https://bondvigilantes.com/wp-content/uploads/2024/03/1-100-days-of-milei-1024x576.png As Franklin D. Roosevelt took to power in 1933, the USA had just entered the fourth year of its Great Depression. Faced with such significant economic turmoil, Roosevelt had little choice but to begin implementing structural reforms within a very short timeframe, not just to galvanize the economy, but also to stamp his authority having just been elected to his country’s greatest position of power. Thus, the concept of a president’s ‘first 100 days’ was born. Javier Milei, Argentina’s newly elected president ..read more

https://bondvigilantes.com/wp-content/uploads/2024/03/1-the-great-escape-of-uk-unemployment-reporting-1024x576.png The Bank of England Monetary Policy Committee potentially has a problem: it requires data to make its labour market forecasts and assessments, but the unemployment statistics have become increasingly unreliable. This is because the Labour Force Survey participation rate (on which the unemployment figures are based) has fallen below 50% since 2018 and has been as low as 15% recently[1]. What is the solution to this difficult measurement problem? An answer can be found in the classi ..read more

https://bondvigilantes.com/wp-content/uploads/2024/03/1-china-supportive-policies-aim-to-bolster-growth-amid-challenges-1024x576.png Since the onset of the year, Chinese authorities have embarked on strategic measures to stabilize the capital market and bolster economic growth. The People’s Bank of China (PBOC) has taken significant steps, including a 50 basis point cut in the reserve requirement ratio (RRR) – the largest since 2021 — followed by a historic 25 basis point decrease in the 5-year Loan Prime Rate (LPR). These policy actions have significantly boosted market sentiment, as reflecte ..read more

https://bondvigilantes.com/wp-content/uploads/2024/03/1-portfolio-trading-three-key-advantages-for-investors-1024x576.png Portfolio Trading (PT) has seen a sharp rise in prominence over the last few years, establishing itself as an integral part of today’s world of credit trading. Thanks to improved integrated technology, fixed income dealers have made significant advances from the rudimentary embers of trading lists of bonds on spreadsheets over email.   In a PT, a list of bonds is traded on an aggregated weighted average price or spread. This can be executed at any point in time, o ..read more

https://bondvigilantes.com/wp-content/uploads/2024/02/3-the-interest-rate-cutting-race-1024x576.png As we step into 2024, inflation figures have significantly decreased from their peaks, and inflation is continuing to make progress towards central banks’ inflation targets. With current interest rates kept in place, real policy rates are beginning to pose constraints on economies. Consequently, there is an anticipation of substantial interest rate cuts by major central banks in the developed world this year, opening the door for additional volatility in bond markets. There is a divergence of op ..read more

https://bondvigilantes.com/wp-content/uploads/2024/02/1-2024-the-year-of-the-wood-dragon-1024x576.png The Chinese zodiac, a 12-year cycle that assigns animal signs to each lunar year, is a cornerstone of cultural tradition, intertwining with the five basic elements (wuxing 五行) of Metal (jin 金), Wood (mu 木), Water (shui 水), Fire (huo 火) or Earth (tu 土), to form a complex 60-year cycle. On February 10th  2024, we transitioned from the Water Rabbit to the year of the Wood Dragon.  Unlike its earthly counterparts, the dragon stands as a celestial symbol of strength, power, wisdom, good f ..read more

https://bondvigilantes.com/wp-content/uploads/2024/02/1-the-traitors-can-a-game-of-human-psychology-draw-parallels-with-bond-markets-1024x576.png After last week’s final of the second series of ‘The Traitors’, I have had endless conversations about the human psychology behind the decisions made; how the show could be a reflection of many elements of our society; and about how winning the game requires the most delicate balance of popularity, strategic thinking and perfect timing. I also couldn’t help thinking about how the show links to bond markets and behavioural finance when thinking of som ..read more

https://bondvigilantes.com/wp-content/uploads/2024/02/japan-1024x576.jpg Source: M&G, AI-Generated Photo The yield curve in Japan is reaching intriguing levels. The Bank of Japan (BoJ) has remained resolute, maintaining an ultra-accommodative monetary policy in a world aggressively hiking interest rates to stem inflation. Fearlessly forging ahead with Quantitative Easing, the BoJ has maintained its negative interest rate policy (NIRP), and this monetary divergence has caused a meaningful weakening of the Japanese Yen (JPY) on the back of interest rate differentials: Source: M&G, Bloo ..read more

https://bondvigilantes.com/wp-content/uploads/2024/01/1-ramp-up-policy-1024x576.png In the last few days, Chinese authorities have announced a slew of measures aimed at stabilising capital markets and supporting growth in the country. The key policy measures, targeting different segments of the economy, are outlined below: Stock Market On the 23rd of January, Bloomberg reported that the Chinese government is considering setting up a RMB 2 trillion ($80 billion) stabilization fund to support the equity market. The report suggested that policymakers could utilise funds in offshore accounts of Ch ..read more

https://bondvigilantes.com/wp-content/uploads/2024/01/price-talk-slide1-1024x576.png Arranging banks (on behalf of bond issuers) typically release the initial price talk (IPT) at the same time as the announcement of a bond deal. It is seen as a crucial tool for new bond price formation and is traditionally stated in yield terms for high yield (HY) and spread over benchmark (or swap curve) for investment grade (IG) bonds. From an investor’s perspective, spreads are the better way to analyse value in a bond because the benchmark rate can change over the course of the new issue process (we have s ..read more