Increase in equities + decrease in yields: what is behind this joint dynamics?

Posted on 03. Jun, 2014 by Jean Jacques Ohana in Weekly Focus

Since the start of the year, interest rates drifted lower including in core sovereign debts (US, UK, Japan, Germany) while global equities rose. As a matter of fact, the US 10 years rates dropped around 50 bps, the German 10 years Bund rate tumbled 60 bps whereas the MSCI World index increased by 3.3% before [...]

A cornered ECB

Posted on 23. Sep, 2013 by Jean Jacques Ohana in Weekly Focus

Since the successive announcements of the OMT by the ECB and the QE3 by the Federal Reserve, the trend of the EUR/USD (presented in figure 1) has permanently drifted higher despite the broad based strength of the dollar (see figure 3). By deciding not to taper its program of asset purchases, the Fed unwillingly trapped [...]

Policy driven financial markets: why 2013 may be far different from 2012

Posted on 31. Dec, 2012 by Jean Jacques Ohana in Weekly Focus

The anatomy of financial market returns shows that all assets apart from base metals rose in 2012 (Figure 1).

Despite the unprecedented liquidity provided by Central Banks, the performance was however highly contrasted across the different assets. The risky bonds stand out remarkably with Sharpe ratios above 3 for emerging debt, high yield corporates, investment grade [...]

Gold is now the only freely traded currency

Posted on 03. Sep, 2012 by Jean Jacques Ohana in Weekly Focus

Since the intervention of the Swiss National Bank in September 2011 which has eventually stuck the EUR/CHF at 1.2010, currencies manipulations engineered by Central Banks have generalized:

The Norges Bank has cut interest rates twice and threatens other cuts in interest rates to prevent the NOK appreciation. In parallel, the Norwegian Sovereign Wealth Fund is selling [...]

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 [...]

The euro zone crisis: you can’t hide elephants in mouseholes

Posted on 17. Aug, 2012 by Jean Jacques Ohana in Weekly Focus

August 13, 2012
Mario Draghi recently intervened on behalf of the ECB, compensating for the current lack of political incentives across Europe. He announced an operation to support the short-term obligations of the Euro zone countries. This modest objective is by no means comparable to the Fed’s Quantitative Easing operations. The long lasting crisis affecting the [...]

The Italian “Drunken Boat”, on the verge of leaving the shore?

Posted on 10. Aug, 2012 by Jean Jacques Ohana in Weekly Focus

August 10, 2012

The recent monetary interventions are unlikely to have poured out the liquidity thirst of European markets and the schizophrenia symptom between risk-off and risk-on assets, that we recently documented, is still very much applicable. An extreme nervousness is indeed at stake in unsustainable financial markets which can alternate between +5% and -5% returns [...]

The bubbles created from the race to negative rates

Posted on 16. Jul, 2012 by Jean Jacques Ohana in Weekly Focus

As the ECB cut the main refinancing rate and the deposit rate by 25 basis points to 0.75 percent and zero respectively, the Denmark responded and cut its key interest rate by 25 basis points to a negative 0.20 percent. France issued a short term bill at 0%,

Last week, 6 European countries’ two years maturity [...]

How do you spell Quantitative Easing in German? « LTRO »

Posted on 17. Jan, 2012 by Riskelia in Weekly Focus

As the recent S&P’s downgrade puts back the sovereign debt issue on the front stage, the liquidity conditions have significantly improved as shown by three different indicators:

The Radar’s trend is flipping to the positive side on dollar and sterling short term interest rates futures. The reason is not that central banks will further decrease their [...]

Is dollar more precious than gold?

Posted on 20. Dec, 2011 by Riskelia in Weekly Focus

For the first time since the August 2008 deleveraging, the gold trend has gone below 10%. The recommendation is still in positive territory but it is about to go negative as showed in figure 1. Even more worrying, we come from a situation where the bubble was nearing 80%, reflecting extreme herding behavior and high [...]