User Name: Password:      Register - Lost password?

Forex News Blog
Back to The Headlines
Monday March 16, 2009 - 11:01:08 GMT
Lloyds TSB Financial Markets - www.lloydstsb.com/corporatemarkets

Share This Story:
| | Email

Economics Weekly - Despite rising supply, global bond yields still fall; Weekly economic data preview - Is the US Fed any closer to buying treasuries?


Economics Weekly - 16 March 2009


Despite rising supply, global bond yields still fall

As the Bank of England embarks on a £150bn programme of buying securities from the private sector that will not be financed by an equivalent issue of government paper - so called quantitative easing – bond yields are falling around the world. This is perhaps partly because of a perception that others around the world may also join the UK central bank in purchasing government debt, although there is no convincing evidence yet to support such a view. Indeed, the most likely reason for what is a coordinated fall in global yields could simply be the fact that the economic data flow in the last few weeks has been very poor for most countries. Admittedly, government bond yields in the UK have fallen more sharply than most this week, owing to the start of quantitative easing by the Bank of England, see chart a. This has left UK 10 year gilts yielding just under 3%, below the equivalent German government bond for the first time in seven years, though still above the US 10 year treasury.


Of the £150bn of unfunded debt purchases planned by the Bank of England, £100bn will be spent on UK government gilts, or roughly equivalent to one third of the entire stock of conventional gilts at end 2008. (Quantitative easing has all sorts of other implications for financial markets and we will consider some of these in a future article). However, our focus is not on the UK gilt market alone but on the general decline in major developed country government bond yields that has occurred in the last few weeks. What appears to be the best explanation for this and what does it mean for the shape of the yield curve in the months ahead and prospects for economic recovery.

 

Weaker economic growth and falling inflation explain sudden dip in government bond yields around the world…

Calculations suggest that net new debt issuance by governments around the world will be of the order of $3trillion in 2009, after $1trillion in 2008. This may not come as a surprise to many and, in fact, could even be an underestimate, since new spending initiatives are being announced seemingly every week. Hence, no one is sure what the total liability of the many packages to counter the threat of deflation, of bank and financial market firm rescues and to boost economic growth will mean for government spending until after the year is out. What is sure however, is that it will entail a significant rise in debt issuance to fund this spending increase. A rise in bond supply should mean a fall in global bond prices and therefore mean a rise in yields but bond yields are falling, i.e. prices are rising. Part of the explanation is that the collapse in so many asset markets (equities, property, commodities etc) around the world is making government bonds the safest place to put investment flows, so encouraging buying of government debt.

 

Charts b, c and d show that the reason why bond yields have fallen is that there has been a steep dive into recession in the US, UK and Euro area economies in the last quarter of 2008. Further, the flow of economic data so far in Q1 suggests that this recession has deepened rather than eased. And the reason why a fall in nominal yields is entirely sensible is that without it, real yields would have risen given a fall in current consumer price inflation. This would mean a rise in the cost of borrowing at a time of worsening recessionary conditions and so would be inimical to economic recovery. We have calculated a measure of ‘real’ bond yields by deflating nominal 10 year government bond yields in the US, UK and euro area with consumer price inflation for the relevant time period.

 

The result of this analysis shows that real bond yields would be rising quickly and be significantly higher than in the last few months. Fortunately, forward looking inflation expectations derived from index-linked gilts show that inflation expectations are falling, see chart e. The reason is shown in chart f, which is that consumer price inflation is falling very sharply and so 10 year ahead inflation expectations in the bond markets have fallen back. This means that the ingredients for economic recovery are still in place. This in turn implies that bond yields further out along the maturity curve, 2 years to 10 years and beyond will be low and flatter than otherwise in the months ahead. This is something that governments want to see to encourage economic recovery through a lower cost of borrowing for companies and households at a time of rising unemployment. A change to this mix of low inflation expectations and low bond yields is unlikely to occur until economic recovery looks like a real prospect.

Trevor Williams, Chief Economist, Corporate Markets

 

 

Weekly economic data preview -16 March 2009

 

Is the US Fed any closer to buying treasuries?

The Bank of England was the first among the world’s leading central banks officially to start the purchase of longerterm government debt or gilts. The US Fed signalled at the January FOMC meeting that it was ‘prepared’ to start buying government bonds as well. One question this week is whether the Fed will take the plunge and announce on Wednesday it will buy US government debt. In the UK, on Wednesday the minutes of the March 4/5 MPC meeting will give a detailed account of the discussion that led to the cut in base rate to 0.50% and to the MPC agreeing to buy gilts. UK unemployment data will be published on Wednesday and may show a rise above 2 million in the total number of unemployed.

