The man who bought the world

[hermes]

Segundo os dados mais recentes do TIC o tio Ben está a fazer um excelente trabalho a comprar o que o mundo está a vender, pois no mês de abril o mundo vendeu 120 biliões de dívida pública enquanto que os meses anteriores o resto do mundo andava a comprá-la à taxa de 45-50 biliões por mês.

[Kin2010]

Li hoje num artigo que o mercado global de OTs safe heaven (rating AAA) está na seguinte situação.

Os bancos centrais como a Fed, BCE, BoE, BoJ, detêm 10 triliões de USD.
Os fundos soberanos como o chinês, árabes, e outros, detêm outros 10 triliões.

Essas entidades acima citadas detêm pois 20 triliões, o que é 25% do PIB mundial.

E estão a comprar 1.8 triliões por ano, ou seja, estão a aumentar o seu portfolio de OTs uns 9% ao ano.

Essas compras de 1.8 triliões absorvem a grande maioria das emissões, que são de 2 triliões.

Perante isto, o que é que se pode concluir? Vai haver forte inflacção ou não?

Os montantes destas emissões são assustadores. No entanto, já que essas mega-instituições públicas estão a dominar completamente o mercado de OTs, e cada vez mais, não será que o dito mercado funciona já tanto em circuito fechado que isso impedirá a inflacção?

[Incognitus]

Não, a contrapartida vai sendo a criação de mais dinheiro. Em algum ponto pode dar em inflação. Para já, dá em inflação do preço da maioria dos activos.

[Mystery]

esta capa significa que atingimos provavelmente o pico da confiança no banco central norte-americano 

[syncd]

esta capa significa que atingimos provavelmente o pico da confiança no banco central norte-americano 

A capa é de Abril de 2012. A maldição talvez esteja um pouco atrasada.

[hermes]

Li hoje num artigo que o mercado global de OTs safe heaven (rating AAA) está na seguinte situação.

Os bancos centrais como a Fed, BCE, BoE, BoJ, detêm 10 triliões de USD.
Os fundos soberanos como o chinês, árabes, e outros, detêm outros 10 triliões.

Essas entidades acima citadas detêm pois 20 triliões, o que é 25% do PIB mundial.

E estão a comprar 1.8 triliões por ano, ou seja, estão a aumentar o seu portfolio de OTs uns 9% ao ano.

Essas compras de 1.8 triliões absorvem a grande maioria das emissões, que são de 2 triliões.

Perante isto, o que é que se pode concluir? Vai haver forte inflacção ou não?

Os montantes destas emissões são assustadores. No entanto, já que essas mega-instituições públicas estão a dominar completamente o mercado de OTs, e cada vez mais, não será que o dito mercado funciona já tanto em circuito fechado que isso impedirá a inflacção?

Kin, o problema é que essa dívida não existe sozinha. A dívida é um dos conjugues do casal o outro é receber o dinheirio agora. Ora a outra cara metade está a ser gasta na economia e a produzir os seus efeitos, por enquanto mascarados pela desalavancagem do shadow banking.

[Visitante]

[Visitante]

Perante isto, o que é que se pode concluir? Vai haver forte inflacção ou não?

[Kin2010]

Visitante, as expectativas podem virar de um dia para o outro. Se postasses um gráfico com as expectativas de lucros, de cotações, etc, das empresas dot.com em Janeiro de 2000, elas dariam valores dezenas de vezes maiores do que veio a acontecer realmente.

[Visitante]

Kin2010, o histórico de mais de 30 anos evidencia as mudanças repentinas de que falas, mas são controladas e não da ordem das dezenas de vezes.

[hermes]

Fears of global credit shock rising as the bond boom unravels
 
Rising economic powers are liquidating holdings to bolster their weakened currencies
 
By Ambrose Evans-Pritchard
August 23, 2013

http://www.calgaryherald.com/business/Fears+global+credit+shock+rising+bond+boom+unravels/8826468/story.html

The $9 trillion accumulation of foreign bonds by the rising powers of Asia, Latin America and the emerging world risks going into reverse as one country after another is forced to liquidate holdings to shore up its currency, threatening to inflict a credit shock on the global economy.

India’s rupee and Turkey’s lira both crashed to record lows on Thursday following the US Federal Reserve releasing minutes which signalled a wind-down of quantitative easing as soon as next month.

Dilma Rousseff, Brazil’s president, held an emergency meeting on Thursday with her top economic officials to halt the real’s slide after it hit a five-year low against the dollar. The central bank chief, Alexandre Tombini, cancelled his trip to the Fed’s Jackson Hole conclave in order “to monitor market activity” amid reports that Brazil was preparing direct intervention to stem capital flight.

