Bonds deleveraging and spring clean up

Posted on 03. Jun, 2013 by Jean Jacques Ohana in Weekly Focus

We have downplayed the bonds’ deleveraging stating that the objective of Central Banks, and the Federal Reserve in particular, was to maintain negative real interest rates. Meanwhile, the interest rates have sharply risen in the US.

The rise in interest rates is for sure not related to doubts about US solvency (as the US CDS drifted [...]

Revisiting the anti-euro crisis portfolio

Posted on 22. Jun, 2011 by Steve Ohana in Weekly Focus

Despite the agreement reached on a “voluntary participation” of private creditors to the Greek debt refinancing, the solvency risk stays intact. Absent a comprehensive debt restructuring, the euro zone debt problem will not find a definitive resolution.
In this context, instability in the euro zone has resurfaced. The wave has started from OECD Sovereign debt and [...]

Will commodities eventually rise following addictive monetary policy?

Posted on 02. Sep, 2010 by Jean Jacques Ohana in Weekly Focus

The monetary policy in the US and in G10 countries has been complacent, driven by the purchase of Government Bonds and MBS Securities (Fed and BOE alike) or unlimited credit facilities to the banking system (ECB).

And with the Quantitative Easing unfolding, the Central Banks balance sheets are likely to rise in the US and in [...]

Is deflation behind the dollar drop?

Posted on 18. Jul, 2010 by Jean Jacques Ohana in Weekly Focus

The past month has seen a surprising dollar bearish move across the board. The dollar drop has been particularly acute against European currencies but has concerned every currency from yen to Latam. Nevertheless, this move must not be interpreted as a positive liquidity move since the most pro-cyclical currencies, i.e. commodities currencies and emerging currencies [...]

Inflation or deflation?

Posted on 05. Apr, 2010 by Steve Ohana in Weekly Focus

We have already emphasized that the weak link of the financial system is the G10 solvency issue. Despite the continuous rise in financial assets which may last farther out, particularly in the commodity complex, the solvency problem is still present at the heart of the financial system as reflected by a snapshot of Riskelia’s Radar [...]

What will the next crisis look like?

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

The « Black Swan » theory, introduced by Nassim Taleb, contends that market disruptions arise in a totally unpredictable manner, independently of the players’ behaviour. Yet, most market disruptions are endogenous to the financial system, the final dislocation representing a phase transition of an unstable system from a state of expansion to a state of implosion.
The financial [...]

Deciphering the G10 sovereign debt crisis: a macroeconomic perspective

Posted on 14. Mar, 2010 by Jean Jacques Ohana in Weekly Focus

When a country runs a current account deficit, the private sector and the public sector cannot deleverage at the same time. Let us explain this simple fact.
There is an economic equilibrium relating current account balance, budget balance and private sector balance:
Private Balance + Budget Balance = Current Account Balance
where we denote Private Balance = Private [...]

Euro’s fall or dollar’s rise?

Posted on 06. Mar, 2010 by Jean Jacques Ohana in Weekly Focus

The EUR dropped from 1.50 USD to 1.36 USD in two months. Many reasons have been invoked to explain the demise of the euro: governance failure within the euro zone, failure to set up credible assistance measures to help countries with worrying public debt burdens such as Greece, Portugal and Spain.

Value of one euro in [...]

Banks seism and financial crisis

Posted on 05. Feb, 2010 by Jean Jacques Ohana in Weekly Focus

Is the financial crisis over? This question has been raised many times, but this is an issue which cannot be solved objectively since we can make as good a case arguing that that the crisis is behind us or on the contrary highlighting the new sources of concern in the financial system.
Riskelia proposes an objective [...]

Sovereign solvency risk and financial stability

Posted on 31. Jan, 2010 by Jean Jacques Ohana in Weekly Focus

Since the banking system collapsed in September 2008, private and corporate debts have been replaced by public debt. Since then, sovereign solvency risk has become investors’ major concern, provoking successive dramatic surges in government interest rates: Greece, Portugal and Spain… After the latter countries, which country will be next to be downgraded? The risk concerns [...]