Welcome Guest [Log In] [Register]


Reply
The Bond Bubble Collapse Thread; Reset Time. This is the End of the Line for All the Rolling Bubbles Propped Up in the last 30 Years
Topic Started: 21 Aug 2016, 04:02 PM (11,440 Views)
newjez
Member Avatar


Guest
26 Aug 2016, 10:41 AM
Heres the problem we face now. We saw in a thread the other day how $13,000 billion in bonds were now getting a negative return. While this might be exceptable to some , or seems many, its not for others. We now have less economic sectors making profit as commodity prices have been tanking over recent years. As a result, there are now less sectors from which to make a profit from. What this does is then force more and more money into these only sectors making a profit. The result is that these sectors soon become oversupplied, and then the profits on those start dropping as well. As time goes by, what was still profitable, soons becomes less profitable as too much money flows into that sector.

Basically, the profits are slowly but surely dissappearing.
Maybe there's too much money?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
Profile "REPLY WITH QUOTE" Go to top
 
Rastus2
Member Avatar



The obvious question is, how does one profit from a bond collapse then ?


Other than simply shorting a company that seems unstable and is issuing large amounts of bonds, is there a way to hedge, or profit from a bond collapse ?
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
Profile "REPLY WITH QUOTE" Go to top
 
createdby
Default APF Avatar


Rastus2
26 Aug 2016, 07:01 PM
The obvious question is, how does one profit from a bond collapse then ?


Other than simply shorting a company that seems unstable and is issuing large amounts of bonds, is there a way to hedge, or profit from a bond collapse ?
Gold and gold mining companies.

And put your bank notes in a safe out of the banks. They will be bailed in on the next credit crunch event.

Wait for governments to issue 10% and above 30 year treasury bills. They will almost certainly do this to save currencies. Then liquidate all your gold and buy the t bills. You'll be sitting pretty for the next 25 years when they lower rates again all the way to zero.
Profile "REPLY WITH QUOTE" Go to top
 
Sydneyite
Member Avatar


Rastus2
26 Aug 2016, 07:01 PM
The obvious question is, how does one profit from a bond collapse then ?


Other than simply shorting a company that seems unstable and is issuing large amounts of bonds, is there a way to hedge, or profit from a bond collapse ?
Being short in the bond futures would be the easiest way - but you need to either maintain a position long term that could cost you a fair bit of margin if/when the market still moves the other way, so you need to have the liquidity available for that, or else keep taking positions and stop yourself out if as required - but again, you need enough liquidity to keep going until the eventual correction that you are expecting.
For Aussie property bears, "denial", is not just a long river in North Africa.....
Profile "REPLY WITH QUOTE" Go to top
 
Rastus2
Member Avatar


Sydneyite
27 Aug 2016, 10:42 AM
Being short in the bond futures would be the easiest way - but you need to either maintain a position long term that could cost you a fair bit of margin if/when the market still moves the other way, so you need to have the liquidity available for that, or else keep taking positions and stop yourself out if as required - but again, you need enough liquidity to keep going until the eventual correction that you are expecting.

Thanks, but as you point out, I am not keen to be proven right in the long run, but go broke trying to hold my position.


createdby
26 Aug 2016, 07:54 PM
Gold and gold mining companies.

And put your bank notes in a safe out of the banks. They will be bailed in on the next credit crunch event.

Wait for governments to issue 10% and above 30 year treasury bills. They will almost certainly do this to save currencies. Then liquidate all your gold and buy the t bills. You'll be sitting pretty for the next 25 years when they lower rates again all the way to zero.
Thanks..

Interesting idea... not sure how that would pan out.

Would prob. leave the cash in the bank, but have the physical gold available to liquidate should any other asset class present itself as a screaming buy.