The country has so far relied on futures contracts to defend the real - disguising the erosion of Brazil’s $374bn reserves - but this has failed to deter speculators. “They are moving currency intervention off balance sheet, but the net position is deteriorating all the time,” said Danske Bank’s Lars Christensen.

A string of countries have been burning foreign reserves to defend exchange rates, with holdings down 8pc in Ecuador, 6pc in Kazakhstan and Kuwait, and 5.5pc in Indonesia in July alone. Turkey’s reserves have dropped 15pc this year.

“Emerging markets are in the eye of the storm,” said Stephen Jen at SLJ Macro Partners. “Their currencies are in grave danger. These things always overshoot.”

It was Fed tightening and a rising dollar that set off Latin America’s crisis in the early 1980s and East Asia’s crisis in the mid-1990s. Both episodes were contained, though not easily.

Emerging markets have stronger shock absorbers today and largely borrow in their own currencies, making them less vulnerable to a dollar squeeze. However, they now make up half the world economy and are big enough to set off a crisis in the West.

Fears of Fed tightening have pushed borrowing costs worldwide to levels that could threaten global recovery. Yields on 10-year bonds jumped 47 basis points to 12.29pc in Brazil yesterday, 33 points to 9.72pc in Turkey, and 12 points to 8.4pc in South Africa.

There had been hopes that the Fed might delay its tapering of bond purchases, chastened by the jump in long-term rates in the US itself. Ten-year US yields - the world’s benchmark price of money - have soared from 1.6pc to 2.9pc since early May.

Hans Redeker from Morgan Stanley said a “negative feedback loop” is taking hold as emerging markets are forced to impose austerity and sell reserves to shore up their currencies, the exact opposite of what happened over the past decade as they built up a vast war chest of US and European bonds.

The effect of the reserve build-up by China and others was to compress global bond yields, leading to property bubbles and equity booms in the West. The reversal of this process could be painful.

“China sold $20bn of US Treasuries in June and others are doing the same thing. We think this is driving up US yields, and German yields are rising even faster,” said Mr Redeker. “This has major implications for the world. The US may be strong to enough to withstand higher rates, but we are not sure about Europe. Our worry is that a sell-off in reserves may push rates to levels that are unjustified for the global economy as a whole, if it has not happened already.”

Sovereign bond strategist Nicolas Spiro said India was “caught between the Scylla of faltering growth and the Charybdis of currency depreciation” as hostile markets start to pick off any country with a large current account deficit. He said India’s central bank was playing with fire by reversing its tightening measures to fend off recession. It has instead set off a full-blown currency crisis that is crippling for companies with dollar debts.

India is not alone. A string of countries across the world are grappling with variants of the same problem, forced to pick their poison.

[hermes]

When bonds don’t trade

By Felix Salmon
November 5, 2013

http://blogs.reuters.com/felix-salmon/2013/11/05/when-bonds-dont-trade/

In the September issue of Euromoney, Peter Lee has a huge investigation into what he calls “the great bond liquidity drought”. The landing page for the story features subscriber-only links to the whole thing, as well as free-to-access links to various sections. But it also neatly summarizes the problem a single paragraph:

Liquidity is drying up across the bond markets. Regulations designed to curtail banks’ leverage have had the unintended consequence of also sharply reducing their ability and willingness to make markets in corporate and even government debt. New regulations on the leverage ratio that will reduce banks’ repo funding books threaten to make matters even worse and to spread the drought from credit markets to rates, the underpinning of all financial markets. Secondary markets are close to a breakdown that will soon imperil the primary markets on which companies and sovereigns depend for funding. All that is masking the decay is the extraordinary actions of central banks.

Here’s a chart from Citigroup which helps show at least part of the story:



This chart doesn’t just cover Citigroup, it covers all bond broker-dealers. They massively increased their inventory of bonds during the 2000s bubble — but so did everybody else: total credit assets were raising substantially over that period. Then, after the financial crisis, came the great divergence. Broker-dealers retreated from the market, even as investors continued to seek the safety of bonds. So while broker-dealers were about half the size of the credit mutual fund industry in 2007, according to the quantity of assets they owned, today they’re only about 1/20th of the size. And those broker-dealers are still the only real liquidity providers in the market. If you want to buy or sell a bond on the secondary market, there’s really only one way to do it: phone a bunch of broker-dealers, ask them to make you a market, and either accept the best price you find, or don’t.

