Forex Futures Forum Archive for 04/26/2011

Syd 22:35 GMT April 26, 2011 Reply   
Price rises may slow Asian growth
The ADB report warned that if fuel and food prices continue to rise at their current pace, inflation could shave between 0.4 and 1.5 percentage points off gross domestic product in each of Asia's largest developing economies this year and next, including in China and India. Barring such price rises, the intergovernmental bank expects growth in the region overall to be 7.8 per cent this year.

UNCHECKED increases in oil and food prices could shave growth across Asia over the next two years, according to a report by the Asian Development Bank, imperilling economic gains among the poor in the globe's fastest expanding region.

Syd 22:28 GMT April 26, 2011 Reply   
but i'm betting the fed says something to boost the dollar a little bit, knocking commodities down again.

but i'm betting the fed says something to boost the dollar a little bit, knocking commodities down again.

Syd 15:31 GMT April 26, 2011 Reply   
Using the metric developed by the IMF in its latest fiscal monitor, France is the next country potentially at risk of a rating action. This risk is important, argues Deutsche Bank, as various European support mechanisms, ESM and EFSF, have their lending capacity tied to AAA countries. Deutsche notes France has remained in the low 30s over Germany in the 10-year cash space and being short France offers "a relatively cheap hedge against an unexpected rating action."

Syd 15:23 GMT April 26, 2011 Reply   
As the Federal Reserve's bond-buying program draws to a close, with few expecting a third round, the government will have left the Treasury investment community with a false sense of profit, said a portfolio manager at bond-fund giant Pacific Investment Management Co.

In the fund's April Global Central Bank Focus released Tuesday, Pimco marketing strategist and portfolio manager Anthony Crescenzi compared the Fed's "quantitative easing" program with a Ponzi scheme.

"Just as Charles Ponzi needed donuts to turn back a suspicious crowd of investors, the Fed needs 'donuts' in order to fill the bellies of the literally millions of investors worldwide who worry about the alarmingly large U.S. budget deficit and the impact that the U.S. debt dilemma could have on their Treasury holdings," Crescenzi said, adding that it will take "a lot of convincing" to draw investors to future Treasurys auctions.

Having become the Treasury market's biggest buyer, the Fed has created a "profit illusion" for investors who believe they can make money off rising prices and falling yields, Crescenzi said. Beyond the direct impact on Treasurys, Crescenzi said "quantitative easing" boosts economic growth and inflation, which "confiscates" the earnings made off Treasurys yields. Foreign investors have only added to the pain with the dollar's decline in foreign-exchange value.

In February, Pimco founder and co-chief investment officer Bill Gross dumped all U.S. government-related holdings from the Total Return Fund, the world's biggest bond fund. He later explained that he saw "little value" in U.S. bonds given unchecked entitlement spending adding to the nation's ever-growing debt load. Pimco oversees more than $1 trillion in assets.

With the second round of QE set to end in June, Crescenzi said that Treasury investors will realize that the government's bond purchases have been the main source of U.S. bond demand and had "suppressed the rates they earn on Treasury holdings."

"Treasury investors face the potential for capital losses for having bought into the Fed's scheme at prices inflated by QE," Crescenzi said.

In the same note, Pimco senior vice president and portfolio manager Ben Emons added that rising inflation expectations will pose a challenge for the Fed to exit QE2 smoothly. The 5-year/5-year forward breakeven--one of the Fed's most-watched market gauges of inflation expectations--currently stands around 3.1%. That compares with about 2.9%, which was further alleviated by damp inflation fears in the eurozone, when the Fed concluded the first round of QE.

The U.S. "must own up to its past sins," Crescenzi concludes, suggesting that economic growth in the U.S. needs to come from investments in its people, land and infrastructure, not debt.
Dow

Syd 15:20 GMT April 26, 2011 Reply   
A possible restructuring of Greece's sovereign debt would have a worse systemic effect on global markets than the 2008 Lehman Brothers bankruptcy, European Central Bank Executive Board member Jose Manuel Gonzalez-Paramo said Tuesday.

"Any debt restructuring would imply the breach of legal obligations, which most likely would have a more negative systemic effect than the Lehman catastrophe," Paramo added.

Speaking at an academic event in Cordoba, Spain, Paramo said the ECB doesn't contemplate such a restructuring as a "central scenario" and added that Greece's government has "viable" plans to cut its sizeable budget deficit.

"The Greek government is implementing reforms," he said. "It makes no sense to have this debate."

Paramo also said that no debt restructuring has occurred in a developed European economy since World War II, and any such event would have an impact on the European banking sector as a whole.

Last year, Athens was forced to appeal to its European Union peers and the International Monetary Fund for a bailout loan of EUR110 billion in return for an overhaul of its economy.

However, the country's economy and government finances remain mired in a deep crisis. Meanwhile, some economists say that the government may be forced to restructure debt, despite a recent repayment extension for Greece's EU and IMF loan

GVI Forex Jay 09:44 GMT April 26, 2011 Reply   
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