Can we all just calm down???

D

DerKaiser

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8pm - US to keep interest rates near zero: However, stocks initially fell after the statement was released, possibly reflecting disappointment that the Fed did not announce another round of bond buying.
http://www.independent.ie/breaking-news/world-news/us-to-keep-interest-rates-near-zero-2844038.html

8pm - Investors brushed aside a statement by the Federal Open Market Committee that virtually ensures rock-bottom interest rates through 2013, sending the U.S. stock market plummeting once again. The Dow was almost immediately down more than 1% following the 2:15 p.m. statement after trading in positive territory throughout the day Tuesday.


Somewhere in between I click on "Market Stutters after Fed hold line on rates" which leads me to an article titled "Market Rises After Fed Holds Line On Rates"

10pm - Dow rallies after Fed statement
[broken link removed]

The problem is that there are too many people paid to report & analyse financial indicators with the lion's share of them not having a clue of the fundamentals. Is this how far the human race has come? What a waste of time.....
 
I also notice the media aren't rushing to report the recent huge rally in Irish Government bonds across the curve and yet when they were falling, we were getting hourly updates.
 
One thing I have learned in the last couple of years is to take the mainstream media reports as a source of comedy and nothing else. The only thing I filter out is the reported facts (if they are even mentioned) and then make up my own opinion.
I think your post highlights some of the bizarre comments. What baffles me most is that you sometimes hear CNBC report that "the stock market rallied because interest rates were kept low" and then a few months later you hear "the stock market rallied because interest rates were kept low". It is truly comic at times.

Sunny, I am also surprised at the lack of commentary, but it does show the old mantra that good news is no news.
 
Sunny said:
I also notice the media aren't rushing to report the recent huge rally in Irish Government bonds across the curve and yet when they were falling, we were getting hourly updates.
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I wondered about this too, altho disaster and panic make for better news!

I think this morning I heard yields were around the 9.? mark. Surely this is good news or am I reading this wrong? If Italy and Spain can borrow at 6.? then we aren't that far off those levels. The forecast is stable from S&P too. Am I missing something here, or is it likely we could be back into bond markets in the not too distant?
 
horusd said:
I wondered about this too, altho disaster and panic make for better news!

I think this morning I heard yields were around the 9.? mark. Surely this is good news or am I reading this wrong? If Italy and Spain can borrow at 6.? then we aren't that far off those levels. The forecast is stable from S&P too. Am I missing something here, or is it likely we could be back into bond markets in the not too distant?
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The 10 year have gone from about 14% to about 9% in the past month. Markets are still volatile so the we could see a huge sell off again so wouldn't get too excited. There are signs on investors returning though. I just remember reading headlines in most media outlets when yields hit 14%. Haven't seen one saying we are down at 9%.

Think you are right about bad news is better than good news when it comes to the media.
 
Which is the more important Sunny? 10 yr or 1 yr or whatever. Or is there any significance between them in terms of their importance to us?
 
horusd said:
Which is the more important Sunny? 10 yr or 1 yr or whatever. Or is there any significance between them in terms of their importance to us?
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10 year is the one the commentators latch onto. At the moment, there is no real difference because we can't borrow for any length and the shorter maturities are trading at similar levels. Obviously it is more encouraging if you see investors buy longer dated paper purely as a sign of confidence.
 
Sunny said:
10 year is the one the commentators latch onto. At the moment, there is no real difference because we can't borrow for any length and the shorter maturities are trading at similar levels. Obviously it is more encouraging if you see investors buy longer dated paper purely as a sign of confidence.
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Rightio. Thanks. The news report this am suggested significant American interest in Irish 10 yr bonds, so that looks good I suppose. I wonder do these lads buy them discounted on the secondary market, and at what interest rate ? Or is the interest rate whatever the original bond was issued for? It sounds lucrative, even if somewhat risky. I also wonder can anyone buy these?
 
horusd said:
Rightio. Thanks. The news report this am suggested significant American interest in Irish 10 yr bonds, so that looks good I suppose. I wonder do these lads buy them discounted on the secondary market, and at what interest rate ? Or is the interest rate whatever the original bond was issued for? It sounds lucrative, even if somewhat risky. I also wonder can anyone buy these?
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The prices and yields quoted and for existing bonds being traded on the bond market. Anyone can buy them through a broker, but there may be minimum purchase amounts involved.

