Recently in Market Category

(English) DOC090323174049.pdf 

 

(Japanese, by NSJ Fund Newspaper) DOC090323174059.pdf

 

 

20081211 Bloomberg - Senate Rejects Auto Industry Bailout After Talks Fail.pdf

20081212 Reuters - US auto bailout crashes.pdf

20081212 NIKKEI NET - 大引け、５日ぶり大幅反落.pdf

The headline probably came out at about 22:30 EST --- And USD/JPY tanked 3.5%, bouncing back 1.5%.

 

and the Nikke 225 started tanking right out the the gate at 12:30 JST...

to drop 6% and bounce back 2.5%...

Not that there is any doubt that news moves prices, but its interesting to confirm it once in a while.

However, thats the way the markets have been moving anyhow, so it seems to be yet just another confirmation of the current trend.

Cheers.

20081010 FT - Market crash shakes world.pdf (Video)

 

All these folks look like they just won the reverse lottery, except for the guy on the far right.

He looks like he's going to Disneyland.  Congratulations. 

DOC080904204655.pdf 

 

Investors & Markets: http://press.princeton.edu/titles/8272.html
Sharpe's website: http://www.stanford.edu/~wfsharpe/
Sharpe's APSIM: http://www.stanford.edu/~wfsharpe/apsim/index.html

Here's William F. Sharpe's latest book... I attached the first chapter, which briefly describes each chapter.
job_21-evince-print.pdf

s8272.pdf

I first heard about it in my Personal Finance class, (the professors take turns hosting the class)
and the reknown Yuichiro Kawaguchi (川口有一郎), recommended us to check out the work that Sharpe is doing...

Sharpe uses a simulation to attempt to derive information about asset prices.  The program named, APSIM [Asset Pricing and Portfolio Choice Simulator], simulates a market with participants that have state & preference...

I also saw a review of it in the Journal of Economic Literature (attached as job_21-evince-print.pdf), which is a bit of a short overview, and I personally have it on order.

Cheers, Happy reading!
Scott

USD Treasury Curve Steepening... Further steepening?

 Historical Treasury Yields

Graph: treasuryyields20080222.bmp  - Data: TYDs.xls

Source:http://www.treas.gov/offices/domestic-finance/debt-management/interest-rate/yield_historical_main.shtml

 

  20080220 FT - Dealers keep the faith about their sure-bet trade in US Treasury debt.pdf

Dealers keep the faith about their sure-bet trade in US Treasury debt
By Michael Mackenzie in New York
Published: February 20 2008 02:00 | Last updated: February 20 2008 02:00

The sure-bet trade in the US Treasury bond market this year has involved owning the two-year note and selling long-term debt.

Like all popular strategies that enjoy profitable runs, the yield curve steepening trade is a hot topic for debate among traders, analysts and investors.

In terms of momentum, the trade could suffer as some investors begin to take profits, however the mood among many dealers remains overwhelming bullish on a still steeper curve.

Since the start of the year the difference in two-, and 10-year Treasury note yields has risen from 0.98 percentage points, or 98 basis points, to a recent peak of about 190bp. This represents the steepest difference in the benchmark curve since the summer of 2004.

"Without exception, there is a lot of talk about the steepening trade among dealers," says Michael Kastner, portfolio manager at SterlingStamos. "They are all saying the curve has more room to steepen."

Some dealers such as Tom di Galoma, head of Treasury trading at Jefferies & Co, expect the curve will steepen towards 210bp and 220bp.

The drivers of the yield curve are the different dynamics that underpin how investors value short- and long-term Treasury debt.

The two-year note is largely influenced by expectations of the Federal Reserve's interest rate policy.

Interest-rate futures reflect a Fed funds rate of about 2 per cent in the coming months and the yield on the two-year note is at 1.99 per cent.

If the spreading credit crunch prevents a rebound in the economy, the prospect of rate cuts below 2 per cent will grow, resulting in further steepening of the curve, traders say.

When investors look at the 10-year note and the 30-year bond, value is driven by expectations of future inflation, as rising prices over time erode the fixed returns of a bond.

Recently, the steepening trend has been driven by rising long-term yields, while the two-year note has remained anchored about the 2 per cent mark. This is a change from when the curve began its

steepening run last year, which saw yields fall across the market but the two-year note's yields falling faster than others.

Now, the investors who expect a steeper curve are focused on long-term rates and the prospect of persistent inflation leading to interest rate rises in the future.

"The front end is locked down," said Dominc Konstam, head of interest rate strategy at Credit Suisse.

"The steepener trade is a bearish view on the back end, due to worries about inflation."

The prospect of a recovery in the economy thanks to interest rate cuts and fiscal measures, which will also boost the supply of Treasury debt this year, makes shunning long-term Treasuries a logical choice say traders. Inflation expectations have been rising, but they remain below peaks set two years ago.

Further ammunition for selling long-dated bonds comes from the Pension Benefit Guaranty Corporation, which insures US pensions. It plans to reduce its holdings of bonds from 72 per cent of its portfolio to 45 per cent, a move that could result in some $15bn of long-dated sales, say traders.

"It's a negative for the market, but there has been talk that this was coming," says Mr di Galoma.

That may explain why the yield on the 30-year bond has risen towards 4.70 per cent from a record low of 4.10 per cent last month.

The yield on the 10-year note has neared 3.90 per cent, up from 3.40 per cent in late January.

At present levels, however long-term yields are starting to look attractive and with the two-year anchored, the curve could flatten back towards 150bp, says Mr Kastner.

Copyright The Financial Times Limited 2008