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Wednesday, September 4, 2013

Links (2013-09-04)

Lightweight post tonight; I am in the process of upgrading my research platform's database.

  • Stan Collender on how Syria impacts the outlook for the U.S. fiscal process. It provides political cover for yet another can-kicking exercise. As a Canadian, I find Stan Collender's site  (Capital Gains and Games) a very valuable resource for understanding the understanding political process behind the tortuous budget negotiations for the past few years.
  • 0.25% !!! Kazuhiko Sano, the chief bond strategist at Tokai Tokyo Securities Co. predicted the 10-year JGB will hit 0.25% in the next fiscal year. He had predicted a 0.50% yield for this year, and it hit 0.32%. About a decade ago, I used to cover the JGB market. As one of the few Occidental secular JGB bulls at the time, I admire his call. But 10-year yields below 0.7% are fairly silly, even if you expect the short rate to average 0% over 10 years. Sure, you win if you hold to maturity, but if there is any volatility, it's a one-way bet against you on shorter horizons. (The payoff is effectively the same as a short put, with an effective option premium of 0.)
  • Calculated Risk gives the charts of the U.S. trade data. The Trade Deficit widened to $39.1 billion in July. Trade is another automatic stabiliser for the U.S. economy; as retail spending expands, trade is an increasing drag on growth.
  • Garth Turner's latest missive on the Canadian housing market. He has some comments on the latest wave of local data. He has been chronicling the craziness of the housing market here for a few years. The official data available for Canadian housing is of debatable quality, and he attempts to sort through the various trends in the very distinct regional markets. I'll be getting around to the subject shortly; it is the main issue facing Canadian bonds. (The currency and stock market tend to follow commodities.) 

(c) Brian Romanchuk 2013

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