Jun

9

I found myself really confused by the move in bonds this week, not to mention the apparent expectation of higher interest rates 'globally'.

My novice reading of this is that maybe things aren't so global; the US economy is continuing at a fair clip (low taxes etc) whilst the green, leftist UK looks like it's heading towards stagnation. And we haven't even had our housing slump yet.

Carrying my thoughts a few steps further (way too far probably) then the dollar will strengthen against the pound and Brits should turn to defensive stocks and grade A corporate bonds, if they don't want to buy US stocks that is.

George Zachar writes: 

There have been reports of an enormous multi-week liquidation of cash bunds dragging all debt markets lower, which in turn triggered rebalancing of positions embedded in structured notes, which were synthetic short straddle positions.

The economic fundamentals have been bond-bearish IMHO for a long time. This rout, though notionally validating my view, was triggered not by repricing the Fed, but by judo in the hand-to-hand combat of the capital markets.


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