April 25. Search for yield continues

–Once again quiet in the interest rate arena, though Durables yesterday were a big miss to the downside at -5.7.  Today brings Jobless Claims expected 350k and 7 yr auction (following well received 5’s).
–British Pound soaring this morning as UK Q1 GDP squeaked out +0.3 gain.  Spain unemployment hit a new record over 27%.  It appears Letta will form a new gov’t for Italy.  More talk of Japanese lifers diversifying into foreign bonds.
–Speaking of diversification, interesting post on Bloomberg about central banks moving into equities.
The article notes that bonds just aren’t providing enough yield: “While consumer prices are rising at a 1.5 percent annual rate in the U.S. and 1.7 percent in the euro area, the average yield to maturity of securities in Bank of America Merrill Lynch’s Global Broad Market Sovereign Plus Index fell to an all- time low of 1.34 percent on April 23…”  Might as well have had the title, “Central banks push other central banks, and every other investor, into more risk.”  At the same time, AAPL, which is taking advantage of low rates to issue bonds to return cash to shareholders, will not receive a top investment rating from S&P or Moody’s. In some ways, AAPL’s move dovetails with the Fed’s strategy; issue bonds to yield starved pension funds and either buy back shares or give cash to shareholders who then recycle the money into other equities…i.e. pile on the risk.

Posted on April 25, 2013 at 5:38 am by alexmanzara · Permalink
In: Eurodollar Options

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