The circumstances of 10% and above 30 year T-Bills may mean other asset classes are equally attractive...
Edited by Rastus2, 27 Aug 2016, 11:00 AM.
Shadow - Defrauded his Bank ? 2015 I have 9 different loans and my bank had no idea which ones were personal and which were investment. They had half of them classed incorrectly. When this change came in they asked me to tell them if any personal loans were incorrectly classed as investment, which I did, and they switched them to personal for the lower rate. They also had a couple of investment loans incorrectly classed as personal. They didn't ask me about those. So they stay on the lower rate too. Worked out pretty well. :)
Shadow - 2008 Sydney Median House Price 1.25M by 2014-2015

Shadow : I think this boom has already begun in several cities. My prediction :
Peak of boom: 2014-2015. Sydney Median Price: $1,250,000 Bottom of bust: 2017-2018. Sydney Median Price: $1,100,000

Shadow's Original 2010 House Boom and Crash prediction http://s836.photobucket.com/user/rastus22/media/shady-orig-2010-chart.png.html?sort=3&o=0

Shadow's attempt to edit his 2010 chart in 2015 and replace it with one that does not show a crash in 2013 http://s836.photobucket.com/user/rastus22/media/Screen%20Shot%202015-06-06%20at%207.12.52%20pm_1.png.html
Profile "REPLY WITH QUOTE" Go to top
 
newjez
Member Avatar


Sydneyite
27 Aug 2016, 10:42 AM
Being short in the bond futures would be the easiest way - but you need to either maintain a position long term that could cost you a fair bit of margin if/when the market still moves the other way, so you need to have the liquidity available for that, or else keep taking positions and stop yourself out if as required - but again, you need enough liquidity to keep going until the eventual correction that you are expecting.
That's the problem with shorting. The timing.

What about utilities which offer a decent dividend?

Also, will this bond crash be an event or a slow melt?
Whenever you have an argument with someone, there comes a moment where you must ask yourself, whatever your political persuasion, 'am I the Nazi?'
Profile "REPLY WITH QUOTE" Go to top
 
createdby
Default APF Avatar


One world currency soft-launch: a preview of your new money when sovereign bonds collapse.



http://www.reuters.com/article/china-debt-sdr-idUSL3N1BC2FB
UPDATE 2-World Bk sells landmark SDR bonds at lower-end of guidance, challenges loom
(Updates with bond sale price, PBOC statement)
By Michelle Chen and John Ruwitch

Aug 31 The World Bank sold its first batch of Special Drawing Right (SDR) bonds in China at a yield well below those for similar Chinese bonds, highlighting Beijing's challenge in getting global recognition for its yuan currency and SDR assets.

The three-year bonds were sold at 0.49 percent, two sources with direct knowledge of the deal told IFR, a publication of Thomson Reuters, at the lower end of the World Bank guidance at 0.4-0.7 percent and below the three-year Chinese government bond yield at 2.434/2.387 percent.

A statement from the People's Bank of China said the 500 million SDRs ($700 million) issue, which was settled in yuan, was 2.47 times oversubscribed, and that interested buyers numbered around 50.

The global lender has got approval from the PBOC for a 2 billion SDR programme, and despite the apparent success of Wednesday's issue analysts say future demand for the bonds from local investors might prove tepid.

"We are not interested in SDR bonds and we can't see why Chinese investors should want these bonds since they can easily buy much higher yielding bonds in China," said a fixed-income fund manager in Hong Kong who invests both onshore and offshore debt markets.

The issue, the first SDR bond in 35 years, is being closely watched by investors as it's part of a wider push in China to increase the net supply of such bonds, and comes as Beijing hosts the G20 summit in Hangzhou on Sept. 4-5.

Analysts say China will be keen to foster interest in the SDR debt programme as it steps up efforts to internationalise the Chinese yuan, and further liberalise its capital markets.

The decision by the IMF last November to include the yuan currency in its SDR basket was seen as a diplomatic triumph for Beijing as China seeks full integration with the international monetary system. The yuan will be formally added to the basket on Oct. 1.

Some analysts argue that the SDR bond may provide Chinese investors an opportunity to diversify their portfolios since Beijing's control on capital outflows in the past year has made it difficult to buy overseas assets.