Lee’s article makes a very strong case that the only way out of this problem is for buy-side institutions to start trading directly with each other, since the broker-dealers have enough to be able to provide good service only to their very best clients. But neither of the two buy-side bond market giants (Blackrock and Pimco) seem to have been able to make such a system work, and although the MarketAxess system is growing fast, there isn’t going to be any fundamental change unless and until bond investors start making buy/sell markets of their own. Which is simply not going to happen: bond investors don’t tend to think in terms of opportunistic trading, precisely because their portfolios are so illiquid. What’s more, the ability to make a two-way market is contingent on the ability to buy one name when you sell another, which is not something anybody can reliably count on being able to do any more.

In other words, we’re living through a vicious cycle: the less liquid the market gets, the less ability there is for anybody to make markets, which in turn just worsens the liquidity problem. And things are only going to get worse still if and when QE goes away.

The implications, as Lee says, are enormous. The whole point of bonds is that they’re tradable: you don’t need to hold them to maturity. But increasingly you do need to hold them to maturity, since finding a buyer for your inventory is extremely difficult — especially if you’re investing in size. This is one reason why the two big bond investors arguably pose a systemic risk: if either one of them were to suffer substantial withdrawals, the selling pressure on the market would be so enormous that the entire bond market could pretty much cease to work. It’s already extremely difficult for bond funds to grow without changing their risk profile: while it’s possible to buy large positions in the primary market, it’s basically impossible to continue to add to those positions as your fund increases in size.

Part of the problem is the degree to which the market is fragmented: GE has more than 1,000 separate bond issues, while Citigroup has almost 2,000. (Both of them, of course, have only one equity security outstanding.) But there’s little incentive for companies to issuer fewer separate bonds, since the primary market is the one place where the bond market actually seems to work. And besides, if the bond market becomes harder to navigate, companies always have the option of going to the loan market instead, or raising equity instead of debt.

For sovereigns, however, the fate of the bond market is of paramount importance: they have to be able to issue debt, even as major banks are withdrawing from the markets entirely. And sovereign bonds are being hit just as badly as corporate bonds by the liquidity drought:

Traders say that without moving the price the markets might still absorb a large customer order for €250 million in German Bunds, maybe €100 million in French government bonds, perhaps €50 million in Italy and €25 million in Spain.

In Portugal, which has no direct market access of its own, Lee adds, it’s almost impossible to buy a position of any size at all without moving the market, with even the benchmark 10-year bond gapping out as much as 100 basis points on minimal underlying volume.

The result is that the bond market is going to have to contend with more than just rising rates over the next few years: it’s going to have to deal with rising illiquidity premiums as well. A bond yield will be the benchmark rate, plus the credit spread, plus the illiquidity premium, and it’s going to become impossible to disentangle the last two variables, especially when benchmark government bonds themselves are often quite illiquid. The effect on aggregate global borrowing costs could add up to trillions of dollars, and severely crimp the ability of the bond markets to finance growth.

Still, over time, those extra trillions of dollars are going to find their way into the pockets of bond investors: an illiquidity premium is still a premium. It’s never nice to see rates rise, but once they’ve risen, the extra yield will surely be very welcome to savers. And for the time being, at least, borrowing costs are not really a problem for most issuers with market access. If companies have to pay an extra 50bp to borrow money, so be it — they’ll live.

Sovereigns, however, are another story — they need to borrow in size, and they have historically relied on liquidity issues to ensure that they get the cheapest possible rate. (That’s the main reason why US Treasury bonds have the lowest yields in the world, on a swapped-into-dollars basis: it’s all about the liquidity, not the credit risk.) The great bond liquidity drought is arriving at the worst possible moment for G20 sovereigns which are already struggling with unprecedented levels of bonded debt. It’s always liquidity that kills you, not insolvency: it’s the inability to roll over your debts as they come due. Which means that the next wave of sovereign debt defaults might come even sooner than many analysts currently fear.

[hermes]

Return of inflation is inevitable says Aronstein

By Stephen Foley
January 2, 2014 4:30 pm

http://www.ft.com/intl/cms/s/0/53e40c80-73c4-11e3-beeb-00144feabdc0.html

Markets are underestimating a coming rout in bond prices, and missing early signs of the return of inflation, according to the US mutual fund manager who has raised more money than any other in the past year.

Investors have put billions of dollars behind Michael Aronstein and his bets that central banks will wait too long to end their crisis-era monetary expansion, triggering inflation spikes and a long bear market in bonds that might already be more than a year old.

“They never fail to make that error,” he says, “because they’re structured as bureaucracies and they have to wait until they have enough evidence to convince everybody in the room.

