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Friday, 19 July 2013

Bloomberg - Spanish 10-Year Bonds Decline as Italian Yield Rises to 4.48%

Bloomberg - Spanish 10-Year Bonds Decline as Italian Yield Rises to 4.48%

In light of our market alert, regarding Portugal's Bonds, earlier this week, along with the growing concern for adverse circumstances in Europe, even more focus is now being given to European Bond Markets. Market activity in these markets may now have greater bearing on the global financial system than US treasuries. No kidding?

Similar to Japan, bond values and rates in the US appear to be hand-cuffed at low levels for some time. Moreover, enjoying the reserve currency status allows the US to gather the loose liquidity in the global system and harbour its flight and fright capital, thereby easing any upward rate pressures. Plus, an interest rate increase state-side would be absolutely devastating to the US economy at this juncture - and just pour gas on a stumbling economy's fires. 

Underlying the European bond markets are chronic diseases that  show no signs of abating - in fact there is growing evidence to the contrary. Like Japan and Middle East countries, Europe suffers from a physical economic overcapacity issue that cannot be resolved by abstructionist economic measures. Limited and declining physical economic inputs can only lead to one result - declining economic outputs. All of which is made worse as populations grow and per capita output consumption ratios thusly sink even further. Bad "Real" News!

Particularly after Cyprus, we are seeing signs of desperate central bankers pulling out devious last stops to cure the terminal economic cancer. The markets in Greece, Spain, Italy, Ireland and Portugal are at the greatest risk of crashing global bond prices. They are "bonded" by a common concern with a staggering rippling potential affecting markets with traumatic head to toe  effects. 

Our main message here - this one ain't over yet; 'cause, "it ain't over, 'til its over"  

July 19, 2013

A Bonding Crisis - the future is yet to come...

While the rest of the world may think that the FED is the driver behind global rates, largely because of the US reserve currency status and its trading volumes - we are not so certain, and believe as Grandma use to say "the devil is in the details - at Lehman Bros?" And so when all hell breaks loose; something small and overlooked is often perpetrating the angst.

Of course, then there was Yogi's wisdom - a great "Bondplayer" too  

Dr. Peter G Kinesa

July 19, 2013

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