ANZ analysts said they expected China to encourage policy banks and other organisations such as the Asian Infrastructure Development Bank to sell SDR bonds and some of the issuance may be in offshore market.

The SDR is a synthetic reserve currency administered by the IMF, whose value is determined by a basket of other major world currencies.

ICBC, China Construction Bank, China Development Bank and HSBC (China) were the lead underwriters of the bond. (Reporting by John Ruwitch and Michelle Chen; Editing by Shri Navaratnam)



http://blogs.reuters.com/breakingviews/2016/09/01/china-is-wrong-venue-for-an-sdr-revival/
China is wrong venue for an SDR revival
By Breakingviews ColumnistsSeptember 1, 2016
By Pete Sweeney

The author is a Reuters Breakingviews columnist. The opinions expressed are his own.

China is the wrong place to revive Special Drawing Rights. Beijing wants to rejuvenate enthusiasm for the International Monetary Fund’s quasi-currency, using domestically issued “Mulan bonds” from the World Bank and others. Unlike the Tang dynasty warrior turned Disney heroine, though, the outcome will probably not be legendary.

In today’s warped environment where even terrible news in the United States sparks a flight into dollars, the case for SDR, or another alternative reserve currency, is stronger than ever. SDRs represent claims on a weighted basket of dollars, euros, yen, and pounds. From Oct. 1, the yuan will make up 10.92 percent of the basket, in a triumph of Chinese economic diplomacy. China has every reason to push SDR, and is doing so.

The SDR bond market dried out in the 1980s, for want of interest from investors and market-makers. But China has funds to spare and a cartel of more-or-less compliant banks. If a local SDR market takes off, and domestic banks then expand into trading and clearing securities offshore, they could theoretically resuscitate the global market. Chinese policy banks could offer offshore issues settled in other currencies.

Enter the World Bank, with a $700 million SDR bond issue in China on Aug. 31, the first tranche of a planned $2 billion programme. The 3-year bond was keenly priced to yield 0.49 percent, near the low end of the range, and was oversubscribed 2.5 times.

That sounds nice until one considers many of the 50 purchasers were almost certainly ordered to buy it. Chinese corporate buyers prefer to hedge with dollars offshore, not low-yielding SDRs settled in local currency inside China’s capital controls. Meanwhile foreign investors, leery of China’s bond market, are unlikely to prove more enthusiastic for Mulan deals. The World Bank’s creditworthiness is impeccable, with triple-A credit ratings, but anyone selling the bonds would receive proceeds in yuan, in China, with the potential restrictions on overseas remittance that implies. Mulan is unlikely to conquer the world.





Edited by createdby, 5 Sep 2016, 10:17 AM.
Profile "REPLY WITH QUOTE" Go to top
 
createdby
Default APF Avatar


The opposite of "green shoots" in the bond world


http://www.bloomberg.com/news/articles/2016-09-06/there-s-been-a-quiet-riot-in-japanese-government-bonds
There's Been a 'Quiet Riot' in Japanese Government Bonds
A potential watershed moment as investors turn their attention from monetary to fiscal policies.
by Tracy Alloway
September 6, 2016 — 6:21 PM AEST

Investors have been stealthily shedding Japanese government bonds, pushing yields on the benchmark 10-year security to their highest in almost six months.

JGBs have recorded their worst monthly performance since 2010 with longer-dated debt under particular pressure as investors fret that Bank of Japan Governor Haruhiko Kuroda will further reduce debt purchases following a comprehensive review of monetary policy on Sept. 20-21.

A gauge that tracks notes with maturities of more than 10 years posted its longest losing streak since 2013, but the "quiet riot" is also spreading to shorter-dated debt, according to analysts at Jefferies Group LLC, with the 10-year yield breaking through a series of moving averages in recent days.

The sell-off in JGBs may prove significant for wider financial markets given the propensity of deep-pocketed Japanese investors including banks, insurers, and pension funds, to affect other asset classes ranging from corporate bonds to global equities. But the sell-off could also mark a milestone in which markets turn their attention from the Bank of Japan's unconventional monetary policy — including quantitative easing and experiments with negative deposit rates — to more government-led measures.

