Yesterday, 10:59 AM
- The ECB's €60B per month QE program includes sovereign bonds from two to 30 years in length, but the interest rate must be above the central bank's benchmark deposit rate of -0.2% - typically not an issue, but fixed-income these days is far from typical.
- German bonds are a cornerstone of the purchase program, writes Chris Whittall, accounting for about €11B of the monthly purchase total. The trouble is, 42% German paper is trading at yields below the -0.2% cutoff, leaving it ineligible for purchase by the ECB.
- “There are not enough long-term bonds unless there is a short-term selloff.” says HSBC's Elie El Hayek, and Morgan Stanley's Andrew Millward sees German paper all the way out to six years eventually trading at less than -0.2%, leaving 62% of that market ineligible for central bank purchase.
- The ECB could end up changing policy - i.e. lowering the deposit rate further, or lifting the cap of not owning more than 25% of any single bond issue.
- ETFs: EU, BUNL, ITLY, ITLT, GGOV, BUNT
Tue, Mar. 10, 10:31 AM
- Sliding stock prices will trump strong economic numbers any day. The U.S. 10-year Treasury yield shot up to 2.25% following Friday's nonfarm payroll beat, but it's returned all the way to 2.12% thanks to another sharp decline in the major equity averages.
- The S&P 500 and the DJIA have both turned negative for the year.
- And U.S. yields positively tower over those in Europe. The German 10-year yield is all the way down to 0.20%. Italy's at 1.23%, and Spain's at 1.25%.
- Want to put your money in German 5-year paper? It'll cost you 11 basis points per year to do so.
- TLT +1.05%, TBT -2.1%
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, ZROZ, SBND, TLH, VGLT, DLBS, UBT, TLO, PLW, GOVT, BUNL, ITLY, TENZ, LBND, ITLT, GGOV, DLBL, TYBS, BUNT, TAPR
Thu, Jan. 22, 9:38 AM
- It's an all-time low for Spain's 10-year note, which falls 14 basis points to 1.41% after the ECB launches a €60B per month asset purchase program. Italy's 10-year is down 12 bps to 1.56%.
- German 10-year Bund yields are down eight basis points at 1.40%, and the U.S. 10-year Treasury yield has undergone a major reversal, now lower by four basis points to 1.84% after rising as high as 1.94% after the ECB announcement. TLT goes green by 0.45% after being down more than 1.5%.
- ETFs: EU, BNDX, BWX, IGOV, BUNL, ITLY, ITLT, GGOV, BUNT
- Previously: ECB launches €60B per month QE (Jan. 22)
- Previously: Futures add to gains after ECB goes bigger than expected (Jan. 22)
Tue, Jan. 6, 7:16 AM
- The improbable (to most) rally in long-dated U.S. government paper continued overnight, with the 10-year yield dipping down all the way to 1.98%. It's bounced since, and currently stands at 2.00%, off three basis points on the session.
- It's a global rally, with bonds in the BAML Global Broad Market Sovereign Plus Index having an effective yield of just 1.28% - an all-time low (data is from 1996 on). A sampling: Japan 10-years 0.29%, German 10-years 0.47%, Spain 1.55%, U.K. 1.62%, Italy 1.77%, Australia 2.7%.
- TLT +0.5%, TBT -1%
- ETFs: TBT, TLT, TMV, TBF, EDV, TMF, TTT, JGBS, JGBD, BNDX, ZROZ, BWX, SBND, TLH, VGLT, DLBS, UBT, TLO, IGOV, BUNL, JGBL, ITLY, TENZ, LBND, ITLT, JGBT, GGOV, TYBS, DLBL, BUNT, JGBB
Fri, Jan. 2, 5:33 AM
- Eurozone manufacturing PMI remained subdued in December (below a flash estimate of 50.8) at 50.6, but above November's 16-month low of 50.1.
- "Euro zone factory activity more or less stagnated again in December," says Markit. "The weakness of factory output, combined with the subdued service sector growth signaled by the flash PMI, suggests the eurozone economy grew by just 0.1% percent in the fourth quarter."
- France and Italy's manufacturing sector continued to shrink in December, although Germany's figure was in line with earlier flash estimates at 51.2, as more new orders helped lead a return to growth.
- The new data is yet another sign toward Mario Draghi announcing QE at the ECB's next policy meeting.
- Euro Stoxx 50 index is -0.2%, while the euro is -0.5% at $1.2044.
- ETFs: FXE, VGK, EUO, FEZ, EWP, EWI, ERO, EU, EPV, IEV, EZU, HEDJ, DRR, FEU, EUFX, UPV, ITLY, ULE, FEP, ADRU, URR, ITLT, FEEU, FIEU, DBEU
Dec. 12, 2014, 11:24 AM
- The 10-year Treasury yield has tumbled all the way to 2.08% - a 16-month low if one forgets October's flash crash in yields. The 30-year is down to 2.77%.
- Checking Europe, German 10-year yields look about ready to challenge Japan, down another five basis points to 0.63% (Japan's at 0.40%). In the U.K., 10-year government paper yields 1.81%, Spain 1.88%, Italy 2.04% - all less than the U.S.
- 30-Day Fed Funds Futures contracts continue to price in a rate hike next year, but it's been pushed back to the September/October time frame.
- TLT +0.8%, TBT -1.6%
- The moves come, of course, as oil continues to carve out new multi-year lows (now down 3% on the session to $58.15 per barrel), setting off broad declines in the equity averages here and across the pond.