 

􀂄 Strong participation last week at the first so-called reverse gilt auctions by the BoE ensured a flawless start to quantitative easing (QE) in the UK. The plan is to gradually increase the size to £5bn in two auctions this week, focusing on longer term paper on Monday (10y-25y) and on medium term paper (5y-10y) on Wednesday. The objective of QE is to inject liquidity in the economy and increase the level of nominal spending through a widening of the monetary base. We will carefully monitor changes in the BoE’s balance sheet and swings in indicators of money and credit growth to asses the success of the BoE’s purchases. The auctions helped last week to bring down UK 3-month Libor to 1.87% and narrow the Libor/Ois spread to 139bp, signalling a further modest thawing in credit market tensions. The minutes of the March MPC meeting are due on Wednesday and are expected to reveal a unanimous vote for the cut in base rate to 0.50% and for an immediate start with QE. Any disagreement on the committee is likely to relate to the size of the rate cut (Blanchflower may have preferred a 75bp move), whilst we may also hear a range of opinions on the effectiveness of QE and the expected lag before it feeds into the real economy. BoE governor King may discuss the credit environment at a speech on Tuesday. UK unemployment has been on a steady upward trajectory now for almost a year and we suspect this continued in February. Claimant count figures will be released on Wednesday and may show a rise of around 80,000. The ILO unemployment rate is forecast to have edged up to 6.5%. Public finances for February are due on Thursday. February traditionally marks a fairly static month for public finances but it could be different this time around as a weak economy curbs the inflow of tax receipts and boosts public spending. We expect the cumulative PSNCR to have widened to £26.1bn, more than double the cumulative cash requirement one year ago.

 

􀂄 The likelihood that the Federal Reserve decides to follow the BoE and start buying treasuries cannot be ruled out when the FOMC meets on Tuesday and Wednesday. Two-day meetings generally allow the Bank more time to discuss in depth the state of the economy and the impact of existing funding and liquidity programmes. The fact that the Fed changed its position in January and said it is ‘prepared to purchase longer-term Treasury securities rather than ‘studying’ the purchase cannot be downplayed and means markets will be alert to the Fed stepping in, especially if it believes that conditions in private credit markets have not sufficiently improved. Treasury yields have been fairly rangebound since the January FOMC meeting despite sizeable (and well received) 10y and 30y treasury auctions since then. This could lead the Fed to delay the outright purchase of government paper and instead reiterate its pledge to do so if market conditions change. The Fed funds rate is expected to stay at 0.25%. The Fed will this week also accept the first applications for the Term Asset Backed Loan Facility (TALF). The first 3-year loan grants will start on March 25th. The TALF is aimed at generating lending to consumers and small businesses and the size of the programme could reach $1 trillion. US data this week are forecast to show a fall in annual CPI in February to -0.1% (Wednesday) and weak housing construction in February (Tuesday).

 

􀂄 Extremely weak German industrial orders and output data were published last week, indicating that the contraction in Q1 gdp could be even worse than in Q4 2008. This will put the spotlight on ECB president Trichet’s speech on Monday and on the German ZEW survey on Tuesday. It is our view that the spectacular rise in the ZEW last month was exaggerated and is poised for a correction as economic reality sinks in. The relief rally in equity markets last week may well support confidence but may be less relevant with regard to the short-term economic outlook. Data on Thursday is forecast to show that euro zone industrial production dropped 15% y/y in January.

Kenneth Broux, Economist

 

Economic Research,
Lloyds TSB Corporate
Markets,
10 Gresham Street,
London EC2V 7AE
,
Switchboard:
0207 626 - 1500
www.lloydstsb.com/corporatemarkets

 

Any documentation, reports, correspondence or other material or information in whatever form be it electronic, textual or otherwise is based on sources believed to be reliable, however neither the Bank nor its directors, officers or employees warrant accuracy, completeness or otherwise, or accept responsibility for any error, omission or other inaccuracy, or for any consequences arising from any reliance upon such information. The facts and data contained are not, and should under no circumstances be treated as an offer or solicitation to offer, to buy or sell any product, nor are they intended to be a substitute for commercial judgement or professional or legal advice, and you should not act in reliance upon any of the facts and data contained, without first obtaining professional advice relevant to your circumstances. Expressions of opinion may be subject to change without notice. Although warrants and/or derivative instruments can be utilised for the management of investment risk, some of these products are unsuitable for many investors. The facts and data contained are therefore not intended for the use of private customers (as defined by the FSA Handbook) of Lloyds TSB Bank plc. Lloyds TSB Bank plc is authorised and regulated by the Financial Services Authority and is a signatory to the Banking Codes, and represents only the Scottish Widows and Lloyds TSB Marketing Group for life assurance, pension and investment business.




