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Bonds & Interest Rates

Bond Market Matters

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Posted by Levente Mady

on Monday, 16 April 2012 15:35

The bond market traded in a fairly narrow range last week, as it held key support at 140 through the period.  The 10 Year Treasury Note yield is back below 2% again, kicking around the bond bears in the process.  There was no renewed talk of QE3 from any talking Fed Heads, but the nervousness in stocks coupled with rising European Sovereign yields was more than enough to provide solid support for bonds in spite of the heavy issuing calendar and negative seasonal influences.  The auctions last week were mediocre, but good enough not to cause any concern.  Traders were astute enough again to take down the 30 year tranche at the lowest prices of the week.  The bond market was relatively stable considering the roller coaster we had in stocks and a few other things.  Stocks and bonds are quite close to fair value. So there is no compelling reason to stick our neck out on that front other than the momentum that is rolling from stocks into bonds.

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Bonds & Interest Rates

The War for Spain

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Posted by John Mauldin

on Saturday, 14 April 2012 12:12

In my book Endgame, co-author Jonathan Tepper and I wrote a chapter detailing the problems that Spain was facing. It was obvious to us as we wrote in late 2010 that there really was no easy exit for Spain. The end would come in a torrent of misery and tears. Tepper actually grew up in a drug rehab center in Madrid – as a kid, his best friends were recovering junkies. (For the record, he has written a fascinating story of his early life and is looking for a publisher.) His Spanish is thus impeccable, and he used to get asked to be on Spanish programs all the time. Until the day came when the government created a list of five people, including our Jonathan, who were basically named "Enemies of Spain," and pointedly suggested they not be quoted or invited onto any more programs.

As it turns out, the real enemy was the past government. We knew (and wrote) that the situation was worse than the public data revealed, but until the new government came to power and started to disclose the true condition of the country, we had no real idea. The prior government had cooked the books. So far, it seems it even managed to do so without the help of Goldman Sachs (!)

In about ten days I will be sending you a detailed analysis of all this, courtesy of some friends, but let's tease out some of the highlights. True Spanish debt-to-GDP is not 60% but closer to 90%, and perhaps more when you count the various and sundry local-government debts guaranteed by the federal government, most of which will simply not be paid. Spanish banks are miserably underwater, and that is with write-offs and mark to market on debts that totals not even half of what it should be. If Spanish housing drops as much relative to its own bubble as US housing has so far (and it will, if not more), then valuations will drop 50%. The level of overbuilding was stupendous, with one home built for every new every person as the population grew. We know that unemployment is 23%, with youth unemployment over 50%. Etc, etc. We could spend 50 pages (which is what I will get you access to) detailing the dire distress that is Spain.

To Read More CLICK HERE

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Bonds & Interest Rates

Artemis On Volatility At World's End: Deflation, Hyperinflation And The Alchemy Of Risk

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Posted by ZeroHedge

on Tuesday, 10 April 2012 10:02

"Artemis Capital Management, whose latest epic letter is an absolute must read for all" - ZeroHedge

Imagine the world economy as an armada of ships passing through a narrow and dangerous strait leading to the sea of prosperity. Navigating the channel is treacherous for to err too far to one side and your ship plunges off the waterfall of deflation but too close to the other and it burns in the hellfire of inflation. The global fleet is tethered by chains of trade and investment so if one ship veers perilously off course it pulls the others with it. Our only salvation is to hoist our economic sails and harness the winds of innovation and productivity. It is said that de-leveraging is a perilous journey and beneath these dark waters are many a sunken economy of lore. Print too little money and we cascade off the waterfall like the Great Depression of the 1930s... print too much and we burn like the Weimar Republic Germany in the 1920s... fail to harness the trade winds and we sink like Japan in the 1990s. On cold nights when the moon is full you can watch these ghost ships making their journey back to hell... they appear to warn us that our resolution to avoid one fate may damn us to the other.

....read it all HERE

Screen shot 2012-04-10 at 9.57.15 AM



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Bonds & Interest Rates

Sovereign Bond Yields Sharply Higher in Spain, Italy, Portugal

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Posted by Mike Shedlock - Mish's Global Economic Trend Analysis

on Thursday, 05 April 2012 05:33

Sovereign Bond Yields Sharply Higher in Spain, Italy, Portugal   Curve Watcher's Anonymous has an eye on European sovereign bond yields. In the absence of another huge LTRO program from the ECB, and perhaps even with another LTRO program, yields in Spain, Portugal and Italy should head North. The LTRO is not going to trump long-term fundamentals which are downright horrible.

Here are a few charts to consider.  

Spain 10-Year Yield    

sovereign debt  Spain 2012-04-04

Italy 10-Year Yield  

sovereign debt  Italy 2012-04-04

Portugal 10-Year Yield    

sovereign debt  Portugal 2012-04-04



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Bonds & Interest Rates

"Fascinating Interview With Martin A. Armstrong on the Sovereign Debt Crisis

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Posted by Steve Saville via 321Gold.com

on Friday, 30 March 2012 00:51

The Hera Research Newsletter is pleased to present a fascinating interview with Martin A. Armstrong, founder and former Head of Princeton Economics, Ltd.  In the 1980s, Princeton Economics became the leading multinational corporate advisor with offices in Paris, London, Tokyo, Hong Kong and Sydney and in 1983 Armstrong was named by the Wall Street Journal as the highest paid advisor in the world.
 
As a top currency analyst and frequent contributor to academic journals, Armstrong’s views on financial markets remain in high demand.  Armstrong was requested by the Presidential Task Force (Brady Commission) investigating the 1987 U.S. stock market crash and, in 1997, Armstrong was invited to advise the People’s Bank of China during the Asian Currency Crisis.
 
Based on a study of historical gold prices and financial panics, Armstrong developed a cyclical theory of commodity prices, which lead to the pi-cycle economic confidence model (ECM), used to make long term forecasts.  Using the ECM, Armstrong predicted both the high-water mark of the Nikkei in 1989, months ahead of time, and the July 20, 1998 high in the U.S. equities market, as well as a major top in financial markets on February 27, 2007.  The ECM was called “The Secret Cycle” by the New Yorker Magazine and Justin Fox wrote in Time Magazine that Armstrong’s model “made several eerily on-the-mark calls using a formula based on the mathematical constant pi.” (Pg 30; Nov. 30, 2009).

.....read the whole interview HERE (scroll down a bit)

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