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from Global Investing:
Bond investors’ pre-budget optimism in India
Ten-year Indian bond yields have fallen 30 basis points this year alone and many forecast the gains will extend further. It all depends on two things though -- the Feb 28 budget of which great things are expected, and second, the March 19 central bank meeting. The latter potentially could see the RBI, arguably the world's most hawkish central bank, finally turn dovish.
Barclays is advising clients to bid for quotas to buy Indian government and corporate bonds at this Wednesday's foreigners' quota auction (India's securities exchange, SEBI, will auction around $12.3 billion in quotas for foreign investors to buy bonds). Analysts at the bank noted that this would be the last auction before the central bank meeting at which a quarter point rate cut is expected. Moreover the Reserve Bank of India will signal more to come, Barclays says, predicting 75 bps in total starting March.
That is likely to be driven first by recent data -- inflation in January was at a three-year low while growth has slowed to a decade low. Barclays notes:
Based on our economists’ view of a 25bp repo rate cut in Q1, and a further 50bp in Q2, we expect the bond curve to fall around 55bp in a parallel move. As such, we recommend extending duration to long end bonds....Given high carry, attractive price returns and our forecast for modest nominal appreciation of the rupee, we expect an approximately10% dollar return (FX unhedged), and a 7% return (FX hedged) on 30-year bonds in the next six months.
from Global Investing:
Emerging EU and the end of “naked” CDS
JP Morgan has an interesting take on the stupendous recent rally in the credit default swaps (CDS) of countries such as Poland and Hungary which are considered emerging markets, yet are members of the European Union. Analysts at the bank link the moves to the EU's upcoming ban on "naked" sovereign CDS trades -- trade in CDS by investors who don't have ownership of the underlying government debt. The ban which comes into effect on Nov. 1, was brought in during 2010 after EU politicians alleged that hedge funds short-selling Greek CDS had exacerbated the crisis.
JP Morgan notes that the sovereign CDS of a group of emerging EU members (Bulgaria, Croatia, Hungary, Lithuania, Poland and Romania) have tightened 100 basis points since the start of September, while a basket of emerging peers including Brazil, Indonesia and Turkey saw CDS tighten just 39 bps. See the graphic below:
from The Great Debate:
On Wall Street, big paychecks do not replace corporate culture
Goldman Sachs can’t seem to stay out of the wrong spotlight these days. With reports about executive layoffs and high numbers of senior people leaving, Goldman is losing its once-untouchable luster as analysts scrutinize its performance through a new lens.
The oceanic rift between average Wall Street salaries and those of everybody else has been measured by both public and private facilities. The New York State Comptroller’s office released a report last October showing that while total profits at Wall Street’s major brokerage houses declined during the first half of 2011, employee compensation, which accounts for about 60 percent of expenses for the firms, increased by 18.7 percent compared with the same period the year before.
from The Great Debate (India):
Reuters, link economy and the business of journalism
The following is a guest column by Chris Ahearn, President, Media at Thomson Reuters.
Last summer, I published a blog post that laid out my feelings about the link economy and its positive contribution to the evolution of the business of journalism. One year later, Reuters.com continues to encourage linking to the rich content we offer and even pulling interesting excerpts for discussion in a different forum.
from The Great Debate (India):
Is an end in sight for the Reliance dispute?
The feud between the billionaire Ambani brothers became public in 2004, and still drags on.
On Sunday, Anil Ambani issued a statement expressing his willingness to end the bitter feud with elder brother Mukesh.
from The Great Debate UK:
What our wellbeing says about the economy
- Peter Dixon is a guest columnist, the views expressed are his own. He is global financial economist at Commerzbank -
The popular image of economists is one of pointy-headed analysts, poring over data and running models in order to make predictions about the future which will invariably prove to be wrong.