"The turnaround in JGB yields has been independent of the recent retreat in the yen cross rate and suggests that the bond markets are beginning to discount no further negative deposit rate cuts as well as potentially longer duration JGB primary sales ahead of this month’s BOJ meeting," Jefferies analysts led by Sean Darby wrote in a note published today. "A more sinister view of the reversal in JGB prices is that the markets have begun to realize that the 'frontier' in QE policies is drawing to a close. In particular, there is the growing reality that the BOJ may be set to taper JGB purchases at the forthcoming BOJ meeting."

Investors may be expecting the BOJ to attempt to attempt to fan inflation through new fiscal measures, including an "income and wages" policy that would force Japanese corporations to increase workers' pay, Jefferies said.

Such a move would "entail a more government-led approach to exiting deflation than necessarily an entirely monetary one," concluded Darby. "The bottom line is that the earlier 'bond market sell-off' following the August BOJ meeting is turning into a 'mini' bond market rout. It remains to be seen whether the August BOJ meeting or the forthcoming BOJ meeting proved to be the watershed for JGB bonds."


http://www.bloomberg.com/news/articles/2016-09-06/puerto-rico-failed-to-make-9-9-million-bond-payment-on-sept-1
Puerto Rico Failed to Make $9.9 Million Bond Payment on Sept. 1
by MichelleKaske
September 7, 2016 — 12:44 AM AEST

Government Development Bank owed interest on agency debt
Federal control board will oversee any debt restructuring

Puerto Rico’s Government Development Bank, which served as the island’s financial adviser and lender before being placed in a state of emergency, failed to pay investors $9.9 million of interest due Sept. 1., according to a regulatory filing.

The bank, whose regulator says is insolvent and faced a cash shortfall of as much as $1.3 billion in June, has been defaulting on debt payments since May. September’s missed payment was disclosed in a filing Tuesday on the Municipal Securities Rulemaking Board’s website, called EMMA.

President Barack Obama last week selected seven people from lists provided by congressional leaders from both parties to serve on a federal control board that will oversee any restructuring of Puerto Rico’s $70 billion of outstanding debt and monitor the island’s budgets.
Puerto Rico defaulted on nearly $1 billion on July 1, including $780 million on general-obligation bonds, the largest such payment failure in the $3.7 trillion municipal-bond market. The island’s economy has shrunk in the past 10 years and residents are leaving at record levels to find work on the U.S. mainland.


http://www.businessinsider.com.au/the-worlds-love-affair-with-australian-government-debt-is-ending-2016-9
The world's love affair with Australian government debt is ending
by GREG MCKENNA
SEP 6, 2016, 5:04 PM

Overseas investors’ share of outstanding Australian Commonwealth Government Bonds (ACGBs) continues to fall with foreign holdings at their lowest level since Q2 2009, according to ANZ Research.

ANZ analysts Katie Hill, Martin Whetton, and Daniel Been say that while foreigners holding rose in absolute terms the overall share of total outstanding debt dropped to 59.4%. That’s the “eighth consecutive fall”, they say.

Posted Image

“Non-resident holdings of ACGBs rose in absolute terms to AUD284.1bn in Q2 2016 from AUD282.4bn. However, the rise appears to reflect valuation effects” Hill, Whetton, and Been wrote.

In fact they say “flow data suggests net foreign purchases declined in Q2 – the first decline since Q2 2013”. The amount of selling equated to “AUD2.3 billion for the quarter” the ANZ said.

The ANZ Research team isn’t about to read too much into one quarter’s numbers but notes that “in Q2, markets were preparing for the Brexit vote, which may have involved some portfolio de-risking, and the RBA had cut rates in May, delivering capital gains for investors”.

That said however, they believe foreign purchases as a percentage of the total stocks of Australian government debt will continue to fall in percentage terms.