“The only period that may be comparable to this is after the discovery of the New World, when all the Europeans looted all the gold and silver, new money out of the sky, a la the Bernanke Doctrine. You had, basically, a century of inflation in Europe. The tulip bubble didn’t come out of nowhere; that wasn’t just people’s appetite for flowers.”

Mr Aronstein’s Mainstay Marketfield fund, distributed by New York Life Investments, has been the talk of the industry. In 12 months, the fund has quadrupled in size to $18bn, giving him more firepower than many more famous hedge fund managers.

Inflows had totalled $12.4bn by the end of November, according to data from Morningstar, more than any other actively managed mutual fund. Only a trio of index trackers from Vanguard attracted more cash last year.

In part this is a legacy of how Mr Aronstein insulated investors from the worst of the financial crisis, losing 13 per cent in 2008 versus 37 per cent for the S&P 500, without foregoing any of the upside when markets rebounded over the next four years.

The fund is also riding a wave of interest in so-called alternative mutual funds, which mimic hedge funds in giving their managers wide latitude to invest as they see fit, including by taking negative bets as well as positive ones – something that is instrumental in surviving a bear market. The Mainstay Marketfield fund can take positions in equities, bonds, commodities, exchange traded funds and derivatives.

Financial advisers and asset management groups are pushing alternative mutual funds as a way for investors to diversify their portfolios away from traditional equity and bond funds, since equities are volatile and bonds could tumble in price as rates rise.

Assets in US alternative funds jumped to $247.6bn at the end of November from $157.6bn at the end of 2012, Morningstar calculates.

Mr Aronstein is not betting it will last. “We’ll start hearing complaints about how poorly we’re doing,” he says, pointing out that 2013 was a year when simply following the US S&P 500 generated a total return of 32 per cent. The Mainstay Marketfield fund returned just under 17 per cent, held back by its geographical diversity and short positions.

“It was a very simple year. And, as you can see, I’m drawn more to complexity than simplicity,” he says.

While his fund is relatively new – it was set up in 2007 – Mr Aronstein is a late bloomer when it comes to star fund managers. He began his career in 1979 at Merrill Lynch, where he was an investment strategist, and has worked at a string of boutique firms over the years. He has blotted out the modernity of Marketfield’s Midtown Manhattan headquarters by furnishing his office with a leather couch, dark bookshelves and antique porcelain trays, and his macroeconomically driven investment philosophy is unabashedly influenced by history.

“All grand excesses have the same form, with different content,” he says. “Japan was no different, in concept, than the ‘Nifty 50’ in 1972. We’ve got bonds now,” Mr Aronstein says.

He and his team pore over price data from hundreds upon hundreds of commodities and manufactured goods, and he highlights proteins – shrimp, beef, chicken – and US lumber among the areas where price spikes are already developing. It is outwards from these pressure points, he says, that the world will finally move from asset price inflation to real consumer price rises.

And as that happens, bonds will tumble and investors will reassess the safety of emerging markets that till now have been fuelled by unprecedentedly cheap money. There are profits to be made buying the companies with pricing power and betting against those without, he says, and from concentrating investment in developed economies and staying cautious beyond.

This year there are many billions more dollars hoping Mr Aronstein is right.

[Kin2010]

E ele deve ter razão, mas talvez não a vá ter para já, e 2014 venha a ser simplesmente um ano banal, como 2013.

[hermes]

Deus te oiça e que esse cálice não venha já, pois ainda não estou tão abrigado quanto desejaria.

[Kaspov]

Pois, se o dilúvio está a chegar, convém abrigarmo-nos enquanto é tempo, de preferência num abrigo à prova de água...   

[hermes]

É melhor que as Cinderelas não esperem pela última da hora, caso contrário vão tropeçar umas nas outras, perder os sapatos pelo caminho, ficarem todas esfarrapadas e encontrar os magníficos coches e garbosos corcéis transformados em abóboras e ratos.

Fed looks at exit fees on bond funds

By Tom Braithwaite, Tracy Alloway and Michael Mackenzie in New York and Gina Chon in Washington
On June 16, 2014 7:35 pm

http://www.ft.com/intl/cms/s/0/290ed010-f567-11e3-91a8-00144feabdc0.html

Federal Reserve officials have discussed whether regulators should impose exit fees on bond funds to avert a potential run by investors, underlining concern about the vulnerability of the $10tn corporate bond market.

