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Are Bond Vigilantes Now Focusing On UK Gilts?
The chart below is not indicative of the widening in the sovereign credit of some backwater PIIGS country. It shows the rather substantial move higher in 10 year British Gilt yields over the past week.
Are the bond vigilantes slowly but surely (and as very much expected) moving from the periphery, where all the low hanging fruit has been picked, to the core, where the acceleration is only just starting? To be sure, the Gilts are easy targets: with QE unanimously voted out, and increasing budget deficit, there is little to like.
The Guardian has more:
"The market is upset about that – the UK budget deficit is an issue,
everyone wants to know what the government plans to do," said Jim
Leaviss, head of fixed interest at M&G Investments. "We need to do
something, otherwise we're in big trouble."Leaviss runs a website called Bond Vigilantes
– reviving a term coined in the 1980s in the US when activist investors
sold bonds en masse, pushing yields up, and forcing cuts in the US
deficit.
"The bond vigilantes are the most important people in
the capital markets right now – they're back and they'll punish the
weak," said Gary Jenkins, a credit analyst at Evolution Securities.
"The bond market is the single most important market and will determine
what the other markets will do: the key question this year is: will
sovereign countries be able to finance themselves at a rate that's
reasonable? If so, markets will develop. If not, everyone has a
problem."
The bond vigilantes are punishing countries with high
budget deficits, such as Britain, the US, Greece, Spain, Italy and
Portugal, on concerns about their ability to recoup loans. Far from
declaring themselves speculative opportunists, the punishment comes
against "governments that have lost control of their public finances",
Leaviss said, as he iwarned governments to get public spending under
control.
"We're reflecting the reality that developed nations
need to sort out their budget problems. Otherwise, there's potential
default, or inflation," he said.
And concludes:
After a few days of calm, the cost of insuring British, Greek,
Spanish and Portuguese debt against default rose again, according to
data from Markit. Greek bond yields also leapt after a German official
said that "not a penny" should be lent to Greece. The comments contrast
with the EU's assurance last week that it would stand by the country.
"The EU politicians should speak on one voice if they want the bond market to calm down," Jenkins said.
The vigilantes are watching indeed.
If the UK goes, Germany itself can't be too far behind. If Gilts are about to be Friend-O'ed, don't look for Bund love too far from Newport Beach's Fashion Island.
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why is the market ramping? can someone with a bloomberg terminal please tell me what happened at 2:15PM EST that was so damn important?
Focusing On Gilts?
Only after Goldman Sachs and John Paulson are finished with Greece.
Yves Smith:
Goldman Sachs contre, tout contre, la Grèce Jean Quatremer (hat tip Eurointelligence). I’d translate the piece, but my French is not what it once was (as in I can read it but I might muff some of the finer points). He accuses Goldman and John Paulson’s hedge funds of being the moving forces behind the attack on Greece and the euro:
Why is this market up on big volume since 2:15PM EST???
taking responsibility for your own actions is so last generation...
bond vigilantes are extinct
and so is price discovery
every price is determined by Goldman Fucking Sachs
so long as the government continues to allow them to operate
Bond vigilantes makes them sound sinister--they're not, they protect the value of our currency and our savings. Governments are way out of control with crack-pot Keynesianism, where in the long run you're dead but in the short run you're still tripping. Go bond market, sober these guys up!
Shorting government bonds in this enlightened age of the Gutenberg 5000X fiat printing press is sheer folly. This is all going to end very badly (and very quickly when it starts to topple), but not because of falling prices, of anything.
"We need to do something, otherwise we're in big trouble."
I can't see the Labour party announcing any spending cuts this close to an election and the Conservative party will talk about spending cuts but not actually tell us what they are. Unless the political leadership in the UK vanishes into thin area and politicians like Daniel Hannan come into power I think we're on a sinking ship.
At least we won’t be alone.
Oh, as I always like to be the optimist at least when the pound crashes gold 'n silver will go sky high (in the UK anyway).
What would be most unfortunate is twisting this event as a false pretext for going after political opponents.
That twisting has already begun. Remember, never let a good crisis go to waste.
http://www.dailykos.com/story/2010/2/18/13251/7661
The start of more terrorism?
http://www.thesmokinggun.com/archive/years/2010/0218102stack1.html
Many parts of it read something like a teabagger manifesto, purportedly written by Joe Stack.
The Dominos are starting to fall....
We would look forward to this. Please bring on the guilt strike.
We are governed by a crazy party who spend literally billions on nothing and have no respect for the (unwritten) constitution. They also couldn't organize a piss up in a brewery. Owing to the fact that all private donors have stopped funding the labour party and it has -£30 million, the unions have a lot of power and have been organizing to cause problems as soon as labour lose the election (if they don't rig it).
If a guilt strike happens before the election a) the labour party will be destroyed forever and b) the labour party will be blamed (they will try to blame it on "foreigners" ala EU & Greece however the media (bar the BBC) will know where the true blame lies).
This will hopefully allow us to tackle the bloated public sector (more than 50% GDP), remove the endless red tape, simplify the tax system (there are 16,000 pages of primary tax legislation - the largest in the OECD) and rebuild our country. Our economy is absolutely ruined and needs to be reformed, but the labour government has spent the past 18 months "stimulating" the economy by stealing from the future - making things much worse but not immediately obvious to people who don't take much of an interest in the arcane world of sovereign debt, off balance sheet items, tax revenues etc. The government hopes that when it loses the election the new government, who seem to be serious, well at least we hope, will be forced to deal with these problems (austerity) and can then snipe from the sidelines with a view to winning the subsequent election.
A guilt strike would be a good thing - focus minds.
trading the markets so long as goldman fucking sachs is allowed to operate this way is just a mistake
i'm not touching ANY securities until they are shut down
In case you have not noticed, US treasuries have been getting hit too...
But again like anything this may all be a head fake...
exactly. the spread to treasuries hasn't changed in the last week. 10y gilt is hanging around 35bps over
It's hammer time!
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