Monday, 14 May 2012

Get your bonds here .... red hot bonds

So a day off from cycling and the gym after the marathon ride yesterday. Maybe if I find time I'll switch on the Giro d'Italia to get a cycling fix.

Today it's all about bonds again and between visits to my local coffee shop I see Spanish yields have hit 6.2%. So much for drawing a line at 6%! The market now understands it's game on for Greece to leave the Eurozone and the weak (i.e. southern) members of the block to renegotiate things again. The Germans are in a horrible position now that their main ally France has voted for a soft option. The flight to quality is on and the German bund is heading for 1% (now at 1.45%).

The Chinese rate cut helped for about 2minutes this morning and my favorite short, the AUD has gone straight through parity. I think we'll see another rate cut in the next 60days in Australia and the realistic target for the currency is 90cents.

Enough of the eurozone.

As a sometime commodities trader I've been surprised by the lack of speed at which the various trading houses have moved towards IPO's. Louis Dreyfus Commodities plans to issue a bond as a way of financing new acquisitions. This of course is similar to Glencore's move. This is the usual pattern, you get some debt out in the market and establlish a price and get the analysts to conduct the proper credit due diligence. Later you have to expect that they will look to list the company, no matter what the lovely Margarita Louis-Dreyfus says.

I don't want your money honey, I just want your research . . .
Of course this mimics Glencore, though their move was always primarily aimed at consolidating Xstrata within their empire. I guess we have to expect the rest to follow. Vitol anyone?

And finally I personally want to stop talking about J P Morgan for the moment. I thought Krugman's piece in the NYT yesterday did a good job at saying why the average man has a right to be worried. More importantly though I thought the FT had a small but important angle on it by putting the loss in the context of published VaR exposure. And for those who have said to me nothing is wrong at JPM, then why fire Ina Drew in NY and a raft of others in the London office?

Any a quick cycling fix from yesterdays Giro - enjoy!

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