As the Australian Treasury backs a further residential mortgage backed security (RMBS) 'securitization market' that is already at $16billion AUD (which is close to the Australian military budget), it also now wants expand into 'covered bonds' released onto the market via smaller lenders. The catch? The goverment (taxpayer) will underwrite the deposits connected to the covered bonds, in which the taxpayer funded monster Australian Office of Financial Management (AOFM) has been hemorrhaging since 2008.
The problem? The market will eat this (insanity from the Australian goverment) alive, as the whole thing will be interpreted as a goverment fear of a housing bubble/crash. Watch Australian bond yields go into hyper space as Australian borrowing costs blowout.
If China pops the commodity bubble in 2011, Australia's income dependency will dissipate and you might as well connect Australia to the EU debt problem, say similarity being Spain (housing bubble/bust, banks, trillion dollar economy etc)
"SINGAPORE, Dec 13 (IFR) - Australia’s Treasurer Wayne Swan yesterday (December 12) announced a series of bank reforms including introduction of covered bonds and setting aside another AUD4bn (USD3.9bn) to support the RMBS market.
The measures were issued under the the government’s Competitive and Sustainable Banking System reforms. Draft amendments in the Banking Act to allow issuance of covered bonds in Australia will be released when the Parliament first reconvenes next year.
As a three-pronged strategy, the government has allowed all banks, credit unions and building societies to issue covered bonds, a move that will help these borrowers access cheaper and long term stable funding. Covered bonds are backed by assets which can be enforced upon at the occurrence of a default. They therefore are priced at lower interest rates compared to plain vanilla bonds.
Under the proposal, each covered bond issuer may have a limit or cap assigned. For instance, an issuer may be allowed to issue covered bonds up to 5% of its total Australian assets.
The government also plans to deepen the corporate bond market by launching the trading of government bonds on exchanges.
Meanwhile, the government extended by a further AUD4bn the support programme to the RMBS market. The government has already provided AUD16bn to the Australian Office of Financial Management to invest in the Triple A rated RMBS tranches. The fund was created in early 2008 at an initial size of AUD8bn, and a year later, doubled to help the securitization industry, which has suffered a hit by the global financial crisis. So far, about AUD15bn is believed to be fully invested in the market, while the remaining will be invested by early 2011.
Significantly, the government has also emphasised on the development of special “bullet” bonds for smaller lenders to help diversify their funding. Last week, regional lender Bendigo and Adelaide Bank issued an AUD1bn RMBS, which had little over 50% of the deal in bullet notes. This was the second deal in the year which had fixed rate notes."
Showing posts with label Commodity producing countries under pressure (political/economic). Show all posts
Showing posts with label Commodity producing countries under pressure (political/economic). Show all posts
Sunday, December 12, 2010
Thursday, November 4, 2010
Commodity producing countries under pressure (political/economic - Brazil) - Brazil to Tim Geithner 'You and that lunatic Fed chairman are...
...fucking slugs
(update 12)
My Portuguese isn't too good, but under his breath and his subconscious thoughts would translate the above sentiment towards the joke that is America's financial custodians
CHICAGO (Dow Jones)--Brazil Central Bank President Henrique Meirelles on Thursday became that country's latest official to criticize the U.S. Federal Reserve Board's move to stimulate the U.S. economy by buying bonds from the market.
The move has "negative consequences for other countries, which is the case for Brazil," Meirelles told reporters after a speech at the University of Chicago Booth School of Business. "The quantitative easing creates excessive liquidity which overflows to countries like Brazil, and then we have to take measures to address that issue," he said. "It does create a problem."
Meirelles confirmed that Brazil, at the Group of 20 meeting next week in Seoul, will present proposals "to several countries, the U.S. and China and others, to reach a different agreement not to generate so many distortions for countries like Brazil." He did not offer specifics about the proposals.
On Wednesday, the U.S. Federal Reserve announced it would purchase some $600 billion in bonds from the market over the next eight months. The move will sharply increase liquidity in the U.S. and markets worldwide.
"The Fed is doing what the Fed thinks is right for the United States. Period," Meirelles said. His comments came after Brazilian Finance Minister Guido Mantega, speaking in Brasilia on Thursday, called the Fed decision "an error." Mantega said much of the increased liquidity will flow to emerging market countries, such as Brazil, in the form of unwanted short-term investment inflows. "The latest Fed move will lead to greater disequilibrium in world markets," Mantega said.
