Yields Are Trading At A Whopping

Forex News and Events: Asian session was quiet as markets began bracing themselves for tomorrow's ECB meeting. Risk appetite was muted as equity indices painted a mixed picture. EURUSD provided a solid U-shaped path trading from 1.2770 to 1.2730 then back to 1.2780. The correlation between EURUSD and its interest rate differential remains high so any directional price action will probability wait till tomorrow ECB meeting. German GDP 2011 printed in line with expectations at 3.0% y/y vs 3.6% prior read. The German newspaper A Die Welt reported on Italian PM Monti's wishes for lower interest rates from the EU. Monti also mentioned that the EU crisis is not due the poor structure of the European Union, but instead was caused by the US. Comments from San Francisco Fed President John ...

Forex News and Events: There was a high level of disbelief as Italian yields ripped through the 7.00% barrier with not so much as a peep from European policy makers or the ECB. At this point we need to be asking is Italy really too big to fail. In last night’s US republic primary debate the candidates echoes what we suspect is the general feeling in the USA, which is Europe needs to bailout Europe. There are significant examples that stress in Italy is now a contagion risk. Yield spreads across the Europe Late in the day there were rumors of an emergency ECB meeting, but central banks spokespeople declined to comment. Risk rushed out of the markets with the EURUSD collapsing to 1.3523 from 1.3850 and indices on both sides of the Atlantic sold off. The temporary relief provided by news ...

Forex News and Events: Trading remains dominated by random headline reports making FX trading volatile and prone to sudden reversals. The selloff in risk correlated trades has been driven primarily by heavy barrage of warnings that expectations for a grand solution at this weekend summit were overdone. In addition there is mounting reports that even if policy makers wanted to make a deal they lack the integration to execute a grand solution. Media outlets are reporting that the fund being made available to recapitalize banks could end up being less the €100bn and legal issues might stop having the EFSF directly guarantee sovereign debt. In addition, as rumor that emergence talks between French President Sarkozy, German Chancellor Merkel and the heads of the IMF and ECB have stalled. ...

American investors returned from their Labor Day holiday to face another laborious trading day on Wall Street. As your California editor pecks away at his keyboard this afternoon, the Dow Jones Industrial Average is down more than 200 points to within spitting distance of 11,000. For the first three trading days of September 2011, the Dow has tumbled more than 600 points — or about 5% — the worst three-day start for the month of September in the history of the US stock market. (Thanks to CNBC for this utterly meaningless statistic). As it happens, the Dow is also down about 5% for the year-to-date, and down about 5% from its record high of October 2007. “Down 5” is not exactly the new “up,” but it feels like it. Over in the Old World, the best-performing stock market in the European ...

The EUR continues to be pressured as a combination of Greek and Italian debt issues combined with a slowing of the global economy weighs on the EUR. This week is an important week as six G10 central banks meet along with a planned economic speech by President Obama. Economic News USD - Ugly Return to US Trading US traders will return from their Labor Day holiday to find the state of markets in turmoil. A combination of the euro zone debt crisis and the slowing of the global economy are pressuring risky assets. With the US stock markets closed on Monday the S&P 500 looks to gap significantly lower upon Tuesday's opening bell. As noted in yesterday's daily analysis, US investors will be looking to both the President and the Fed for policy responses to stop the bleeding. President Obama ...

NEW YORK, Aug 24 (IFR) - While corporate bond coupons have been shrinking fast, they haven't been able to keep pace with the precipitous decline of Treasury rates. As a result, the difference between corporate and Treasury yields -- a key measure of high-grade bond investment risk -- is wider than it has been all year. Yet corporate bonds, with the exception of banks, aren't that much riskier. Witness the option adjusted spread (OAS) between Treasuries and corporate bonds in the Barclays investment grade corporate index: closing at 2.12% on Tuesday, it is wider than it has been in more than a year and a half (see chart). Last Friday it breached the 2.00% mark for the first time since December 3 2009, when it closed at 2.03%. For a chart of the OAS for all corporates and financials, ...

NEW YORK, Aug 24 (IFR) - While corporate bond coupons have been shrinking fast, they haven't been able to keep pace with the precipitous decline of Treasury rates. As a result, the difference between corporate and Treasury yields -- a key measure of high-grade bond investment risk -- is wider than it has been all year. Yet corporate bonds, with the exception of banks, aren't that much riskier. Witness the option adjusted spread (OAS) between Treasuries and corporate bonds in the Barclays investment grade corporate index: closing at 2.12% on Tuesday, it is wider than it has been in more than a year and a half (see chart). Last Friday it breached the 2.00% mark for the first time since December 3 2009, when it closed at 2.03%. Yesterday's close was about 76bp wider than this year's low of ...

In the first five minutes of trading this morning, the Dow fell 300 points. It fell a further 40 in the ensuing 25 minutes. Then shed another 150 the moment the Philadelphia Fed announced grim news for manufacturing at 10:00 a.m. As you might expect, the “safety trade” is back on. At the opening, it sure looks like today will be the day gold breaks $1,800… and sticks. At last check, the Midas metal is up to $1,822. This morning’s initial shock in New York began in Europe. Major indexes in London, Frankfurt and Paris all shed 3-4% during their sessions. No specific event set things off… except perhaps “the realization is that don’t really have a clue” one waggish analyst explained it to MarketWatch. Banks across the board are taking the biggest hit. Good thing officials banned short- ...

FX Briefing Highlights Rating agencies challenge proposal to involve private creditors... ...and downgrade Portuguese bonds to “junk” status ECB raises refinancing rate to 1.5%, confirms upside risks to inflation German economy posts robust increase in production and orders in May Chinese central bank raises interest rates by 25 basis points No Summer Break for the Periphery after all The calmer mood in the markets after the Greek parliament had passed the austerity plan did not last long. Eurogroup finance ministers approved the next €12bn bailout tranche to Greece, but failed to unveil a comprehensive Greek aid package. Markets did not take this amiss on Monday, but then S&P quashed the French plan to involve private creditors, and Moody's downgraded Portugal's ...