Howdy,
Greece? feh. Italy? er, apparently, it's the 8th largest economy in the world. Their bond yields soared today to over 7% on the 2-3 year. Germany is 2+%. Gee, why can't I borrow euros in Germany and buy Italian bonds? Oops, Corzine tried that with Greek bonds. The problem is that after Italy comes Spain and Portugal, then Ireland and then France. Yeppers, you can probably add France to the list.
Now, if you've got the sand and unlike Corzine, not bet the bloody farm, you can find some serious yields around the globe.
Been watching gold take a bath today after making a huge bounceback to 1800. smoke and mirrors folks. Gold is up in every other fiat currency. It's that you've got europeans dumping euros for dollars -- not doing anything positive for fringe euro bonds in the process.
I still like NCV and JTD for yield. The former is 12% and the latter 8.7% tax exempt.
and so it goes,
peace,
rono
Comments
So what happened today? Everybody all of a sudden woke up and thought about Italy (and the rest maybe to follow too)??
Why would MMKT funds be in extreme danger?
Again: WTF???
Not that this matters per se, for daily monitoring; but this link lets one view the Italian 10yr bond rate/price. I have watched this beginning when MF Global closed down their operations. Although having a fair amount of bond exposure, I attempt to view various yields/prices globally.
http://www.bloomberg.com/quote/GBTPGR10:IND
As to the MM funds; over their history, a fair amount of the monies are loaned to others for various uses and are known as "commercial paper". This is unsecured monies, backed by the full faith and credit (stand in line, if need be) of those accepting the usually short term loans, averaging 45 days or so. The loan periods are usually not for more than about 9 months. This "paper" does move, sell and/or trade. BUT, when the faith starts to go away and one is way down the list of creditors; well, obviously folks become anxious. Per one of the articles I read (can't recall when); this past May found about 1/2 of the monies of MM funds was on loan to folks in Europe. That has been reduced to about 25% now, if I recall properly.
I took the dirty way out and placed two links here that are related: MM's Euro zone exposure and commercial paper aspects of MM funds.
Poo, the links won't link properly. You may choose to use the wording above.
Hope this helps a bit.
Take care,
Catch
A few times today (Wed) the short term Italian bond yields were a bit higher than the 10 yr.....an inverted yield curve. This is not a very pretty indicator. I placed a link for the 10yr in the reply post to OJ here.
The bond traders, in my opinion are also putting the big pressure squeeze; as to "get something done, get a plan".....the old, we'll drive your rates to the Twilight Zone to find what action you will now take. I am sure the ECB has been buying bonds to keep the yields low and to no avail.
I still do not see/find an easy way out for the Euro folks; let alone here.
Take care of yourselves over there........got get to the pillow at this house.
Catch
Yeppers, it's a fairly easy money play for someone that trades this stuff and why not? Sure, the politicians will squeal 'it's the speculators', but they only do this when they're the ox being gored.
Joe, with MM funds, think of mortgages and tranches and CDOs. It's not as dangerous and they're bound to fixed percentages, but the concept is similar. They're all searching for yield and I'm not sure that there is any sort of mutual fund or money market fund or whatever, that doesn't allow at least 15% for 'play'.
and so it goes,
rono