IIFT Daily Note with Peter Brown

All about bond yields

Posted by:  |  Time: 7:44 am  |  Topic:  |  Comments: 2
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What a day yesterday. I don’t think anybody expected Spain’s bailout rest bite to last a couple of hours. That is all we got. A massive sell off followed, led by the bond markets when the structure of the deal became clear. The 100bln will add 10% to Spain’s GDP, effectively worsening their funding position. The contagion has now spread to Italy with their bond yield reaching 6% .

The signal for today will be again from the bond markets in Spain and Italy. A move higher from 6.5% and 6% respectively will cause sell offs across all markets. Lower will lead to a bounce. We might get a foot on the ball day today but the macro view is definitely negative.

Targets are 1.2440 for the Euro and 1.2525 on the topside. 1305 on the S&P and 1335/40 on the upper end. Very wide but yesterday was such an unusual day the range is now very wide.

The tone will come from bonds so watch them closely.


Ray Martin

June 12, 2012


Hi Peter, well done again on #vinb last night calling a spade a spade. The fact that u and CG scared the bejaysus out of us viewers is neither here nor there. But u might ease our concerns re possible Euro breakup with some advice eg $ deposit acc. Keep it in Eire?, switch to Ger/Us gov bonds or what?

Peter Brown

June 13, 2012


Hi Ray, Tks for your comments. We do not provide financial advice however there are some basic principles I have no problem sharing with you.
1. Money in a foreign currency is always a risk, not a solution to avoiding risk. If the Euro was sorted it could appreciate by about 30% against other currencies.
2. The basic principle to safe heaven investing is to go to the best credit rating in your home currency. In this regard it is German Bonds. Any other scenario carries a greater risk.
3. The greater the return on offer the greater the risk. that is why German bonds offer a negative return in the short term.

If you need financial advice we would be happy to recommend a QFA to you.
Regards Peter