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Position Long IfTitle:
Why the World’s Largest Bond Fund is Now Shorting Treasuries
As we go to the cyber presses this morning, the global equity markets are wobbling a bit. The Dow Jones Industrial Average is down 130 points – its biggest drop in three weeks. Commodities, likewise, are adding to yesterday’s losses. The CRB Index of commodity prices is down more than 3% during the last 24 hours, led by a steep 7% drop in the price of crude oil. The bond market, on the other hand, is enjoying the fleeting popularity of “flight to safety” buying.
This array of counter-trend market moves might be signaling the beginning of new trends – i.e. commodity prices down, bond prices up – but we doubt it. For as long as Ben Bernanke’s money machine keeps churning out the dollar bills that the Fed uses to buy Treasury securities, owning commodities and avoiding bonds seems like the ...
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Analysis: FX options market unconvinced of euro rally
(Reuters) - Expectations of more euro zone interest rate increases have enhanced prospects for the euro this year, but the options market isn't buying it.
Options investors are still betting on a decline in the euro against the dollar, with risk reversals for one-month options still showing a solid bias for "puts" despite an 8.3 percent surge in the single currency this year.
Analysts said there is a tug-of-war going on in the options market between market makers, who provide liquidity, and institutional buyers, who seem skeptical that the euro will keep on rising given persistent sovereign debt problems.
The euro's negative bias in the options market has been in place since October 2009.
A European Central Bank rate increase of 25 basis points to 1.25 percent last week has propelled ...
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Gold slides as oil skids, no help from weaker dollar
(Reuters) - Gold slid by more than 1 percent on Tuesday, echoing a sharp decline in the oil price and ignoring the decline in the dollar to succumb to profit-taking after having hit record highs on Monday.
The correlation between gold and the dollar index .DXY reached its most negative in nearly three months, meaning any decline in the U.S. currency would, in theory at least, help boost the gold price.
Brent crude oil futures lost more than $3 a barrel after top producer Saudi Arabia cut production in response to weak demand, according to two Saudi-based industry sources.
This added to pressure on the commodities complex from Goldman Sachs' decision on Monday to book profits on its positions in crude oil, copper, platinum and some agricultural commodities weighed on the raw materials ...
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Oil extends losses, high prices may hurt demand
(Reuters) - Brent crude fell to around $123 a barrel on Tuesday, extending overnight losses, on concern high fuel prices will destroy demand and after Goldman Sachs advised investors to lock in commodity trading profits.
ICE Brent crude for May fell nearly 1 percent to $123.05 at 0633 GMT, paring losses from a low of $121.97 after hitting a 2- year peak of $127.02 a barrel on Monday.
U.S. crude for May delivery fell 1.2percent to $108.63 a barrel. Earlier, prices dipped to $107.87 after having touched a 2- year high on Monday at $113.46.
Pressure on prices emerged after long-term commodity bull Goldman advised its clients on Monday to take profit as there is a strong chance that commodity prices may reverse.
It noted "nascent signs of oil demand destruction in the United States" that ...
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Japan quake's economic impact worse than first feared
(Reuters) - The economic damage from Japan's massive earthquake and tsunami last month is likely to be worse than first thought as power shortages curtail factory output and disrupt supply chains, the country's economics minister warned on Tuesday.
The more sober assessment came as Japan raised the severity of its nuclear crisis at the Fukushima Daiichi nuclear plant to a level 7 from 5, putting it on par with the Chernobyl nuclear disaster in 1986.
The Bank of Japan governor said the economy was in a "severe state," while central bankers were uncertain when efforts to rebuild the tsunami-ravaged northeast would boost growth, according to minutes from a meeting held three days after a record earthquake struck Japan on March 11.
The government and main opposition party have agreed to a ...
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Dollar rebounds vs euro but bearish outlook persists
(Reuters) - The dollar rebounded on Monday from last week's sharp decline against the euro, but a strong bearish stance toward the greenback is expected ahead of next month's U.S. debt limit debate.
Disparities in global central bank monetary policy will not help the currency.
The dollar found support after a U.S. government shutdown was averted on Friday and the currency's rise was widely viewed as overdue after its sell-off versus the euro for the last four months. So far in April, the dollar is still down more than 2 percent.
Interest rate differentials between Europe and the United States, however, are expected to continue to support the euro following the European Central Bank's 25-basis-point rate increase last week. The U.S. Federal Reserve is widely expected to keep rates low ...
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Gold, Silver, and Crude Oil Prices Drop Sharply
The prices of spot gold and spot crude oil fell from their previous yearly highs as the dollar made up slight ground versus the majors.
A lack of economic data on the calendar and the last minute compromise between Democrats and Republicans over the US budget allowed for the greenback to make up some lost ground versus the majors.
The strengthening dollar combined with concerns that a prolonged increase in crude oil prices will weigh on global growth had traders scaling back long positions in spot crude oil. A report by the IMF showed the agency expects global growth to slow this year to 4.4%.
Near the end of the trading session, spot crude oil prices were down at $109.37, off of this year's high of $113.15. Metals were also off of their highs. Spot gold was down at $1,462 from $1,476. ...
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PIMCO now betting against U.S. government debt
(Reuters) - The world's largest bond fund began betting against U.S. government debt last month on the expectation that shaky finances will jolt interest rates higher.
PIMCO, through its outspoken co-chief investment officer, Bill Gross, have been raising alarms about a lack of buyers for Treasuries once the Federal Reserve ends its own bond purchase program, also known as QE2, in June.
In February Gross revealed his ultra-bearish view on the United States by dumping all of his fund's U.S. government-related debt holdings.
The portion of PIMCO's $236 billion Total Return Fund held in long-term U.S. government debt, including U.S. Treasuries, declined to "minus 3" percent in March from zero in February and 12 percent in January.
In a short position, an investor sells a borrowed security ...
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Yen, dollar remain friendless; euro, Aussie shine
(Reuters) - The yen stayed on the backfoot early in Asia on Monday, while the dollar struggled against other currencies as investors continued to pile on carry trades in favor of higher-yielding assets.
In a further positive sign for global growth and risk trades, China reported exports and imports both stronger than expected in March, with little sign of any impact from the Japanese quake.
All of which helped the Australian dollar to fresh 29-year highs of $1.0585, while the euro extended to 15-month highs around $1.4488, paving the way for a test of $1.4582, the Jan 2010 high.
Indeed, latest data showed speculators abandoned bets in favor of the yen in the week to April 5, shorting the Japanese currency by the biggest margin in nearly a year, while building up a record long position ...
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