Brazil's government has been struggling to cut down on short-term inflows, which have led to a sharp appreciation of the Brazilian real against the U.S. dollar. The real has gained more than 30% against the greenback since March of 2009. The strong real hurts Brazilian exports.
Economists agreed that the Fed move will mean more inflows into Brazil. Brazil's government last month raised the country's financial operations tax, known as the IOF, on incoming investment in fixed-income securities to 6% from 2% previously, in an effort to slow heavy foreign portfolio investment. The government also raised the tax on guarantees for futures and other derivatives operations.
Meirelles and Mantega are slated to accompany Brazilian President Luiz Inacio Lula da Silva and President-elect Dilma Rousseff to the G-20 conference. Mantega said they "will try to convince the U.S. to change its position [on Federal Reserve purchases of bonds]."
Massive capital control protectionism via South America in full effect. It's going to get really nasty very quickly.
(update 12)
My Portuguese isn't too good, but under his breath and his subconscious thoughts would translate the above sentiment towards the joke that is America's financial custodians
CHICAGO (Dow Jones)--Brazil Central Bank President Henrique Meirelles on Thursday became that country's latest official to criticize the U.S. Federal Reserve Board's move to stimulate the U.S. economy by buying bonds from the market.
The move has "negative consequences for other countries, which is the case for Brazil," Meirelles told reporters after a speech at the University of Chicago Booth School of Business. "The quantitative easing creates excessive liquidity which overflows to countries like Brazil, and then we have to take measures to address that issue," he said. "It does create a problem."
Meirelles confirmed that Brazil, at the Group of 20 meeting next week in Seoul, will present proposals "to several countries, the U.S. and China and others, to reach a different agreement not to generate so many distortions for countries like Brazil." He did not offer specifics about the proposals.
On Wednesday, the U.S. Federal Reserve announced it would purchase some $600 billion in bonds from the market over the next eight months. The move will sharply increase liquidity in the U.S. and markets worldwide.
"The Fed is doing what the Fed thinks is right for the United States. Period," Meirelles said. His comments came after Brazilian Finance Minister Guido Mantega, speaking in Brasilia on Thursday, called the Fed decision "an error." Mantega said much of the increased liquidity will flow to emerging market countries, such as Brazil, in the form of unwanted short-term investment inflows. "The latest Fed move will lead to greater disequilibrium in world markets," Mantega said.
Brazil's government has been struggling to cut down on short-term inflows, which have led to a sharp appreciation of the Brazilian real against the U.S. dollar. The real has gained more than 30% against the greenback since March of 2009. The strong real hurts Brazilian exports.
Economists agreed that the Fed move will mean more inflows into Brazil. Brazil's government last month raised the country's financial operations tax, known as the IOF, on incoming investment in fixed-income securities to 6% from 2% previously, in an effort to slow heavy foreign portfolio investment. The government also raised the tax on guarantees for futures and other derivatives operations.
Meirelles and Mantega are slated to accompany Brazilian President Luiz Inacio Lula da Silva and President-elect Dilma Rousseff to the G-20 conference. Mantega said they "will try to convince the U.S. to change its position [on Federal Reserve purchases of bonds]."
Massive capital control protectionism via South America in full effect. It's going to get really nasty very quickly.
Wednesday, November 3, 2010
Commodity producing countries under pressure (political/economic - Australia) - exports starting to crunch on AUD bubble (update 11)
| BALANCE ON GOODS AND SERVICES |  | | | | |
| Trend estimates | 2 254 | 2 338 | 2 368 | . . |
| Seasonally adjusted | 1 704 | 2 446 | 1 760 | . . |
| CREDITS (Exports of goods & services) | | | | | |
| Trend estimates | 24 995 | 25 021 | 24 942 | - |
| Seasonally adjusted | 25 216 | 24 524 | 24 151 | -2 |
| DEBITS (Imports of goods & services) | | | | | |
| Trend estimates | 22 741 | 22 683 | 22 573 | - |
| Seasonally adjusted | 23 512 | 22 078 | 22 391 | 1 |
Tuesday, October 19, 2010
Commodity producing countries under pressure (political/economic - ALL) - Chinese inflation blowout, interest rate hike (update 10)
A blessing or a curse in disguise as a blessing? Point is as commodity producing export countries were caught in the headlights of market overbidding, particularly hedge finds buying their currencies, after the Federal Reserve were to begin (or have already) further Quantitative Easing. The US dollar weakness and becomes oversold, as most commodity producing currencies and Asian exporting currencies became overbought.
