Linking ≠ endorsement. Enjoy and share:
- BOJ Beat: Watchers Expect Fresh Easing Next Year – Japan Real Time – WSJ
September 3, 2013, 5:47 PM. By Takashi Nakamichi.
… while the BOJ is expected to stand pat on policy again when its policy board meets from Wednesday, speculation is rife that it will be forced to take additional easing measures sometime next year, a reflection of the strong skepticism in financial markets that the central bank may not be doing enough to achieve its goal of 2% inflation in two years.
We agree that there will be more easing in Japan. The easing they have done has worked. They have not, however, done enough.
Read the source article … https://blogs.wsj.com/japanrealtime/2013/09/03/boj-beat-watchers-expect-fresh-easing-next-year/
- Housing affordability set to plummet as interest rates spike again » OC Housing News
Sep. 03, 2013.
The gyrations in most financial markets have little or no impact on housing. However, price fluctuations in the market for 10-year Treasury Bills has a strong impact on how much people can borrow to bid on houses. The 10-year Treasury is a close proxy for mortgage bonds as their durations are very similar. Price movements in either of these markets will impact the others as investors move back and forth for the best possible deal.
When prices for 10-year Treasuries fall, so do prices on mortgage-backed securities. When prices on mortgage backed securities fall, interest rates go up (yield is an inverse function of price on bonds). When interest rates go up, house affordability goes down because borrowers can’t finance large mortgage balances. So in an indirect, yet very strong way, prices in the Treasury bond market directly impact house affordability. When bond prices go down, affordability goes down with it.
There has been a great deal of volatility in the bond market since the federal reserve announced they were going to slow down and eventually stop their bond purchases. The so-called “taper” scared bond investors who didn’t want to be the bagholder when the largest buyer of these securities stopped buying. The result was a massive selloff in government bonds which triggered a selloff in mortgage-backed securities that sent interest rates soaring from 3.5% in May to over 4.5% now. This has obviously hurt house affordability.
The fact that concerns analysts who closely watch these markets is that this massive selloff was caused by only the rumor of a slowdown in federal reserve buying. There has been no actual slowdown to date. When the fed eral reserve actually does slow it’s purchases, and the market sees this occurring, the urgency to exit the market will become even greater. And since the entire market has been on federal reserve support for such a long time, nobody knows what the real price should be. When a manipulated market is turned back over to free-market forces, there is generally a great deal of price volatility as both buyers and sellers struggle to discover fair-market value. In short, interest rates will rise, but the flight will be turbulent.
The article linked within the linked article may be underestimating the Fed’s understanding and how it will react to what is being suggested in that article.
Of course, we don’t yet know who will be the Chairperson of the Fed after Ben Bernanke leaves at the end of this year. If it’s Larry Summers, we suspect volatility will be much greater than were it Janet Yellen.
Read the source article … https://ochousingnews.com/news/housing-affordability-set-to-plummet-as-interest-rates-spike-again
- Stock markets soar on positive world manufacturing surveys | Business | The Guardian
UK order books and output grew at fastest pace in 20 years while China’s year-long contraction ended.
By Phillip Inman and Larry Elliott. The Guardian, Monday 2 September 2013 16.56 EDT.
But a fall in the rupee failed to arrest India’s first contraction in manufacturing for more than four years.
Stock markets soared on Monday as surveys of manufacturing output around the world gave the strongest indication yet that the richest countries are finally shaking off the after-effects of the financial crisis.
British manufacturing order books and output grew at their fastest in almost two decades while China, which has suffered a year-long contraction in manufacturing output, saw activity expand in August. Factory sectors in Spain and Italy returned to growth for the first time since 2011. Only France and India among the world’s biggest economies experienced falls in production and Paris will be comforted by indications that some areas of manufacturing stabilised during the summer.
We reserve judgment. It appears to us that there is too much going on that could turn sour giving us pause before trumpeting success for the “richest countries.”
Read the source article … https://www.theguardian.com/business/2013/sep/02/stock-markets-manufacturing-surveys-world
- India Slump Pressures Singh to Boost Lowest BRIC Reserves – Bloomberg
By Unni Krishnan. Sep 2, 2013 10:21 PM GMT-0700.
Prime Minister Manmohan Singh’s potential options to shore up confidence in the rupee include issuing India’s first dollar sovereign bonds, a deposit program to tap the country’s diaspora and bilateral currency-swap agreements. Boosting reserves could avoid the need to support the currency with further interest-rate increases that risk damaging efforts to revive investment.
“India needs to explore all possible funding options,” said Sonal Varma, an economist at Nomura Holdings Inc. in Mumbai. Rate increases may deter some capital inflows by worsening India’s slowdown, she said.
The rupee has slumped 18 percent versus the dollar in 2013 as India’s record current-account deficit made it vulnerable to an outflow of capital from emerging markets, spurred by the prospect of reduced U.S. monetary stimulus.
The shortfall in India’s current account widened to an unprecedented $87.8 billion or 4.8 percent of gross domestic product in the fiscal year ended March. Gold and oil imports contributed to the imbalance in the broadest measure of trade.
The government has raised taxes on inward shipments of gold and plans to compress imports of oil and some non-essential items. The Reserve Bank estimates the sustainable deficit level is 2.5 percent of GDP.
As posted earlier, India has also asked other emerging nations to cooperate with them on stopping the US dollar’s rise.
Read the source article … https://www.bloomberg.com/news/2013-09-02/india-slowdown-pressures-singh-to-bolster-lowest-bric-reserves.html