- ETFs: TBT, TLT, TMV, SHY, IEF, TBF, EDV, TMF, PST, EU, TTT, ZROZ, SBND, TLH, IEI, TYO, VGLT, DLBS, DTYS, BIL, UST, UBT, TLO, VGSH, VGIT, SHV, TBX, SCHO, BUNL, GSY, ITLY, SCHR, TENZ, DTYL, TYD, LBND, ITLT, ITE, DTUS, GGOV, TYBS, SST, DLBL, BUNT, DTUL, DFVL, TUZ, TBZ, FIVZ, DFVS, TYNS, SYTL
Nov. 27, 2014, 6:44 AM
- Draft documents seen by Reuters show that the 2015 budgets of several European countries, including France, Italy and Belgium are at risk of breaking EU rules.
- The Commission specifically picked out the three for a second compliance review to take place in March. This gives the countries more time to adjust policy before the EU executive decides whether to fine France for missing consolidation targets or put Italy and Belgium under a disciplinary procedure because of their debt.
- On Friday, the Commission will publish the assessments of all of the draft budgets of the 18 euro zone countries, except Greece and Cyprus which remain under bailout programs.
- ETFs: EWI, EWQ, EWK, ITLY, ITLT
Oct. 28, 2014, 5:09 AM
- Business confidence rose to 96.0 in Oct. vs. 95.5 in Sept. and 95.0 expected.
- Economic sentiment rose to 89.3 vs. 86.9 in Sept.
- Construction confidence 77.5 vs. 75.5 in Sept. Services confidence 89.2 vs. 85.1. Retailer confidence 93.9 vs. 92.1.
- Source: Istat
- ETFs: EWI, ITLY, ITLT
- Previously: ECB stress test failures centered among Italian banks (Oct. 26)
Jul. 7, 2014, 4:39 AM
- Italian Economy Minister Pier Carlo Padoan says the country will not make its debt repayment to private sector suppliers until the end of the year. This marks the third time the payment was delayed in 2014.
- The European Commission has already opened a formal infringement procedure against Italy for failing to abide by its Late Payments Directive. The law requires governments to reduce payment delays to no more than 60 days.
- Italy currently owes approximately €75B ($102B) to private suppliers, and the suspended payments have triggered layoffs, factory closures and even bankruptcies.
- ETFs: EWI, ITLY, ITLT
Jun. 19, 2014, 5:34 AM
- Euro zone bond yields returned to historic lows today, after the Fed displayed a dovish outlook on its monetary policy yesterday. The Fed declared that interest rates will stay lower than normal until inflation and unemployment move back to target.
- Earlier this week, longer-dated euro zone bonds sold off as higher-than-expected U.S. consumer price inflation put forward the possibility the Fed may raise rates.
- Italian and Spanish 10-year yields fell 7 basis points to 2.78% and 2.69% respectively. Yields on top-rated euro zone bonds were 3-4 bps lower.
- ETFs: EU, ITLY, ITLT
Jun. 9, 2014, 11:46 AM
- The U.S. 10-year Treasury yield of 2.62% is 72 basis points higher than that of the G-7 average, the largest spread since April 2010, according to Bloomberg.
- Earlier this morning, the yield on Spanish 10-year paper fell below that of Treasurys, also for the first time since 2010.
- Trying to come up with a reason other than sheer madness, analysts point to the divergence of monetary policy between the U.S. and Europe, noting the ECB last week cut rates and hinted at QE, while the U.S. is tapering and eyeing rate hikes as soon as mid-2015.
- ETFs: TBT, TLT, TMV, TBF, EDV, EU, TMF, TTT, BWX, BNDX, ZROZ, SBND, TLH, DLBS, VGLT, UBT, PLW, IGOV, GOVT, TLO, ITLY, TENZ, ITLT, LBND, TYBS, DLBL
May. 26, 2014, 5:31 AM
- Euroskeptic and far-right parties have made strong gains in some countries in elections for the European parliament as voters expressed resentment at the EU and the severe austerity it has promoted.
- A stand-out result is the 25% that the anti-euro Front National won in France, where President François Hollande's Socialists received just 14%.
- In Britain, UKIP, which wants the country to leave the EU, took the most votes with a share of more than 27%. Anti-EU parties also did well in Greece and Denmark.
- Markets seem to be fairly sanguine about the results, with the euro +0.1% at $1.3638.
- In Italy, the center-left ruling Democrat Party, led by new Prime Minister Matteo Renzi, won 41% of the vote. "The outcome is...likely to delight the markets, where investors can be expected to see it as a resounding vote of confidence in the 39 year-old prime minister, his youthful cabinet and their ambitious program of political and economic reforms," writes the Economist's Charlemagne column. The FTSE Mib is +2.5%.
- Euro Stoxx 600 +0.35%, London closed, Paris +0.7%, Frankfurt +1.5%, Madrid +0.7%.
- ETFs: GREK, EWI, EU, EWU, EWQ, EDEN, IFEU, EWUS, ITLY, ITLT, FKU, DXPS, DBUK
May. 15, 2014, 4:06 AM
May. 9, 2014, 4:09 AM| Comment!
Apr. 10, 2014, 4:13 AM
Mar. 21, 2014, 5:12 AM
ITLY vs. ETF Alternatives
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