If the Irish government wanted to issue new ten-year debt this instant, they would have to agree to repay at about 7.8 per cent, a record and a very sharp increase on several preceding sharp increases. And this in spite of bond purchases by the ECB.
If investors wanted to insure themselves against the possibility of default on €10m five-year Irish bonds, they would have to pay €608,000. That’s higher than the cost of insuring against Argentinian default, apparently.
German industrial production fell 0.8 per cent in September, according to the Berlin economics ministry, which was a bigger drop than analysts expected. After Friday’s disappointing orders data, the latest news seems to confirm that Germany’s economy has shifted down a gear.
Still, don’t write off yet the recovery in Europe’s largest economy. Export figures for September – released a few hours earlier by the federal statistics office in Wiesbaden - went in the opposite direction. Exports were 3.0 per cent higher than August – and a whopping 22.5 per cent higher than September last year. External demand, it appears, is continuing to power German growth.
Moreover, third quarter gross domestic product data on Friday are expected to show Europe’s economy was growing at a fair clip. Even forecasts at the gloomier end of the range are for a rise of about 0.4 per cent
It is good news that the New York Fed is engaged in a campaign to get key staffers to finally think about asset prices.The Alan Greenspan mantra that the market is always right has – mercifully – been cast aside… Still, there is one sphere where the central banks are unlikely to sound the alarm.
In both Japan and the US, sovereign debt trades at ever lower yields as a result of purchases of government bonds by the central banks themselves… [T]he largest part of the buying comes from the central banks themselves. With massive purchases of Treasuries, the distinction between fiscal policy and monetary policy is becoming blurred. Central banks become ever more complicit in politics…
Markets anticipate further easing from the Reserve Bank of India. Twelve-year bond prices are climbing, apparently on speculation that the central bank will intervene to buy the securities to ease the cash crunch facing banks. Bloomberg reports:
The yield on the most-traded 2022 note fell after the Reserve Bank of India last week bought bonds through an open- market auction for the first time since September 2009. The central bank on Nov. 4 bought back 83.5 billion rupees ($1.9 billion) of debt, after offering to purchase as much as 120 billion rupees.