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Sober Look is a no-hype financial markets/macro blog that typically relies on data analysis, primary sources, and original materials. We keep it concise, to the point, with no self-promoting nonsense, and no long-winded opinions. If you are looking for Armageddon predictions or conspiracy theories, you will be thoroughly disappointed. Topics include financial markets, banking, asset management, risk management, derivatives, global economy, policy, and regulation, with the emphasis on finance education. Follow him on his blog or twitter.

Markets

The ABS market is back in business again

Sober Look Oct 21, 2013

After a rough patch this summer (driven by "taper" fears), consumer asset backed securities (ABS) business is heating up again. The bulk of that business is represented by auto and credit card loans. The pick up in demand is visible in the…

Markets

This simple trading strategy points to rationale for currency wars

Sober Look Oct 18, 2013

Select two countries with the worst performing currencies (against USD) over the past 4 months and go long equity indices of those two countries. Now select the two best performing currencies and short the indices of those countries (to the…

Political Economy

First signs that US shutdown is impacting consumer spending

Sober Look Oct 10, 2013

While data is difficult to come by, there are signs that the sharp drop in consumer confidence since the federal government shutdown (see post) is translating into weaker consumer spending.

Markets

In the event of a missed payment, the US has three days to cure

Sober Look Oct 8, 2013

US CDS is based on treasuries (linked to a specific security - the co-called "reference obligation"), which according to the official offering document (see offering circular here), do not have a "grace period". Under such circumstances…

Markets

Reaching for yield: HY spreads positively correlated to treasury yields

Sober Look Oct 3, 2013

Here is further evidence that in this environment treasuries are driving "risk asset" valuations. Corporate HY bond spreads are now positively correlated to treasury yields. That's quite unusual because traditionally when treasury yields…

Markets

BOJ’s aggressive QE has brought JGBs to negative real yields

Sober Look Sep 25, 2013

The Bank of Japan was able to lower Japanese government bond yields after an unexpected spike earlier this year (see post). The 10yr JGB is now yielding around 70bp, corresponding to about minus one percent of real yield.

Markets

Gauging the trajectory of the US housing market

Sober Look Sep 25, 2013

One could argue that home-buyers are ignoring higher rates, but that doesn't seem likely. Is this spike driven by capitulating buyers who had been waiting on the sidelines for mortgage rates to drop? That strategy had certainly worked in…

Political Economy

Yellen’s nomination is not a done deal

Sober Look Sep 16, 2013

Realizing that the Larry Summers nomination as the next Fed chairman was going to face some tough opposition in Congress, the president decided to pick someone else. Of course the next obvious candidate is Janet Yellen. There could be…

Markets

QE Tapering, MBS volatility, and convexity hedging via Treasuries

Sober Look Sep 10, 2013

While yields on treasury notes and bonds have risen across the board in 2013, the jump in rates has been uneven. The 5-10-year rates - the "belly" of the curve - have increased materially more than other maturities.

Markets

Evidence mounts that China has escaped the worst of emerging markets rout

Sober Look Sep 9, 2013

The latest data seem to suggest that China has so far been able to elude the severe economic headwinds faced by other emerging economies. Signs of stability have been around for a few weeks, but the first set of direct evidence came from…