That means the slack in funding the Australian government’s burgeoning debt issuance, will have to be taken up by domestic players: fund managers and the banking sector. That’s especially the case because “with the spread of ACGB 10 year to UST 10 year at fifteen year lows, Australian bonds could lose some lustre for foreign investors”.

Posted Image

But to the extent that more bonds available for investment means less reliance on self-generated liquidity for the banks under the RBA’s committed liquidity facility, there is local appetite for around another $200 billion (the rough size of the CLF) before issuance becomes a problem for the government.

Looking at the impact of the fall in foreign appetite for local bonds on the Australian dollar Hill, Whetton, and Been say “while the scale of the outflow observed is not significant enough to become a major issue for the AUD right now (particularly at a time when direct investment remains strong), it does serve as a reminder that flow into the AUD is not unidirectional”.

That’s all a polite way of saying the honeymoon looks over for the Aussie dollar and Australian debt. It means a plank of support for the Aussie dollar is being pulled away, and “direct investment inflows, which still remain robust, are becoming an increasingly important driver of the AUD to focus on,” the ANZ says.







Profile "REPLY WITH QUOTE" Go to top
 
createdby
Default APF Avatar


Loonie. I guess the ECB will scoop these up.


http://on.ft.com/2cwelDb
Henkel and Sanofi sell first negative yielding euro corporate bonds
YESTERDAY by: Gavin Jackson

We have the first ever negative yielding euro corporate bonds sold by non-state owned companies.

German consumer goods group Henkel is selling €500m worth of two-year debt with a yield-to-maturity of minus 0.05 per cent, writes Gavin Jackson, the FT’s Capital Markets Correspondent.

The company will also be selling €700m of five-year debt with a yield of zero per cent.

Sanofi, the French pharmaceutical business, will join in the action later, issuing three-and-a-half year debt yielding less than zero, alongside both six-year and ten-year bonds.

Deutsche Bahn, the German state-owned rail company, became the first ever non-financial company to sell negative yielding debt in July. The €350m bond yielded -0.006 per cent.

Euro corporate bond yields have plunged to record lows this year as the European Central Bank has slashed rates deep into negative territory and bought billions of euros of both government and corporate bonds.

The average euro-denominated corporate bond yield hit a record low 0.61 per cent at the end of August, according to Bank of America Merrill Lynch indices.

Posted Image


Edited by createdby, 7 Sep 2016, 06:26 PM.
Profile "REPLY WITH QUOTE" Go to top
 
Terry
Member Avatar


createdby
7 Sep 2016, 06:23 PM
Loonie. I guess the ECB will scoop these up.


[url]
We have the first ever negative yielding euro corporate bonds sold by non-state owned companies.

German consumer goods group Henkel is selling €500m worth of two-year debt with a yield-to-maturity of minus 0.05 per cent, writes Gavin Jackson, the FT’s Capital Markets Correspondent.

The company will also be selling €700m of five-year debt with a yield of zero per cent.

Sanofi, the French pharmaceutical business, will join in the action later, issuing three-and-a-half year debt yielding less than zero, alongside both six-year and ten-year bonds.

Deutsche Bahn, the German state-owned rail company, became the first ever non-financial company to sell negative yielding debt in July. The €350m bond yielded -0.006 per cent.

Euro corporate bond yields have plunged to record lows this year as the European Central Bank has slashed rates deep into negative territory and bought billions of euros of both government and corporate bonds.

The average euro-denominated corporate bond yield hit a record low 0.61 per cent at the end of August, according to Bank of America Merrill Lynch indices.