Of course China and the US have been wrangling with the YUAN (CNY) appreciation, whilst US dollar weaknesses continues with huge trade gaps between the producers (China) and the consumers (US).
It ends.
The US could bluff and force China into a situation where the Chinese would inevitably have to allow their currency to strengthen, how? By the US devaluing their currency the Chinese would of course fix their currency at the same rate as the USD; while the USD devalues. The problem of course is that China has an inflation issue, from property and onward to other consumer based goods, which is most likely getting out of control. The Chinese simply cannot allow their currency to be artificially low, by natural laws of consumption; the Chinese are running too hot on a undervalued purchaser tool - the YUAN. The US, with a chairman of the Federal Reserve Bank (Ben Bernanke), who believes in printing; the argument is that the US is still caught in deflationary trap. This is technical because the counter argument is that utilities haven't gone down and costs of living i.e food, oil maintain a steady incline. But, the US is a struggling economy, which is still caught in a recessionary quagmire (high unemployment, declining property values, declining manufacturing etc). If there is a game of strategy here, the US can force the Chinese to increase their YUAN or increase interest rates, on the simple premise that the Chinese inflation problem is greater than the US inflation problem. The US devalues the USD, the Chinese will do the same, but at a cost of inflation spinning out of control
Point being, China has now increased it's interest rates by the one yr yuan lending rate to 5.56% from 5.31%, the one-year yuan deposit rate to 2.5% from 2.25%
This would indicate that 1. China does have a severe inflation problem 2. A slight liquidity problem is occurring. Keeping in mind that the deposit rate is very low.
Last point re: China, they may be losing control of the car. Slight panic has moved up a notch.
China's tightening of their lending rate will spill over to commodity producing countries, as we should see their currency's drop considerably and mining producing stocks effected considerably.
Of course China and the US have been wrangling with the YUAN (CNY) appreciation, whilst US dollar weaknesses continues with huge trade gaps between the producers (China) and the consumers (US).
It ends.
The US could bluff and force China into a situation where the Chinese would inevitably have to allow their currency to strengthen, how? By the US devaluing their currency the Chinese would of course fix their currency at the same rate as the USD; while the USD devalues. The problem of course is that China has an inflation issue, from property and onward to other consumer based goods, which is most likely getting out of control. The Chinese simply cannot allow their currency to be artificially low, by natural laws of consumption; the Chinese are running too hot on a undervalued purchaser tool - the YUAN. The US, with a chairman of the Federal Reserve Bank (Ben Bernanke), who believes in printing; the argument is that the US is still caught in deflationary trap. This is technical because the counter argument is that utilities haven't gone down and costs of living i.e food, oil maintain a steady incline. But, the US is a struggling economy, which is still caught in a recessionary quagmire (high unemployment, declining property values, declining manufacturing etc). If there is a game of strategy here, the US can force the Chinese to increase their YUAN or increase interest rates, on the simple premise that the Chinese inflation problem is greater than the US inflation problem. The US devalues the USD, the Chinese will do the same, but at a cost of inflation spinning out of control
Point being, China has now increased it's interest rates by the one yr yuan lending rate to 5.56% from 5.31%, the one-year yuan deposit rate to 2.5% from 2.25%
This would indicate that 1. China does have a severe inflation problem 2. A slight liquidity problem is occurring. Keeping in mind that the deposit rate is very low.
Last point re: China, they may be losing control of the car. Slight panic has moved up a notch.
China's tightening of their lending rate will spill over to commodity producing countries, as we should see their currency's drop considerably and mining producing stocks effected considerably.
Monday, October 4, 2010
Commodity producing countries under pressure (political/economic - Australia) - RBA badly timed rate cycle (update 10)
Those crazy (and I mean they have lost the plot on the Australia economy) Reserve Bank of Australia 'officials', may begin a rate tightening cycle amidst a global depreciation in emerging economies currencies, rate cutting /money printing and protectionism. Their (RBA) theory has something to do with wage inflation concerns as Australia is at so called full employment, the RBA crappy modeling relies on a wage modeling based on very iffy employment (mostly part time earners) figures; however they seem to deliberately, call it denial, not to factor in mortgage/house payments eating into wages as REAL interest rates are constantly going upward (re: Australia's huge housing bubble research bond yields and CDS spreads, interbank to see that banks/lenders pass on a constant amount on interest/loaned monies).
refer:
"THE Reserve Bank's case for a rate rise today has been weakened by a survey of prices showing inflation has almost disappeared.
refer:
"THE Reserve Bank's case for a rate rise today has been weakened by a survey of prices showing inflation has almost disappeared.
