Time to convert the Central Banks’ blank checks into gold?

Posted on 27. Aug, 2012 by Jean Jacques Ohana in Weekly Focus

Following the release of the bad PMI numbers in China and the political gridlock in the Eurozone, financial markets have arrived at a critical juncture: either deflation or a new central-bank-engineered asset price rally.

The sudden surge of some key components of the precious metals constellation (represented in Figure 1), waking up from a long depression [...]

A financial crisis without safe haven?

Posted on 25. May, 2012 by Riskelia in Weekly Focus

As showed by Riskelia’s heat map (figure 1), the contagion has spread to almost every link of the financial system. This worrying signal is confirmed by the inversion of the VIX curve which has preceded every major financial crisis since 2007 (figure 2). The performance of global equities indices in high risk aversion territory has [...]

The Spanish decoupling story: new paradigm or new fairy tale?

Posted on 04. Apr, 2012 by Riskelia in Weekly Focus

Last week, we evoked the Chinese thorn in the bulls’ side. Today, we focus our attention to the second major dark spot in the financial landscape, namely the new bout of fever in Spain. One of the most puzzling evolutions of the recent weeks has been indeed the disconnection of Spain from other Eurozone core [...]

The French debt under attack

Posted on 25. Oct, 2011 by Riskelia in Weekly Focus

In the last weeks, we have witnessed a significant deterioration in the French debt status as a safe haven as showed in figure 1. The spread of the French 5 years yield over Germany have widened much more quickly than the Italian one. The spread widening is occurring in a context of global rising yields, [...]

What does the current dry up in the wholesale funding market mean for cyclical assets?

Posted on 28. Jun, 2011 by Jean Jacques Ohana in Weekly Focus

Over the last three weeks, the wholesale funding market has considerably deteriorated on several accounts:

The USD, GBP and EUR 2 years swap spread has widened

The EUR/USD 1 Year Cross Currency Basis Swap, reflecting the price to exchange dollar for euro has started to rise, reflecting increased tightening in dollar funding.

Similarly, the Euro Dollar, Short Sterling [...]

Will the sell-off spiral be short-lived?

Posted on 10. May, 2011 by Jean Jacques Ohana in Weekly Focus

We emphasized last week the risk of a sharp deleveraging in the commodities complex, noticing the offhand proliferation of overheated bubbles (8 in the complex). A massive joint move such as the one observed over the past week was hence to be expected, though the timing of the fall was not predictable. Notwithstanding these recent [...]

Some dark clouds are looming…but the shorts may have a hard time

Posted on 19. Apr, 2011 by Jean Jacques Ohana in Weekly Focus

Significant downsides on equities, commodities and carry trades have been observed since the beginning of the last week, challenging the Radar’s main themes.
As for now, our indicators still point to an environment favorable to risk taking, at least in the short term:

The risk aversion stays very low and reflects a positive environment for cyclical assets. [...]

Will commodities rise defy European solvency issues?

Posted on 29. Dec, 2010 by Jean Jacques Ohana in Weekly Focus

As presented in the following charts, the average 1 year curve on a diversified basket of 17 commodities has dropped to record levels. This curve evolution to backwardation reflects depletion in global commodities inventories and supply tensions among various materials. Cotton and Sugar show the most significant 1 year backwardation to 40% and 30% respectively, [...]

Euro-zone sovereign solvency risk and systemic contagion

Posted on 13. Dec, 2010 by Jean Jacques Ohana in Weekly Focus

From the latest 5 Yrs CDS quotes of various euro zone countries, we can infer the implied cumulative probability of default.

The one year probability of default p may be deduced from the following approximate relationship:

where s represents the CDS price and R represents the recovery (presumably around 35%/40% for OECD countries). This relationship is obtained [...]

Sovereign debt vulnerability and systemic risk

Posted on 10. May, 2010 by Jean Jacques Ohana in Weekly Focus

The chronicle of the financial events of the last three months has been crystal clear:
A global bubble on all risky assets developed since the unprecedented accommodative policy set up by Central Banks and Governments. From a monetary point of view, global rates were set around 0% and liquidity injections in the US have not been [...]