bonds

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…

Safe assets are in short supply. If the US government shuts down for a long time, there will be a flight to quality. And the lack of safe assets will support the Treasury market.

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…

QE is still on, but central banks are pondering exit pathways. Exit requires vacuuming up excess reserves, winding down massive securities holdings, and restoring normal interest rates – all without killing the recovery. This column points…

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.

Over the past few years, investors who have expected aggressive monetary policy to produce high levels of consumer price inflation and have invested accordingly have been disappointed. The right question goes to why consumer price inflation…

We update our views on the main big picture drives for financial market: (1) Fed tapering (2) The stabilization of the Chinese economy (3) The cyclical recovery in Europe (4) The increase in Japanese purchases of foreign bonds

Emerging economies are reeling as rising US bond yields are squeezing the most vulnerable and funding intensive parts of the market. But the squeeze in EM yields is merely an hors d'oeuvre to what is likely waiting in the wings.

The histogram below shows the total return of long-dated treasuries over a rolling 4-month period since 2007. The leftmost bucket contains five periods that constitute the worst treasury losses since 2007. All five of these periods ended…

The same people who have been screaming inflation for the past few years are now saying that interest rates are finally about to explode. This is alarmist nonsense that disregards the influence policy rates have over the term structure of…