The measure of core inflation preferred by the RBA has not changed at all in the past two months and rose by only 0.1 per cent in July, according to the monthly inflation gauge compiled by the Melbourne Institute and TD Securities.
"There's no case for a rate rise in the current data," TD Securities senior strategist Annette Beacher said yesterday.
However, financial markets are putting a 50 per cent chance on the Reserve Bank lifting its benchmark cash rate by 0.25 per cent to 4.75 per cent today. It would be the first increase since May and would lift the standard mortgage rate to 7.65 per cent, its highest level since October 2008.
This good be further proof that household income is being eroded by high rates on mortgages and credit, thus effecting the purchasing power (spending power). Also indicative that the Australian property bubble is at bursting point. A RBA cash rate increase could quadruple with passed on rates via banks.
The RBA with antiquated modelling (not factoring in China market 'distortions') and single minded bullishness maybe solely responsible for imploding the Australian property bubble.
Commodity producing countries under pressure (political/economic - Brazil) - election stalemate (update 9)
Brazil, like Australia (although terminology is different) has entering into a hung Parliament, or a 'run off' election (another election is held at a later date). Good indication of strains on commodity producing ecomomies that are facing political uncertainly and voter backlash. May also indicate that inflation/and or stagflation concerns are arising; with China re-inflating it's economy in a perpetual boom cycle and trying to manage it's over heated property markets. Market distortion via the Federal Reserve quantitative easing number 2 set for November 2010 and China, have sent emerging economies currencies in an appreciation cycle or bubble.
Negative reverberations in the 'wealthy' commodity producing countries (via China demand) may be the stark warning signs of a global slowdown/China crash
refer:
BRASILIA (Dow Jones)--Brazilian government-backed presidential candidate Dilma Rousseff is ready to hold dialogue with third-place Green Party candidate Marina Silva to gain support in a runoff election later this month, Rousseff said Monday. Rousseff attracted 46.9% of votes in a first-round election Sunday. The total fell short, however, of the 50% necessary to win the election. Leading opposition candidate Jose Serra of the Social Democracy Party got 32.6% of the vote and Marina Silva 19.3%. Rousseff will face Serra in a runoff election Oct. 31. Discussing the results at a press conference Monday evening, Rousseff said that, after the commotion settles from the first-round election, her campaign plans to approach Silva and her Green Party allies. "We're going to be able to show to this segment that we are better able to represent their interest than our adversary," Rousseff said. Political analysts note that support from Silva and her constituency could be critical for Rousseff or Serra to clinch victory in the runoff. Marina Silva, who formerly served in the government of President Luiz Inacio Lula da Silva as environment minister, quit her post in 2008 after reported disagreements with Rousseff over policies related to infrastructure projects and development. Rousseff, meanwhile, said that a large coalition of allies elected to congressional and gubernatorial posts in the nationwide election Sunday would be helpful in obtaining the necessary support in the second round. Rousseff met in Brasilia Monday with a large contingent of recently elected allies to discuss her bid for the presidency. She said that during the second round of the campaign she would focus on the issues of health care, education and security. Rousseff also reaffirmed her plans to compare policies of the Lula government to those carried out during the years of former Brazilian president and Serra ally Fernando Henrique Cardoso, of the Social Democracy Party. She said her campaign meant to continue a "transformational" project carried out by President Lula to achieve sustainable growth, development, and jobs. She said this would involve a reduction of domestic interest rates to levels used internationally and a continued reduction of the country's debt, which has fallen over the past eight years to the equivalent of around 40% of GDP from 60% previously. Brazil's reference Selic interest rate currently stands at 10.75% annually, and rates on consumer loans have hovered at levels of around 40% annually.