 

 

Forex Trading News

Forex Research

Daily Forex Market News
Forex news reports can be found on the forex research headlines page below. Here you will find real-time forex market news reports provided by respected contributors of currency trading information. Daily forex market news, weekly forex research and monthly forex news features can be found here.

Forex News
Real-time forex market news reports and features providing other currency trading information can be accessed by clicking on any of the headlines below. At the top of the forex blog page you will find the latest forex trading information. Scroll down the page if you are looking for less recent currency trading information. Scroll to the bottom of fx blog headlines and click on the link for past reports on forex. Currency world news reports from previous years can be found on the left sidebar under "FX Archives."



Elevate Your Trading With The Amazing Trader!

The Amazing Trader includes:
  • Actionable trading levels delivered to YOUR charts in real-time.
  • Live trading strategy sessions.
  • Market Updates with Trading Tools.

Register To Test Your Amazing Trader


Trading Ideas for 18 October 2017

Register for the Amazing Trader

1.

Amazing Trader EVENT RISK Calendar:

Wed 18 Oct
12:30 US- Housing Starts & Permits
14:30 US- EIA Crude
Thu 19 Oct
01:30 AU- Employment
08:30 GB- Retail Sales
12:30 US- Weekly Jobless
Fri 20 Oct
12:30 CA- Retail Sales & CPI
14:00 US- Existing Homes Sales

Forex Trading Outlook


Trading Opportunities


  • POTENTIAL PRICE RISK: HIGH Tue-- 08:30 GMT GB- CPI top tier confirmation of Inflation.

  • POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT DE- ZEW Survey second most important German monthly Survey.

  • POTENTIAL PRICE RISK: Medium Tue-- 09:00 GMT EZ- final HICP revision to flash report. Revisions are usually minor.

  • POTENTIAL PRICE RISK: Medium Tue-- 13:15 GMT US- Industrial Production. Top output indicator.



  • POTENTIAL PRICE RISK: Medium Wed-- 12:30 GMT US- Housing Starts and Permits revision to flash report. Useful housing leading indicator.

  • POTENTIAL PRICE RISK: Medium Wed-- 14:30 GMT US- EIA Crude. Top WTI inventory measure.



  • POTENTIAL PRICE RISK: Medium Thu-- 01:30 GMT AU- Employment. Top economic indicator.


  • POTENTIAL PRICE RISK: Medium Thu-- 02:00 GMT CN- GDP. Top economic indicator.


  • POTENTIAL PRICE RISK: HIGH Thu-- 08:30 GMT GB- Retail Sales. Top consumption indicator.


  • POTENTIAL PRICE RISK: Medium Thu-- 12:30 GMT US- Weekly Jobless. Employment Indicator.



John M. Bland, MBA
co-founding Partner, Global-View.com

EXCLUSIVE: Global-View Daily Trading Chart Points Updated

EXCLUSIVE: Global-View Free Forex Database updated




TRADER ADVOCACY ARTICLES

Trader's Advocate Articles..

pic

Retail Forex Brokerage Changing!

Are you looking for your first broker or do you need of a new one? There are more critical things to consider than you might have thought.

We were trading long before there were online brokers. Global-View has been directly involved with the industry since its infancy. We've seen everything and are up-to-data with recent regulatory changes.

Our Best Brokers listing section includes:Forex Broker Reviews, Forex Broker Directory, Forex Broker Comparisons and advice on How to Choose a Forex Broker

If would like guidance, advice, or have any concerns at all ASK US. We are here to help you.

SEE Our Best Brokers List

Currency Trading Tools

  • Live rates, currency news, fx charts. 

  • Research reports and currency forecasts.

  • Foreign Exchange database and history.

  • Weekly economic calendar.