Agree with Sunny that bond markets are still hugely volatile and we could well be back above 10% next week. I think what has added to the appeal of junk bonds is that a lot of investors have pulled out of stocks in the last 2 weeks, i.e. the perceived risks involved in stocks increased, which made bonds of all kinds, including junk ones, more attractive to some.
 
Chris said:
The prices and yields quoted and for existing bonds being traded on the bond market. Anyone can buy them through a broker, but there may be minimum purchase amounts involved.

Agree with Sunny that bond markets are still hugely volatile and we could well be back above 10% next week. I think what has added to the appeal of junk bonds is that a lot of investors have pulled out of stocks in the last 2 weeks, i.e. the perceived risks involved in stocks increased, which made bonds of all kinds, including junk ones, more attractive to some.
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I assume that the traded bonds are for the original issued interest rate. Is this correct?

Isn't it also true that both Japan and Italy have lower borrowing costs (despite high debt levels) because so much of the debt is held by citizens and institutions of these countries? Would it not make eminent sense for the gov't to offer these for sale to Irish people on some discounted buy-back and re-sell principle. Where the bonds would be bought back at a discounted rate, and re-sold to Irish citizens and institutions, and a small margin would be taken by the gov't. It could also be helped by a tax strategy that acknowledges the risk involved and discounts profits made. This surely would be a win -win for everyone?
 
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horusd said:
I assume that the traded bonds are for the original issued interest rate. Is this correct?

Isn't it also true that both Japan and Italy have lower borrowing costs (despite high debt levels) because so much of the debt is held by citizens and institutions of these countries? Would it not make eminent sense for the gov't to offer these for sale to Irish people on some discounted buy-back and re-sell principle. Where the bonds would be bought back at a discounted rate, and re-sold to Irish citizens and institutions, and a small margin would be taken by the gov't. It could also be helped by a tax strategy that acknowledges the risk involved and discounts profits made. This surely would be a win -win for everyone?
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Easiest way is an example. Let's say the original bond was worth €100 with a coupon of 5% a year. If you buy it now for €80 you will still bet €5 per year on the coupon, but this makes up a higher percentage value.

As for your suggestion, I would rather see the government interfering less than more. There is nothing stopping Irish people to buy up some existing bonds, and there is favourable tax treatment already.
 
A relatively good news article. ( I will take what I can get at this stage!)

Irish Bonds Suggest Dublin Saved as Athens Suffers: Euro Credit
2011-08-23 23:01:00.5 GMT


By Lukanyo Mnyanda and Anchalee Worrachate
Aug. 24 (Bloomberg) -- Irish bonds are delivering the best returns in the world as investors bet the former Celtic Tiger is the most likely of the euro area’s bailed-out nations to grow itself out of trouble, while Portugal and Greece shrink.
Irish securities handed investors a 14 percent gain in the past three months, the highest among 26 government debt markets, according to indexes compiled by Bloomberg and the European Federation of Financial Analysts Societies. The nation’s 10-year yield is at more than two percentage points below its three- month average, the biggest recovery among the countries that received aid. Greek yields are 1.13 percentage points higher than their average since May 23, while those of Portugal are 2 basis points above their mean.
“My perception is, and always has been, that the situation in Ireland is more manageable than in all the other tricky countries,” said Kornelius Purps, a strategist at UniCredit SpA in Munich. “The economy has growth potential while the other economies don’t. That’s one of the biggest problems for Greece and Portugal.”
Bondholders are betting that the Irish economy will extend an export-led recovery that propelled it in the first quarter to the fastest growth rate in more than three years. The economy will probably expand by 0.5 percent this year, while the Portuguese and Greek economies contract by at least 1.9 percent, Bloomberg surveys of economists show. Irish Prime Minister Enda Kenny obtained a cut on the country’s bailout interest rate last month while retaining the right not to raise the 12.5 percent tax rate it charges companies.

