To the surprise of no one, the Chinese yuan on Monday picked back up where it left off last week with Friday’s big move only shifting the level from which it now sinks. Straight from the Asian open, CNY quickly traded lower and settled again closer to 6.57. If it exposes Friday’s reversal as a one-day, knee-jerk reaction then it [...]
By any reasonable standard, today’s trading in “dollars” was highly unusual. The Chinese yuan had been trading its typical depreciation route all through the night and toward the US open. At about 6:15am, CNY was just about to touch 6.59 and a new low that would have put it back into early January territory (not good). It traded modestly higher [...]
Ten days ago, it was reported that the Bank of Japan for the first time set aside reserves against expected losses should its massive portfolio of JGB’s finally move toward QQE success. The main part of all this “stimulus” has been the accumulation of primarily government bonds at massive premiums. If it were ever to actually work, then the Japanese [...]
Last week, Japan reported GDP growth of 1.7% in Q1. That was much better than expected and led to all the usual extrapolations about how bright the future is in Japan now that QQE is working (and NIRP since that was started during the quarter). In this devalued economic world of central banking for the sake of central banking, context [...]
The risk budgets are unchanged again this month. For the moderate risk investor, the allocation between risk assets and bonds remains at 40/60. It was tempting to raise the risk allocation this month and up our allocation to the weak dollar investments we've favored for some time. But the only indicator that really improved was credit spreads and it was not [...]
Japanese officials including those at the Bank of Japan have been acting very erratic of late, eschewing the more traditional financial setting of vagueness. First it was NIRP that immediately blew up in their face, leading to very loud rumors of additional bank “stimulus” to offset NIRP only to have the BoJ instead do nothing at its last policy meeting. [...]
There isn’t a whole lot known about the Federal Reserve’s Foreign Reverse Repo accommodation, and I believe that is intentional. The rate which the Fed pays to “borrow cash” from foreign central banks and governments is unknown. What is known is just how much in total the Fed is “accommodating” foreign dollar business. This RRP, in sharp contrast to the [...]
Japan has seemed unusually put upon by Mother Nature over the past few years, for which we can only express our sincerest sympathy. However, Japan’s most pressing problem is entirely man-made stemming from the fact that it was first among the world’s “developed” nations to have its economy subsumed by central banking. More than a quarter of a century later, [...]
Today was the third consecutive down day or selling in eurodollar futures. The June 2018 contract settled below 98.80 for the first time in April, almost unwinding the move higher at the start of this month. Even after the selling, the eurodollar curve remains as depressed as ever, discounting an entirely different set of future circumstances than stocks or junk [...]
The risk budgets are again unchanged for this month. For the moderate risk investor, the allocation between risk assets and bonds remains at 40/60. The changes in our indicators this month were not significant enough to warrant a change. Credit spreads stopped narrowing and have recently been widening again, ever so slightly. Valuations, long term momentum and the yield curve [...]
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