Directory of  Forex trading tools

 
Terms of Use    Disclaimer    Privacy Policy    Contact    Site Map


Forex Forum
Forex Trading Forum
Forex Forum + forex rates
Forex Forum Archives
Forex Forum RSS
Free Registration

Trading Forums
Currency Forum Guide
Forum Directory
Open Forum
Futures Forum
Political Forum
Forex Brokers
Compare Forex Brokers
Forex Broker News
Forex Broker Hotline

Online Forex Trading
Forex Trading Tools
Currency Trading Tools
Forex Database
FX Chart Points
Risk/Carry Trade Chart Points
Economic Calendar
Quicklinks to Economic Data
Currency Futures Swaps
Fibonacci Calculator
Currency Futures Calculator

Forex Education
Forex Learning Center
FX Trading Basics Course
Forex Trading Course
Forex Trading Handbook

Forex Analysis
Forex Forecasts
Interest Rate Forecasts
Central Bank Forecasts

FX Charts and Quotes
Live FX Rates
Live Global Market Quotes
Live Forex Charts
US Dollar Index Chart
Global Chart Gallery
Daily Market Tracker
Forex News
Forex Blog
Forex News
Forex Blog Archives
Forex News RSS
Forex Services
Forex Products
GVI Forex
Free Trials
FX Bookstore
FX Jobs and Careers
Jobs USA
Jobs UK
Jobs Canada

Forex Forum

The Global-View Forex Forum is the hub for currency trading on the web. Founded in 1996, it was the original forex forum and is still the place where forex traders around the globe come 24/7 looking for currency trading ideas, breaking forex news, fx trading rumors, fx flows and more. This is where you can find a full suite of forex trading tools, including a complete fx database, forex chart points, live currency rates, and live fx charts. In addition, there is a forex brokers directory where you can compare forex brokers. There is also a forex brokers hotline where you can ask for help choosing a forex broker that meets your individual fx trading needs. Interact on the same venue to discuss forex trading.

Forex News

The forex forum is where traders come to discuss the forex market. It is one of the few places where forex traders of all levels of experience, from novice to professionals, interact on the same venue to discuss forex trading. There is also the GVI Forex, which is a private subscription service where professional and experienced currency traders meet in a private forex forum. it is like a virtual forex trading room. This is open to forex traders of all levels of experience to view but only experienced currency tradingprofessionals can post.

Currency Trading

Currency trading charts are updated daily using the forex trading ranges posted in the Global-View forex database. You will also find technical indicators on the fx trading charts, e.g. moving averages for currencies such as the EURUSD. This is another forex trading tool provided by Global-View.com.

Forex Brokers

The forex database can be used to access high, low, close daily forex ranges for key currency pairs, such as the EURUSD, USDJPY, USDCHF, GBPUSD, USDCAD, AUD, NZD and major crosses, including EURJPY, EURGBP, EURCHF, GBPJPY, GBPCHF and CHFJPY. Data for these currency trading pairs dating back to January 1, 1999 can be downloaded to an Excel spreadsheet.

Forex Trading

Forex chart points are in a currency trading table that includes; latest fx tradinghigh-low-close range, Bollinger Bands, Fibonacci retracement levels, daily forex pivot points support and resistance levels, average daily forex range, MACD for the different currency trading pairs. You can look on the forex forum for updates when one of the fx trading tools is updated.

FX Trading

Global-View also offers a full fx trading chart gallery that includes fx pairs, such as the EURUSD, commodities, stocks and bonds. In a fx trading world where markets are integrated, the chart gallery is a valuable trading tool. Look for updates on the Forex Forum when the chart gallery is updated.

Forex Blog

Global-View.com also offers a forex blog, where articles of interest for currency trading are posted throughout the day. The forex blog articles come from outside sources, including forex brokers research as well as from the professionals at Global-View.com. This forex blog includes the Daily Forex View, Market Chatter and technical forex blog updates. In additional to its real time forex forum, there are also Member Forums available for more in depth forex trading discussions.

 

WARNING: FOREIGN EXCHANGE TRADING AND INVESTMENT IN DERIVATIVES CAN BE VERY SPECULATIVE AND MAY RESULT IN LOSSES AS WELL AS PROFITS. FOREIGN EXCHANGE AND DERIVATIVES TRADING IS NOT SUITABLE FOR MANY MEMBERS OF THE PUBLIC AND ONLY RISK CAPITAL SHOULD BE APPLIED. THE WEBSITE DOES NOT TAKE INTO ACCOUNT SPECIAL INVESTMENT GOALS, THE FINANCIAL SITUATION OR SPECIFIC REQUIREMENTS OF INDIVIDUAL USERS. YOU SHOULD CAREFULLY CONSIDER YOUR FINANCIAL SITUATION AND CONSULT YOUR FINANCIAL ADVISORS AS TO THE SUITABILITY TO YOUR SITUATION PRIOR TO MAKING ANY INVESTMENT OR ENTERING INTO ANY TRANSACTIONS.

Copyright ©1996-2014 Global-View. All Rights Reserved.
Hosting and Development by Blue 105