Is it the end of the bond rally?

Posted on 13. May, 2013 by Jean Jacques Ohana in Weekly Focus | 0 comments

The U.S. 10-year yield climbed 16 basis points this week, to 1.9 percent in New York. As shown in Figure 1, this increase has been largely due to an increase in real yields rather than expected inflation, pointing to more optimistic anticipations on the US economic outlook. This move has happened after the number of [...]

Oil WTI vs. Oil Brent: the catch up

Posted on 06. May, 2013 by Jean Jacques Ohana in Weekly Focus | Comments Off

The WTI / Brent ratio rose by 15% since December (figure 1), making up part of the WTI discount compared to the Brent. As the WTI is lighter and sweeter than the Brent, it can be easily refined and is therefore supposed to be worth higher than the Brent (this explains notably why the low-quality [...]

Political divergence, rates convergence

Posted on 29. Apr, 2013 by Jean Jacques Ohana in Weekly Focus | Comments Off

As the disagreements between France and Germany are exposed (at last) to the public, the race of Eurozone rates to the bottom seems unstoppable (figure 1).

The rates move conveys two signals, one being positive, the other one negative:

The good news is that the spreads between German and peripheral debts have shrunk, showing a decline of [...]

Can Italian rates still be pushed higher?

Posted on 22. Apr, 2013 by Jean Jacques Ohana in Weekly Focus | Comments Off

In the past weeks, it has become hard to envision a scenario that could cause peripheral rates to go up. However serious the political gridlock in Italy, however gloomy the growth prospects in Europe, however nervous the commodities and stock markets, the downside of Euro zone peripheral debts could never materialize.

We have observed [...]

What are the implications of the commodities’ debacle?

Posted on 15. Apr, 2013 by Jean Jacques Ohana in Weekly Focus | Comments Off

Commodities have been the poorest performer of all assets classes since 2009 which marked the recovery from the Lehman crisis.

This lackluster performance was first attributed to the persistent steep curve (contango) which penalizes the so called “commodities’ passive investors” rolling over long positions in baskets of commodities futures contracts.

Now, the poor performance is due to [...]

The Japanese kiss of death: reflation in Japan, deflation elsewhere

Posted on 08. Apr, 2013 by Jean Jacques Ohana in Weekly Focus | Comments Off

Japan eventually undertook a very aggressive monetary quantitative easing policy. As Gavyn Davies pointed out, the Bank of Japan (BOJ) announced the largest liquidity injection ever carried out by a Central Bank in a developed country.

This monetary innovation marks a complete shift compared to what has been done in Japan during the last 20 years. [...]

Commodities dismal performance conveys global deflation pressure

Posted on 02. Apr, 2013 by Jean Jacques Ohana in Weekly Focus | Comments Off

Despite supportive liquidity and global monetary easing from Central Banks, commodities have been unable to perform since 2011. Commodities had the worst returns among every asset class over the past 250 days. Commodities, currencies and basic resources equities sectors have been under pressure, as illustrated by figure 2.

The poor performance of cyclical markets such as [...]

The euro zone tyranny should turn into a federal democracy or will necessarily collapse

Posted on 25. Mar, 2013 by Jean Jacques Ohana in Weekly Focus | Comments Off

The Cyprus crisis is interesting, not only for its specificities but as a reflection of general Eurozone woes.

Cyprus banks collected deposits, including abundant money laundering from Russia and Europe. They promised high returns to depositors and took inappropriate risks to meet their promises. Cyprus is also a place where money transits from Russian or European [...]

Throw out the Eurozone crisis by the financial door, it will come back by the political window

Posted on 18. Mar, 2013 by Jean Jacques Ohana in Weekly Focus | Comments Off

Three years after the outbreak of the Eurozone crisis, we know now with certainty that this crisis is not whatsoever a sovereign debt crisis. OECD countries which issue debt in their own currency have no problem to fund their debts. UK, US, Japan, Switzerland, Sweden, Norway, Australia all have different solvency and external balance features. [...]

An equities bubble is swelling now: drawing lessons from past episodes

Posted on 11. Mar, 2013 by Jean Jacques Ohana in Weekly Focus | Comments Off

Global Equities markets are evolving in bubble as showed in figure 1. Riskelia’s bubble indicator measures the regularity of price dynamics over various time frames. An excessive degree of monotonicity in price dynamics characterizes mimetic behavior among market participants who will simultaneously sell their accumulated positions when complacency is called into question by adverse fundamentals. [...]

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