Negative reverberations in the 'wealthy' commodity producing countries (via China demand) may be the stark warning signs of a global slowdown/China crash
refer:
BRASILIA (Dow Jones)--Brazilian government-backed presidential candidate Dilma Rousseff is ready to hold dialogue with third-place Green Party candidate Marina Silva to gain support in a runoff election later this month, Rousseff said Monday. Rousseff attracted 46.9% of votes in a first-round election Sunday. The total fell short, however, of the 50% necessary to win the election. Leading opposition candidate Jose Serra of the Social Democracy Party got 32.6% of the vote and Marina Silva 19.3%. Rousseff will face Serra in a runoff election Oct. 31. Discussing the results at a press conference Monday evening, Rousseff said that, after the commotion settles from the first-round election, her campaign plans to approach Silva and her Green Party allies. "We're going to be able to show to this segment that we are better able to represent their interest than our adversary," Rousseff said. Political analysts note that support from Silva and her constituency could be critical for Rousseff or Serra to clinch victory in the runoff. Marina Silva, who formerly served in the government of President Luiz Inacio Lula da Silva as environment minister, quit her post in 2008 after reported disagreements with Rousseff over policies related to infrastructure projects and development. Rousseff, meanwhile, said that a large coalition of allies elected to congressional and gubernatorial posts in the nationwide election Sunday would be helpful in obtaining the necessary support in the second round. Rousseff met in Brasilia Monday with a large contingent of recently elected allies to discuss her bid for the presidency. She said that during the second round of the campaign she would focus on the issues of health care, education and security. Rousseff also reaffirmed her plans to compare policies of the Lula government to those carried out during the years of former Brazilian president and Serra ally Fernando Henrique Cardoso, of the Social Democracy Party. She said her campaign meant to continue a "transformational" project carried out by President Lula to achieve sustainable growth, development, and jobs. She said this would involve a reduction of domestic interest rates to levels used internationally and a continued reduction of the country's debt, which has fallen over the past eight years to the equivalent of around 40% of GDP from 60% previously. Brazil's reference Selic interest rate currently stands at 10.75% annually, and rates on consumer loans have hovered at levels of around 40% annually.
Wednesday, September 29, 2010
Commodity producing countries under pressure (political/economic - Canada) - GDP going negative (update 8)
Should be a good bell weather sign that a global slow down is priced in for the final 3mths of 2010 going into 2011
WSJ Sept 29 2010
" OTTAWA (Dow Jones)--Canadian Finance Minister Jim Flaherty said Wednesday that July's gross domestic product figure may be "a bit negative." Statistics Canada will release the data at 8:30 a.m. EDT Thursday. The market expects output to have contracted 0.1% in light of soft retail, wholesale and manufacturing sales data. A weak figure may cause the Bank of Canada to hit the pause key on rate hikes after three consecutive increases. "We may see a figure for July tomorrow that's a bit negative, but in July a lot of things happened in Canada, like the introduction of the HST (harmonized sales tax) in two of the largest provinces and a 2% increase in the sales tax in the province of Nova Scotia. So there are reasons for that," Flaherty told reporters after Question Period in Parliament."
WSJ Sept 29 2010
" OTTAWA (Dow Jones)--Canadian Finance Minister Jim Flaherty said Wednesday that July's gross domestic product figure may be "a bit negative." Statistics Canada will release the data at 8:30 a.m. EDT Thursday. The market expects output to have contracted 0.1% in light of soft retail, wholesale and manufacturing sales data. A weak figure may cause the Bank of Canada to hit the pause key on rate hikes after three consecutive increases. "We may see a figure for July tomorrow that's a bit negative, but in July a lot of things happened in Canada, like the introduction of the HST (harmonized sales tax) in two of the largest provinces and a 2% increase in the sales tax in the province of Nova Scotia. So there are reasons for that," Flaherty told reporters after Question Period in Parliament."
Wednesday, September 22, 2010
Commodity producing countries under pressure (political/economic - New Zealand) - GDP flat (update 7)
Economists again are over-stretching assumptions that commodity producing countries are somewhat shielded via China demand for commodities in 2010. This was the fatal error made in 2008 with the decoupling argument (US recession). What we are seeing is China will struggle to maintain domestic consumption, thus it will continues to devalue it's Yuan (CNY), which indicates that it's export markets are petering out on US and Europe weakness. If the US Federal Reserve does decide to embark on more asset buying, via MBS (mortgage back securities) which then means that more liquidity will go into the banking system (to be sucked up by the banks), which then also means the US dollar will weaken (sans risk aversion/possible trade war). The Chinese WILL not devalue or bother trying to prove to the US it is strengthening it's currency. So, if a global slowdown is now occurring, or double dip, and a trade war (protectionism) is about to take place. This will most certainly effect commodity producing countries.
