Courage For The Future – Sept 11 Market Outlook

It is September the 11th today.

Strategists have finally found the time and the courage to look into the future now that the EM crisis is stabilising.

Global Growth

“US liquidity tightening has the same spillover impact on foreign bond markets as it did in the past, so the negative impact on growth abroad from tapering will likely be substantial.

US demand, by contrast, has much less impact on global demand than in the past, both because the recovery is likely to be more muted than in the past and because the (non-petroleum) import content of US demand is no longer rising.

US demand won’t rescue EM and G10.

Bottom line : there is no reason to expect that the tightening impact of a backing up of US rates is less than in the past and there is plenty of reason to think the contribution of US growth to the rest of the world will be much less than in previous rebounds.” Source : Citi


The 2Y started it all last week but now “The US 2 year yield posted an outside day on Friday, suggesting yields could be moving lower from here..” (Citi).

For A Quick Buck : Running For The Safety Of Treasuries ( 09/09/13

“Robert Kessler of Kessler Investment Advisors was on WealthTrack this last weekend defending bonds.  He takes the contrarian view that the bond bull isn’t over yet.  His defense:

  • Nothing has really changed in recent years to force yields higher.
  • Deflation remains a higher risk.
  • De-leveraging continues.
  • The economy is actually weaker than it was in 2012.
  • Inflation is lower than it was in 2012.

Kessler says the 10 year Treasury bond should yield about 1% above the rate of inflation and that means the risks to yields at present are to the downside. ”

Source :

“First, Japanese investors bought U.S. bonds in July for the first time on a monthly basis here is 2013. The JPY2.7 trillion (~$27 bln) bought was the largest since March 2011, and accounted for 78% of the foreign bonds Japanese investors bought in July. Note that in the previous six months, Japanese investors had sold JPY9.24 trillion worth of U.S. bonds.” Citi FX

EM Crisis

Benchmark Index Relative Value

–    Our screener shows extreme levels of polarization across EM assets, increasing the danger for mean reversion

–    In FX, KRW, PLN, HUF, ILS and MXN are overbought while IDR, MYR and TRY are oversold.

–    Bonds in Israel, Hungary, Poland and Czech Republic are overbought while those in Indonesia, Singapore, Peru, Thailand, Turkey, Brazil, South Africa, Colombia and Korea are oversold.” Citi

All the other risks still remain even if Syria is over.

And Italy is a new risk this week.

“Italy Yields Rise Above Spain’s Amid Berlusconi Debate

Sept. 10 (Bloomberg) — Italian 10-year bond yields rose
above those of Spain for the first time in 18 months amid
speculation a vote on whether to expel Silvio Berlusconi from
Italy’s Senate will destabilize the coalition government.”

As For China

Euphoria premature ?

”     Sept. 11 (Bloomberg) — Chinese companies will miss more
debt payments in the coming year as smokestack industry losses
mount on Premier Li Keqiang’s plan to switch the economy’s focus
toward services, according to Standard & Poor’s.”

On September the 11th, we have Russians better chess  players than Americans.

I will take this opportunity to buy some insurance bets for the next 7 days into FOMC.