but will not quickly yield a big move by its currency.
"This is an important move as it signals recognition by Chinese officials that a more flexible exchange rate is in China's own interest and also acknowledges its responsibility to the international community," said Eswar Prasad, a former head of the IMF's China division.
"We believe this is a positive gesture, suggesting the yuan will soon resume its appreciation against the dollar," Goldman Sachs economists Yu Song and Helen Qiao said.
"The global economy is gradually recovering. The recovery and upturn of the Chinese economy has become more solid with enhanced economic stability," the Chinese central bank said in a statement on its website.
"It is desirable to proceed further with reform of RMB exchange rate regime and increase the RMB exchange rate flexibility," it said.
Europe Welcomes China's Move
Reuters reports Europe welcomes China's declaration on yuan reform
French President Nicolas Sarkozy said the move was "encouraging" and the European Union's executive said the expected reforms to the exchange rate of the yuan (also known as the renminbi or RMB) should have positive repercussions for the euro zone.
"The European Commission welcomes The People's Bank of China decision to proceed further with the reform of the RMB exchange rate regime and to resume the RMB exchange rate flexibility," it said in a statement.
"It considers that such a move will be beneficial for both the Chinese economy and the global economy. The European Commission looks forward to work closely with the Chinese authorities bilaterally and in the G20 to address successfully the current challenges to the global recovery."
Russian Finance Minister Alexei Kudrin also welcomed the move but said that it would not have much impact on Russia's economy or trade between the two emerging economies.
Geithner Urges Vigorous Action
Treasury Secretary Tim Geithner is also in on the love-fest while Urging Vigorous Action After Yuan Decision
U.S. Treasury Secretary Timothy F. Geithner called for vigorous action on Chinas pledge today to allow more currency flexibility, and a leading Senate Democrat demanded more details within days to prevent Congress from pursuing trade sanctions.
Firedoglake: China Agrees to Flexible Exchange Rate [UPDATED]
This is an important step, but the test will be how far and how fast they let the currency appreciate, Geithner said in a statement today in Washington. Vigorous implementation would make a positive contribution to strong and balanced global growth.
China signaled an end to a 23-month peg to the dollar that has drawn international criticism and fueled threats of retaliation from U.S. lawmakers including Senator Charles Schumer, who argue that holding down the yuans value unfairly favors Chinese exports. Geithner has urged China to allow the yuan to appreciate, saying the peg is an impediment to the global recovery.
Schumer, vice chairman of the Joint Economic Committee of Congress and co-sponsor of legislation that would allow for duties on Chinese imports, said he was dissatisfied with a Chinese statement that didnt indicate the timing or amount of a yuan adjustment.
We hope the Chinese will get more specific in the next few days, Schumer said. If not, then for the sake of American jobs and wealth, which are hurt every day by Chinas practices, we will have no choice but to move forward with our legislation.
China got exactly the praise it wanted from US and European leaders in exchange for essentially nothing.
China did not agree to a timetable or an amount. In essence it was a hollow statement. By acting extremely tough, then throwing Obama a bare bone, it made it appear as if the action was meaningful.
It wasn't. I am not in favor of tariffs but I expect to see Schumer pressing ahead with protectionist legislation.
in one of your interviews recently ( I think Austalia CNBC) you were mentioning about dangers of rising CPI in China. Today I see it printing 3.1%, what is above expectations, and according to the interview it could very likely trigger tightening in Chinese policy. I understand your theory how it would impact the world economy, but how fast could China go into action ??? I'm I right assuming that Aussie & Kiwi would be it's first victims ?
Thank You
b.
question is do we short it? dont know yet but if your happy to chance a "sell" in Asian session then you'll probably get away till before European session starts and if lucky you might get a dip below to 14520 - 14480. Below that i would rather prefer buying on dip obviously in-line with progressing data to come in days ahead.....
PALO ALTO, Calif. � Hewlett-Packard Co. said Tuesday it will cut about 9,000 jobs and take $1 billion in charges over three years as it creates fully automated commercial data centers.
The Palo Alto, Calif. technology company said it will invest $1 billion in its enterprise services unit, over a multiyear period. The company said the job cuts will be the result of productivity gains and automation. The company said it will replace about 6,000 of the jobs to boost its global sales and delivery staff.
HP, whose fiscal year ends in October, said it will record about half of the $1 billion charge in the third quarter and the rest by the end of fiscal 2013.
More Here..http://www.huffingtonpost.com/2010/06/01/hewlettpackard-to-cut-900_n_595776.html
Further more;
*Mayor of Annapolis Unveils More Budget Cuts
*Oil Industry Lashes Out at Drilling Ban
*Gulf Shrimpers Fear Oil Spill Will Put Them Out of Business
*Three US Cities on The Brink of Broke
*Four More Georgia Banks Get Consent Orders
*NC Mental Health Group Can Only Pay Half Wages
*Thousands of Pennsylvania Jobs Could be Lost If Fed. Funding Expires
*BP (BLOODYPATHETIC) Spill Clouds Future of US Drilling
MAY 14, 2010 | ISSUE 4619
In the face of diminished government revenue, the federal budget deficit set a new record for the month of April. What do you think?
http://www.theonion.com/articles/budget-deficit-hits-record,17441/