Officials are concerned that bond funds are becoming “shadow banks”, because investors can withdraw their money on demand, even though the assets held by the funds can be hard to sell in a crisis. The Fed discussions have taken place at a senior level but have not yet developed into formal policy, according to people familiar with the matter.

“So much activity in open-end corporate bond and loan funds is a little bit bank like,” Jeremy Stein, a Fed governor from 2012-14 told the Financial Times last month, just before he stepped down. “It may be the essence of shadow banking is ... giving people a liquid claim on illiquid assets.”

In the wake of the financial crisis, tougher rules on capital and the abolition of in-house trading operations at major US banks have resulted in Wall Street pulling back from helping big funds buy and sell corporate bonds. Bank inventories of bonds have fallen almost three-quarters from their pre-crisis peak of $235bn, according to Fed data.

At the same time, US retail investors have pumped more than $1tn into bond funds since early 2009. This has created a boom environment for fixed income money managers, but raises the prospect of a massive disorganised flight of money out of the industry should interest rates rise sharply in the coming years.

Exit fees would seek to discourage retail investors from withdrawing funds, thereby making their claims less liquid and making a fire sale of the assets more unlikely.

Introducing exit fees would require a rule change by the Securities and Exchange Commission, which some commissioners would be expected to resist, according to others familiar with the matter.

Such fees could be highly unpopular with retail investors unable to access funds without paying a fee. But some in the industry would welcome them; BlackRock, the world’s largest asset manager, has called for international rules setting exit fees on some funds.

Even as regulators worry about the potential of a sharp correction in the bond market, some investors are building a war chest to take advantage of it. BlueMountain Capital, the New York-based alternative asset manager, has stockpiled funds ready to be deployed when bond prices fall.

“If credit markets were to become stressed due to heavy mutual fund outflows, our funds with patient capital and flexible mandates would be in a position to capitalise on any dislocation,” said Andrew Feldstein, co-founder and chief executive of BlueMountain.

Investors like Mr Feldstein and regulators like Mr Stein have a similar vision of how the dislocation could arrive. “A big theme post-crisis is a significant shift of credit risk from banks to mutual funds,” said Mr Feldstein.

“Mutual funds aren’t leveraged like banks are, so they probably don’t create the same degree of systemic risk. But they do offer daily redemptions, and so they engage in a maturity transformation similar to banks, which could result in significant market stress in heavy outflow scenarios.”

[vbm]

A nota de dólar americano
reza a seguinte declaração
assinada pelo Treasurer
of the United States:

<This Note Is Legal Tender
For All Debts, Public And Private>


So, whoever wants to receive goods
worthwhile of those notes, just has to spend
them in american goods and services at the prices
that they might being on sale!

[hermes]

Lá vem bomba, pois estão a fechar a porta ao bunker. É que podia ser mais complicado impedir a corrida ao banco pelos estrangeiros...

Fidelity Blocks Overseas Clients From Buying Mutual Funds

By Christopher Condon
On 2014-07-01T22:35:58Z

http://www.bloomberg.com/news/2014-07-01/fidelity-blocks-overseas-clients-from-buying-mutual-funds.html



Fidelity Investments, the money manager that operates the largest online brokerage, told investors outside the U.S. they can’t buy mutual funds after July 31.

Boston-based Fidelity informed about 60,000 customers, or about 0.3 percent of account holders, of the change in a letter, Stephen Austin, a spokesman, said today in a telephone interview. The clients won’t be forced to sell existing holdings and will still be allowed to reinvest dividends in their funds.

The announcement reflects “a continually evolving global regulatory environment and is not in response to any specific issue, regulatory or otherwise,” Austin said.

Fidelity applies varying restrictions on overseas clients depending on their country of residency. Most overseas clients opened accounts while living in the U.S. before moving abroad, Austin said. The ban on making new investments into mutual funds applies to Fidelity and non-Fidelity funds, he said.

U.S. law doesn’t prohibit the sale of U.S. mutual funds overseas, according to John Baker, a partner at the law firm Stradley Ronon Stevens & Young in Washington. Restrictions depend on the local laws of the foreign country, he said. It’s illegal for foreign-registered funds to sell their shares publicly in the U.S., he said.

Contents of the client letter were reported earlier today in the Wall Street Journal.

Fidelity had $1.95 trillion in assets under management as of April 30, according to the firm’s website. Its brokerage unit served 19.6 million accounts as of March 31.

To contact the reporter on this story: Christopher Condon in Boston at ccondon4@bloomberg.net

To contact the editors responsible for this story: Christian Baumgaertel at cbaumgaertel@bloomberg.net Josh Friedman

[kitano]

Não vejo o alcance da medida...