Archives of “economic system” tag

rss

Are climbing bond yields about supply or demand?

  
  Analysis
#  #  #  #  #  #  #  #

US Treasury yields climb ahead of auctions

US Treasury yields climb ahead of auctions
It’s a big week in the Treasury market with record-high sales starting with three-year notes today.
With that, Treasury yields have jumped higher. US 10-year notes are up 6.4 bps to 0.6415% today. That’s after hitting a low of 0.5036% last week. The turn in the market came on the refunding announcement as coupon-issues were upsized and now we’re left to ponder what the latest move means.
The optimistic take is that this signals improvement on the virus and the economy. The other side of the argument is that a flood of bonds is going to push up rates.
I’m more sympathetic to the optimistic side, if only because Trump’s executive orders mean that more stimulus spending is less likely and will probably be lower. At the same time, a capital gains cut would blow another hole in the budget.
What does it mean for the US dollar? It’s positive.
BMO today highlights that even at 0.16%, US three-year notes are relatively attractive.
While the past few sessions’ concession will aid the takedown of this afternoon’s offering, at just 16 bp, 3-year yields are not abundantly cheap on an outright basis. However, when compared to overseas yields that have pushed to extremely negative territory, there is an argument to be made that the still-positive nominal rate on Treasuries will increasingly drive foreign interest.
At the same time, they see this latest move as more about supply than a ‘fundamental rethink’ of the econoy.
So the overall message from bonds right now is murky and it’s risky to take any big signals in mid-August.

Why Africa is now the biggest new market for forex trading

  
  Analysis
#  #  #  #  #  #  #  #  #  #  #

Forex trading is on the rise in Africa

FX
In recent years there has been a significant rise in demand for forex trading in Africa, with the majority of the estimated 1.3 million traders in Africa residing in South Africa and Nigeria.

Not only is the number of traders and investors across Africa increasing, but the number of foreign investors is also on the rise, strengthening Africa’s currencies as well as the economy greatly.

With the South African Rand being one of the top 20 most traded currencies in the world at the moment, Africa offers one of the largest markets for forex trading globally.

Some of the world’s largest forex brokers, such as FXTM and HotForex, have become regulated with the Financial Sector Conduct Authority (FSCA) of South Africa, one of the most respected financial authorities in the industry.

With the increase in forex trading in Africa, the FSCA has responded responsibly and enforced a new licensing regime known as the Over the Counter Derivative Provider license (ODP).

The ODP forces all brokers with a local presence to provide transaction data such as price, instrument type, leverage ratios as well as the name and residence of the investor, to the FSCA to ensure safe and legal trading practices.

The FSCA allows these brokers to offer services not only in South Africa, but also to other African countries such as Nigeria, Ghana and Kenya.

The European Securities and Markets Authority (ESMA) enforced new restriction laws on the maximum leverage ratios allowed for European traders, forcing traders to look to other markets.

These new restrictions only allow leverage ratios of 30:1 for major currency pairs, 20:1 for non-major currency pairs and gold, and 2:1 for cryptocurrencies. Leverage ratios as low as these have a massive negative impact on potential profits.

Added to this, the provision of bonuses, promotions and binary options was also banned.

The FSCA allows brokers to offer unlimited leverage ratios, which can potentially maximise funds greatly, and has led to more residents being prompted to start trading the African markets.

Although there are minor restrictions in some African countries to prevent fraudulent activities, there is no complete forex trading ban in Africa, which allows nearly anyone to profit from these ever-growing markets.

Recent lockdown measures as a result of the COVID-19 pandemic and the resulting unemployment have prompted people to explore new opportunities to earn money.

The forex market is easily accessible, holds endless opportunities to make money with little required capital and traded 24 hours, five days a week, allowing people to trade either full-time or part-time.

Where forex trading was always expensive and originally done by large companies and high net-worth investors, it is now more affordable than ever, with some brokers charging no minimum deposits and minimal banking fees.

Another incentive to enter the world of forex trading is the multitude of free tools to ensure success, such as trading courses, demo accounts and webinars that educate beginners on how to trade, use strategies and analyse markets.

Trading is made easy with the internet becoming more accessible across the African continent. All one needs is a smart phone, pc, laptop or tablet, and a good internet connection, to trade from anywhere in Africa and the rest of the world.

The never ending QE story

  
  Analysis
#  #  #  #  #  #

Via Bloomberg

Via Bloomberg  
I came across an interesting Bloomberg piece when the Market’s Live team published a piece on the Market’s Live blog making a case for QE continuing indefinitely.  The rationale for the view is that the world’s major banks are not buying debt quickly enough leaving  ~$1 trillion of new sovereign bonds for buyers in the months ahead. This mean that the Fed, ECB and BoE will need to increase the pace of purchases in order to maintain the present low bond yield levels.
The devilish deal means that huge COVID-19 support packages is met with a seemingly virtually unlimited amount of bond purchases to keep borrowing costs down.
The Market’s Live team make a greta point. There is no way to go back now we have started down this QE road. Many people now who take mortgages will have no memory of high interest rates and how crippling they can be. Many new mortgages will be based on these ultra low rates which means that the central banks must keep adding to their QE programs and keep the borrowing costs down. Failure to do so will just cripple an economy now that is dependent on low borrowing costs
Gold and silver set to shine
This environment is perfect for both gold and silver to shine in. With central banks committed to do ‘whatever it takes’ to cushion the COVID-19 blow and low yields for the medium term future expect the precious metals to keep moving higher and look for pullbacks for buying.
$1855 looks like an area where we can expect pullback buyers in gold and $21 an area to expect pullback buyers in silver.

Why Do More People Just Not Say: Hypocrite

  
Analysis, Education
#  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #  #

 

From Bloomberg Nov 4, 2011:

Warren Buffett’s Berkshire Hathaway Inc. (BRK/A) said third-quarter profit fell 24 percent as derivative bets declined in value.

From BBC March 4, 2003:

Mr. Buffett argues that such highly complex financial instruments [derivatives] are time bombs and “financial weapons of mass destruction” that could harm not only their buyers and sellers, but the whole economic system. Some derivatives contracts, Mr. Buffett says, appear to have been devised by “madmen”. In his letter Mr. Buffett compares the derivatives business to “hell…easy to enter and almost impossible to exit”…

He might be rich, but let’s face it: he is one manipulative character.

35 Chinese Cities Have Economies As Big As Countries

  
Analysis, Economy, Education
#  #  #  #  #  #  #

As Visual Capitalist’s Jeff Desjardins notes, with 1.4 billion people and the third-largest geographical area, the country is a vast place to begin with. Add in explosive economic growth, a market-oriented but Communist government, a longstanding and complex cultural history, and self-inflicted demographic challenges – and understanding China can be even more of a puzzle.
(more…)

India is not a place for investors, but it’s a fabulous country for tourists-Jim Rogers

  
Analysis, Education
#  #  #  #  #  #  #  #  #  #

Rogers is not as optimistic on the other Asian giant, India. He believes the country needs to open up its retail market and make its currency convertible.  He argues that politicians need to address the nation’s problems now instead of pushing them into the future:

 “India has a horrible economic system. Indian politicians are of course now talking the right concepts and are trying to implement them, but a lot goes wrong when they are put into practice and run up against the country’s thoroughly anti-capitalist bureaucracy.”

Go to top