Political divergence, rates convergence

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

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

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

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

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

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 [...]