Market consensus had a 0.8% growth of New Zealand GDP for the June quarter 2010, q/q now @ 0.2 down from (q1) 0.5
FX street
Market consensus had a 0.8% growth of New Zealand GDP for the June quarter 2010, q/q now @ 0.2 down from (q1) 0.5
FX street
Sunday, September 19, 2010
Commodity producing countries under pressure (political/economic - Australia) - Australia's exports pressured/RBA tightning. (update 6)
We have a madman at the helm who seems hellbent on cooling the Australian economy that he believes has been inflated by the mining boom (which the rest of Australia doesn't see).
Of course what has created inflation in Australia is the Australian mega housing bubble, not mining (shipping rates are still low re: Iron Ore). Maintain a tightening bias on top of real interest rates (which are going through the roof) on credit and the Aussie bust will be ensued (small/medium size businesses sans mining will be decimated). Not by a China slow down, but by the Reserve Bank of Australia.
Good to watch is Government stats prior (September 30th/October 5th) to central bank meetings. May fudge (true figures) to hold off a tightening cycle.
Of course what has created inflation in Australia is the Australian mega housing bubble, not mining (shipping rates are still low re: Iron Ore). Maintain a tightening bias on top of real interest rates (which are going through the roof) on credit and the Aussie bust will be ensued (small/medium size businesses sans mining will be decimated). Not by a China slow down, but by the Reserve Bank of Australia.
Good to watch is Government stats prior (September 30th/October 5th) to central bank meetings. May fudge (true figures) to hold off a tightening cycle.
Monday, September 13, 2010
Commodity producing countries under pressure (political/economic - Argentina) - inflation bust scenario looking more certain (update 5)
So we have Europe and the US in a deflation style trap (until both economies are allowed to properly de-leverage) with sprinkles of inflation around the edges, the US and EU banking system is artificially being pumped and supported by the government sector and their incumbent central banks. The question is why didn't Europe and the US fall into broad consumer inflation by the trillions of dollars spent to attempt to stimulate both economies? The answer lies with the fact that the banks are gobbling up excess liquidity at an extreme rate. This indicates that both the EU and US banking system is still insolvent. The private sector has shrunk, with Germany revving exports, but still has a troubling banking system. But domestic consumption has not revived to inflated levels. The US export sector is poor and will remain that way, as China is still undermining the trade gap between the US and China via it's pitiful appreciation of the Yuan. So growth via the US and Europe is negligible, Asia has ramped up stimulus programs and inflated property markets from Taiwan to South Korea, Singapore, Indonesia and of course China. The Asia growth story is fulled by commodity nations, that are now running par inflation rates with Asia, as we know China's inflation will blow out sooner than later.
What appears more likely on the scenario, is even if the US doesn't statistically fall into a double dip recession (but just stays adrift in an economic dead zone), it will be the commodity based nations, via China that will lead to the global bust, thus global GDP will be stripped down. China will initiate a bust scenario for the world, even if China or a portion of China crashes, commodity producing countries, that are still running large fiscal deficits and rely heavily of debt markets to secure funding. Will be hit hard. As all commodity producing countries are suffering inflation. The biggest denier in the inflation camp (commodity producing country) is Argentina.
from Bloomberg May 2010 (older article for 2010, but still relevant re: the fudged China data)
"Economists, including former central bank President Alfonso Prat-Gay, say annual price increases are more than 25 percent, which would make Argentina’s inflation rate the second highest in the world behind Venezuela. Both countries would take the inflation crown from Zimbabwe, where prices climbed 500 billion percent in 2008, according to the International Monetary Fund, before slowing last year. Argentina’s statistics agency said prices rose 9.7 percent in March from a year earlier.
Quickening inflation in South America’s second-biggest economy isn’t a concern only for the poor. Doubts about the government’s data mean investors demand higher yields on Argentine bonds, said Edwin Gutierrez, who manages $5 billion in emerging-market debt at Aberdeen Management Plc in London. The current yields on Argentine debt of about 12 percent are unsustainable, Prat-Gay said.
“Anyone who’s playing Argentina knows that they’ve been fudging the data,” Gutierrez said in a May 5 interview.
Economy Minister Amado Boudou said the government’s inflation data accurately reflect cost increases for the poor. Complaints that inflation is being underreported come from wealthier Argentines and investors who hold debt that yields more when inflation quickens, he said in an April 14 interview.
