The Cowell Rhetoric:
Posted on: 13 Jul 2012 by James Farmer

By 11:50am on Thursday, the bid yield on benchmark 10-year gilts fell to 1.518%, through the previous low of 1.524% set in April. Yields were down 0.053% on the day, according to Thomson Reuter’s data, mimicking falls seen in US treasuries following a record auction. The yield on 10-year US treasuries is also lower today, down at 1.488%, following its $21bn auction yesterday which attracted record interest.

 

Gilt yields have plunged over the last year, falling from near 3%, as investors snap up bonds despite the headwinds facing both the UK and US economies. Huge debt piles in both countries, and a lower yield than inflation, have failed to discourage investors who remain panicked about the outlook for the global economy. In other words, for some twisted reason, they trust governments more than banks. I wonder why?

 

EZ summit: ‘No collateral required for Spanish bank bailout’. Is that so? Why then is Finland negotiating to receive shares in Spanish banks as collateral for the country’s participation in the bailout of those banks? The Finnish Finance Minister said yesterday that other eurozone nations “have no alternative but to accept” the demand from the Finns, who received security for loans to the EFSF bailout fund for Greece’s second rescue.

 

Italy’s national statistics body, ISTAT, threatens to stop issuing data on the economy, saying it has been crippled by government spending cuts aimed at reducing national debt. That’s one way to solve the ugly-data problem. How to improve bad economic stats – sack the statistician.

 

Banks’ Libor costs could hit £14bn, warns Morgan Stanley. We have been telling anyone who would listen, since 2007, that they were a bunch of disseminating losers. Unfortunately nothing appears to have changed.

 

Asian stock markets headed sharply lower on Thursday ahead of what is expected to be a weak report on Chinese growth and as the Bank of Japan decided against further policy action to boost growth. The benchmark Nikkei 225 index closed down 130 points at 8,720 in Tokyo while the Hang Seng surrendered 394 points at 19,025 in Hong Kong. But, surprise, surprise! Today, Chinese GDP beats forecasts!  Markets also reacted to minutes of last month’s Federal Reserve meeting which showed further asset-buying was not being considered for now and would only be if US economic conditions deteriorated.

Meanwhile the Bank of Japan kept interest rates ultra-low at its policy meeting on Thursday. The central bank reiterated its pledge to steadily boost the size of its asset purchase programme however the BoJ did not announce any new or significant increase in size of the stimulus programme. Japan also reduced its inflation forecast to 0.2% from 0.3% and cut its growth forecast for the year to March to 2.2% from 2.3%.

 

Investors also mulled a surprise interest rate cut in South Korea. The Bank of Korea slashed its key interest rate to 3% from 3.25%, the first reduction in three years. The world is slowing down folks.

 

At the start of the holiday season, I thought that you might like to share a complaint made to Thomas Cook,”The brochure stated: ‘No hairdressers at the accommodation. We are trainee hairdressers – will we be OK staying there?”

 

Have a good weekend.

 

David Cowell

Tags: asian stock markets | bank bailout | bank of japan | chinese growth | finance minister | gilt yields | gilts | global economy | government spending | headwinds | istat | mimicking | morgan stanley | national debt | national statistics | nikkei 225 | record auction | spanish bank | spanish banks | treasuries