Profit and Loss

Irish 10-year yields slipped below 10 percent this month for the first time since Portugal’s April rescue. The Greek 10- year yield, which reached a record 18.39 percent in July, hasn’t been in single digits since October, while Portugal’s 10-year borrowing cost has stayed at 10 percent or above since June.
The profit investors have made on Irish bonds compares with losses of 2.2 percent on Portuguese securities and 1.5 percent on Greek debt, according to the EFFAS indexes. German bonds gained 6.1 percent in the three months.
Ireland’s funding costs are also declining relative to those of Germany, the euro area’s largest economy, defying a surge in Greece’s. Greek two-year notes yield the most relative to German counterparts since at least 1998 at almost 39 percentage points, while the Irish spread shrank to the narrowest since April at 807 basis points. The Portuguese spread of about 12.3 percentage points is nea its widest this month.

Easier Money

European leaders sought stop a region-wide selloff in bonds by agreeing at a summit on July 21 to extend the maturities of Greece’s existing bailout loans and provide financing at rates close to the cost paid by the European Financial Stability Facility of about 3.5 percent, adding that those conditions would also apply to Ireland. The euro area’s westernmost nation had been originally saddled with an average 5.8 percent rate.
The new deal will save Ireland 1 billion euros or more next year if the cut is extended to other loans, Finance Minister Michael Noonan said on July 22.
The country resisted attempts led by French President Nicolas Sarkozy to force it to raise its corporate tax rate which, at about half the EU average of 23 percent, has lured companies such as Hewlett-Packard Co. and Pfizer Inc. That’s helping fuel optimism that it will resume growth that doubled the size of the economy in the decade through 2007 before a real-estate bubble burst. Economic expansion in Portugal has averaged less than 1 percent a year in the past decade.

Moving Too Far?

Ireland’s yields may have moved too far below those of Portugal, according to Orlando Green, a fixed-income strategist at Credit Agricole Corporate & Investment Bank.
“Good things are happening in terms of fiscal news and they are trying to push through their austerity package,” Green said in a telephone interview from London. “But at current levels, Ireland looks expensive relative to Portugal.”
The spread between Irish and Portuguese 10-year bonds is
158 basis points, the most since at least 1997, when Bloomberg started collecting the data. The gap has jumped from six basis points on Aug. 1. The Irish securities yielded 246 basis points more than their Portuguese counterparts on Dec. 31.
‘We’ve met a number of international investors over the past few months and they seem to view Ireland as being different to Portugal,” said David Owen, chief European economist at Jefferies International Ltd. in London. “A view shared by most institutional investors we talked to is that the Irish economy is flexible and is better positioned to grow.”

Record Surplus

Ireland’s trade surplus widened in June to a record 4.08 billion euros ($5.9 billion) from 3.8 billion euros in May as exports rose, the country’s Central Statistics Office said yesterday. The government predicts that the budget deficit will fall to 10 percent of gross domestic product this year from 32 percent last year. The Irish central bank forecasts that economy will grow 0.8 percent this year and 2.1 percent next year, while exports will rise 6.4 percent.
In contrast, Portugal’s government is expecting its economy to shrink 2.3 percent this year and 1.7 percent in 2012.
Portugal only see an “expressive economic recovery from 2013,”
Finance Minister Vitor Gaspar said on July 14. The Greek economy may shrink by between 4.5 percent and 5.3 percent in 2011, Finance Minister Evangelos Venizelos said on Aug. 22.
“Ireland is not out of the wood yet, and there are still a lot of negatives on the domestic front,” said Padhraic Garvey, head of developed debt-market strategy at ING Groep NV in Amsterdam. “But the country, despite some setbacks, may stand the best chance to outperform going forward. It has the most credible circumstances to get through this relative to the rest.”

For Related News and Information:
Top credit-market stories: TOP CM <GO>
Bond yield forecasts: BYFC <GO>
EU credit stories: NI EUCREDIT <GO>
Debt crisis monitor: CRIS <GO>

--Editors: Mark Gilbert, Dara Doyle

To contact the reporters on this story:
Lukanyo Mnyanda in Edinburgh at +44-131-301-5094 or lmnyanda@bloomberg.net; To contact the reporter on this story:
Anchalee Worrachate in London at +44-20-7073-3403 or aworrachate@bloomberg.net

To contact the editor responsible for this story:
Mark Gilbert at +44-20-7073-3051 or magilbert@bloomberg.net
 
Stay firm. Hold fast. There's a light at the end of the tunnel.

It may be an oncoming train, but as you say, we'll take what succour we can get at this stage.
 
Ireland's 10 year bond yields went below 9% for the first time today since February this year
 
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