Polls show Argentines expect prices to surge 30 percent over the next year. The government will publish April’s inflation data May 12.
Extra Yield
The extra yield investors demand to buy Argentine bonds over U.S. Treasuries is 696 basis points, or 6.96 percentage points, according to JPMorgan Chase & Co. The so-called spread for Iraqi bonds is 3.88 percentage points. The Dominican Republic, whose $46 billion economy is barely one-tenth of Argentina’s, sold $750 million of bonds last month yielding 7.5 percent. Argentina’s dollar bonds due in 2015, by comparison, yield more than 12.5 percent.
Higher bond yields make it more expensive for President Cristina Fernandez de Kirchner’s government to build roads, pay for welfare programs and support subsidies for buses and trains."
What appears more likely on the scenario, is even if the US doesn't statistically fall into a double dip recession (but just stays adrift in an economic dead zone), it will be the commodity based nations, via China that will lead to the global bust, thus global GDP will be stripped down. China will initiate a bust scenario for the world, even if China or a portion of China crashes, commodity producing countries, that are still running large fiscal deficits and rely heavily of debt markets to secure funding. Will be hit hard. As all commodity producing countries are suffering inflation. The biggest denier in the inflation camp (commodity producing country) is Argentina.
from Bloomberg May 2010 (older article for 2010, but still relevant re: the fudged China data)
"Economists, including former central bank President Alfonso Prat-Gay, say annual price increases are more than 25 percent, which would make Argentina’s inflation rate the second highest in the world behind Venezuela. Both countries would take the inflation crown from Zimbabwe, where prices climbed 500 billion percent in 2008, according to the International Monetary Fund, before slowing last year. Argentina’s statistics agency said prices rose 9.7 percent in March from a year earlier.
Quickening inflation in South America’s second-biggest economy isn’t a concern only for the poor. Doubts about the government’s data mean investors demand higher yields on Argentine bonds, said Edwin Gutierrez, who manages $5 billion in emerging-market debt at Aberdeen Management Plc in London. The current yields on Argentine debt of about 12 percent are unsustainable, Prat-Gay said.
“Anyone who’s playing Argentina knows that they’ve been fudging the data,” Gutierrez said in a May 5 interview.
Economy Minister Amado Boudou said the government’s inflation data accurately reflect cost increases for the poor. Complaints that inflation is being underreported come from wealthier Argentines and investors who hold debt that yields more when inflation quickens, he said in an April 14 interview.
Polls show Argentines expect prices to surge 30 percent over the next year. The government will publish April’s inflation data May 12.
Extra Yield
The extra yield investors demand to buy Argentine bonds over U.S. Treasuries is 696 basis points, or 6.96 percentage points, according to JPMorgan Chase & Co. The so-called spread for Iraqi bonds is 3.88 percentage points. The Dominican Republic, whose $46 billion economy is barely one-tenth of Argentina’s, sold $750 million of bonds last month yielding 7.5 percent. Argentina’s dollar bonds due in 2015, by comparison, yield more than 12.5 percent.
Higher bond yields make it more expensive for President Cristina Fernandez de Kirchner’s government to build roads, pay for welfare programs and support subsidies for buses and trains."
Wednesday, September 1, 2010
Commodity producing countries under pressure (political/economic - Australia) - (update 4) July 2010 Trade surplus less than estimates
Australia's trade surplus weak in July 2010 @ AUD$1.89bn against the market consensus @ AUD$3.10bn.
Exports: down 4.5% in July, imports up 1.6%, weaker than expected.
Declines in coking coal and ore prices/volumes recorded during the month.
Imports: consumption goods down. Six bought fighter jets (wonderful!) which then pushed imports up 8.7%, the goverment buying military hardware was the only import rise for July 2010
ABS
Any feverish dip buying on YEN and USD crosses by over leveraged/margin Japanese traders, will be caught in a bull trap.
Exports: down 4.5% in July, imports up 1.6%, weaker than expected.
Declines in coking coal and ore prices/volumes recorded during the month.
Imports: consumption goods down. Six bought fighter jets (wonderful!) which then pushed imports up 8.7%, the goverment buying military hardware was the only import rise for July 2010
ABS
Any feverish dip buying on YEN and USD crosses by over leveraged/margin Japanese traders, will be caught in a bull trap.
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