Posted Image


Incredible. Thx for posting. Sanofi is a an ex-client and this is kind of landmark.
Profile "REPLY WITH QUOTE" Go to top
 
1 user reading this topic (1 Guest and 0 Anonymous)
ZetaBoards - Free Forum Hosting
Enjoy forums? Start your own community for free.
Go to Next Page
« Previous Topic · Australian Property Forum · Next Topic »
Reply



Australian Property Forum is an economics and finance forum dedicated to discussion of Australian and global real estate markets and macroeconomics, including house prices, housing affordability, and the likelihood of a property crash. Is there an Australian housing bubble? Will house prices crash, boom or stagnate? Is the Australian property market a pyramid scheme or Ponzi scheme? Can house prices really rise forever? These are the questions we address on Australian Property Forum, the premier real estate site for property bears, bulls, investors, and speculators. Members may also discuss matters related to finance, modern monetary theory (MMT), debt deflation, cryptocurrencies like Bitcoin Ethereum and Ripple, property investing, landlords, tenants, debt consolidation, reverse home equity loans, the housing shortage, negative gearing, capital gains tax, land tax and macro prudential regulation.

Forum Rules: The main forum may be used to discuss property, politics, economics and finance, precious metals, crypto currency, debt management, generational divides, climate change, sustainability, alternative energy, environmental topics, human rights or social justice issues, and other topics on a case by case basis. Topics unsuitable for the main forum may be discussed in the lounge. You agree you won't use this forum to post material that is illegal, private, defamatory, pornographic, excessively abusive or profane, threatening, or invasive of another forum member's privacy. Don't post NSFW content. Racist or ethnic slurs and homophobic comments aren't tolerated. Accusing forum members of serious crimes is not permitted. Accusations, attacks, abuse or threats, litigious or otherwise, directed against the forum or forum administrators aren't tolerated and will result in immediate suspension of your account for a number of days depending on the severity of the attack. No spamming or advertising in the main forum. Spamming includes repeating the same message over and over again within a short period of time. Don't post ALL CAPS thread titles. The Advertising and Promotion Subforum may be used to promote your Australian property related business or service. Active members of the forum who contribute regularly to main forum discussions may also include a link to their product or service in their signature block. Members are limited to one actively posting account each. A secondary account may be used solely for the purpose of maintaining a blog as long as that account no longer posts in threads. Any member who believes another member has violated these rules may report the offending post using the report button.

Australian Property Forum complies with ASIC Regulatory Guide 162 regarding Internet Discussion Sites. Australian Property Forum is not a provider of financial advice. Australian Property Forum does not in any way endorse the views and opinions of its members, nor does it vouch for for the accuracy or authenticity of their posts. It is not permitted for any Australian Property Forum member to post in the role of a licensed financial advisor or to post as the representative of a financial advisor. It is not permitted for Australian Property Forum members to ask for or offer specific buy, sell or hold recommendations on particular stocks, as a response to a request of this nature may be considered the provision of financial advice.

Views expressed on this forum are not representative of the forum owners. The forum owners are not liable or responsible for comments posted. Information posted does not constitute financial or legal advice. The forum owners accept no liability for information posted, nor for consequences of actions taken on the basis of that information. By visiting or using this forum, members and guests agree to be bound by the Zetaboards Terms of Use.

This site may contain copyright material (i.e. attributed snippets from online news reports), the use of which has not always been specifically authorized by the copyright owner. Such content is posted to advance understanding of environmental, political, human rights, economic, democratic, scientific, and social justice issues. This constitutes 'fair use' of such copyright material as provided for in section 107 of US Copyright Law. In accordance with Title 17 U.S.C. Section 107, the material on this site is distributed for research and educational purposes only. If you wish to use this material for purposes that go beyond 'fair use', you must obtain permission from the copyright owner. Such material is credited to the true owner or licensee. We will remove from the forum any such material upon the request of the owners of the copyright of said material, as we claim no credit for such material.

For more information go to Limitations on Exclusive Rights: Fair Use

Privacy Policy: Australian Property Forum uses third party advertising companies to serve ads when you visit our site. These third party advertising companies may collect and use information about your visits to Australian Property Forum as well as other web sites in order to provide advertisements about goods and services of interest to you. If you would like more information about this practice and to know your choices about not having this information used by these companies, click here: Google Advertising Privacy FAQ

Australian Property Forum is hosted by Zetaboards. Please refer also to the Zetaboards Privacy Policy