The Economist (February 23)
“With short-term interest rates still stuck near zero and their balance-sheets stuffed with government bonds, the central banks of America, Britain and Japan are experimenting with a shift in approach: coupling monetary action with commitments designed to alter the public’s expectations of interest rates, inflation and the economy…. A more doveish stance would entail tolerating higher inflation, at least temporarily, in pursuit of higher output.” But there is “a question-mark over what this wave of central-bank experimentation can achieve: since bond yields are already so low, the marginal return to coaxing them even lower may be scant. For now, though, buoyant stockmarkets are giving the activists the thumbs-up.”
Tags: Bonds, Central banks, Inflation, Interest rates, Japan, Output, Stockmarkets, U.S., UK, Yields
Euromoney (November issue)
“Restrictions and outright bans on short-selling shares, government bonds and credit derivatives were applied across Europe on November 1…. If it is a victory of the European Commission, it is potentially a disaster for Europe’s financial markets. Instead of a positive force for good, as was seemingly intended, negative consequences abound.”
Institutional Investor (August Issue)
With ￥108 trillion in assets under management, Japan’s Government Pension Investment Fund (GPIF) is almost six times the size of CalPERS. “Even more striking than the fund’s gargantuan size is its composition: Fully three quarters of the GPIF is invested in bonds, including ￥58.4 trillion of domestic bonds and ￥14.4 trillion of government agency debt.” This “mountain of government bonds” is “a low-return and potentially high-risk strategy,” and stands in contrast to other pension funds which are “trying to grow their way out by continuing to bet heavily on equities and making ever-larger allocations to private equity, hedge funds, real estate, infrastructure and other illiquid assets.”
Financial Times (May 23)
Bonds are in. Stocks are out. “Institutional investors, from pension funds to mutual funds sold directly to the public, have slashed holdings in the past decade. Stocks have not been so far out of favour for half a century.” The penchant for bonds could reverse. Or “the end of a six-decade passion for equities could lead to a less flexible, more conservative model of corporate financing.”
Bloomberg (February 8, 2012)
Larry Fink, the CEO of the world’s largest asset manager, BlackRock Inc. (BLK), has provocative advice for investors. He’s bullish on the economic outlook and urges investors to take advantage of ultra-low equity valuations. According to Bloomberg, Fink believes “investors should have 100 percent of investments in equities because of valuations and higher returns than bonds.”
Tags: BlackRock, Bonds, Bullish, Equities, Larry Fink, Outlook, Valuations
The Independent (July 22)
In assembling the latest bailout plan for Greece, European leaders have again “done the bare minimum required of them.” They have successfully “bought some time, but not much. Their failure to agree on a radical plan of action to restore confidence and address the root drivers of bond market panic means that this crisis is not over.”
Bloomberg (July 12)
In Europe, contagion is spreading from Greece. “Exploding bond yields in Italy and Spain brought the crisis closer to the heart of the euro area.” Europe’s leaders now look prepared to reconsider measures they had previously ruled out, such as buying back Greek debt at a discount. Whether they can avert disaster remains to be seen. Italy felt the brunt of the expanding crisis as 10-year bonds rose 326 basis points over Germany’s, “a euro-era high.”
