If you insist on betting against France, you’d better short the euro than short the French OAT

Posted on 15. Jul, 2013 by Jean Jacques Ohana in Weekly Focus

With the new downgrade of French debt by Fitch, the discussion of an “imminent attack of French debt” will with no doubt come back to the surface.

France was predicted to go under a number of times before: when it was downgraded for the first time by S&P in January 2012, when French president Hollande was [...]

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 [...]

Is there a scenario where Government yields significantly rise? Not so sure…

Posted on 25. Feb, 2013 by Jean Jacques Ohana in Weekly Focus

As OECD Government yields are still near their lowest levels ever, it is mentally convenient to think that the only path is a rise in interest rates. By the same token, many analysts recommend borrowing money now since yields are expected to sharply increase in the future.

After 6 months of abundant liquidity and steady increase [...]

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 [...]

How long can the “risk-on” “risk-off” schizophrenia last?

Posted on 24. Jul, 2012 by Jean Jacques Ohana in Weekly Focus

The high level of financial integration shown in Figure 1 masks an increasing rift across risky assets. This rift is well-reflected in Figure 2, representing the divergent dynamics of the IBEX and banks, on the one hand, and the DAX and Food and Beverage sector, on the other hand, since 2010. It is also [...]

Catch the yield if you can

Posted on 19. Jun, 2012 by Riskelia in Weekly Focus

juin 18, 2012

A map of global financial asset classes shows that fixed income assets are paving the whole territory, from safe havens to risky assets. As shown in figure 2, the interest rates part of bonds significantly hedges the credit part: the variation of 5 years yield is correlated at -0.65 to the variation of [...]

Buoyant risky assets, reversing safe haven bonds, lackluster dollar

Posted on 22. Mar, 2012 by Riskelia in Weekly Focus

Figure 1 reports the tops and flops of the Radar since the start of the year. The good bets correspond to the assets which have displayed the most robust trends, materializing in steady upward or downward moves. The main investment themes of the year 2012 have been so far:

Cyclical assets with a particular emphasis on [...]

Are safe havens still safe?

Posted on 27. Jan, 2012 by Riskelia in Weekly Focus

The risky assets revival may be good news for markets as a whole… certainly not for safe haven sovereign bonds…
In figure 1, we have represented a bond total return index since 2000 (composed of Gilt, T Notes of different maturities, Bund, Bobl, Schatz) together with the average bond bubble on the same basket of sovereign [...]

Is defensive investment the best attack?

Posted on 13. Dec, 2011 by Riskelia in Weekly Focus

As most investors focus on high profile and volatile assets such as geographical benchmark equities, commodities and high yield, all our indicators point towards defensive investments:

Inflation bonds
Emerging bonds
Defensive equities (low beta) such as consumer staples and health care sectors

Among the Radar’s 30 top positive bets, six belong to a ‘defensive category’, which can be defined [...]

Three reasons to worry about the short-term financial outlook

Posted on 05. Aug, 2011 by Jean Jacques Ohana in Weekly Focus

The financial system faces the threat of an imminent breakdown. As usual, the PIIGS’ sovereign debt and the euro zone banks are at the heart of the storm. The recent statement of the German Finance Minister rejecting a “carte blanche for the widespread purchases of sovereign bonds by the EFSF on the secondary market” [...]