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Strategies & Market Trends : John Pitera's Market Laboratory -- Ignore unavailable to you. Want to Upgrade?

To: richardred who wrote (17723)	2/9/2016 7:19:32 AM
From: John Pitera	3 Recommendations Recommended By 3bar richardred roguedolphin Read Replies (1) \| Respond to of 33421

Global Bond Rally Near `Panic' Level With Japan Yield Below Zero by Kevin Buckland Wes Goodman February 8, 2016 — 7:09 PM CST Updated on February 9, 2016 — 2:34 AM CST bloomberg.com Sovereign bonds surged, sending *the Japanese benchmark 10-year yield below zero for the first time, as investors seeking the safest assets gorged on government debt. Treasury yields dropped to a one-year low and those on short-dated German securities dropped to records in the rush to refuge from a worldwide stock rout.* Traders pared the odds the Federal Reserve will raise interest rates this year to 30 percent, before Chair Janet Yellen begins her two-day testimony to Congress on Wednesday. There is now $7 trillion of government debt with yields below zero globally, with the average yield on the Bank of America Merrill Lynch World Sovereign Bond Index at 1.29 percent, the least in data that go back to 2005. ( that is the Lowest B of A World Sovereign Bond Index EVER) “It’s almost like a panic,” said Hideo Shimomura, the chief fund investor in Tokyo at Mitsubishi UFJ Kokusai Asset Management. “The flight to quality is exaggerated.” The benchmark 10-year Treasury yield declined two basis points, or 0.02 percentage point, to 1.73 percent as of 8:29 a.m. in London, according to Bloomberg Bond Trader data. The 2.25 percent security due in November 2025 rose 6/32, or $1.88 per $1,000 face amount, to 104 21/32. The yield was as low as 1.68 percent, a level not seen since February 2015. Japan’s 10-year bond yield fell as *far as minus 0.035 percent, an unprecedented low for such a maturity in a Group-of-Seven economy.* Volatility in the nation’s debt market climbed to the highest since July 2013. All German bonds maturing in eight years or less have negative yields, while *10-year bund yields dropped to 0.19 percent,* the lowest since April. Australia’s dropped as low as 2.38 percent, also unseen since April. The rally this year has added $1.4 trillion, or 3 percent, to the market value of the Bank of America Corp. Global Broad Market Index. About 29 percent of the outstanding debt in the Bloomberg Global Developed Sovereign Bond Index was yielding less than zero as of Monday. Switzerland’s 3 percent notes due in 2018 had the lowest yield in the gauge, negative 0.95 percent, according to data compiled by Bloomberg. Investors rushed to bonds Tuesday as the MSCI Asia Pacific Index of stocks slid 2.9 percent and Japan’s Topix Index plunged 5.5 percent. Equities Rout“It’s hard to find a reason to short Treasuries,” said Tomohisa Fujiki, head of interest-rate strategy for Japan for BNP Paribas SA in Tokyo, referring to bets that a security will fall. Turmoil “is now affecting equity markets in developed countries as well -- and *commodities and emerging markets have not stabilized yet.” BNP is one of the 22 primary dealers that underwrite the U.S. debt. Yellen is scheduled to appear before the House Financial Services Committee on Wednesday and will address the Senate Banking Committee the next day. Futures contracts indicate traders see a 30 percent probability of a Fed rate increase in 2016, down from 93 percent at the start of the year. Traders who have spent 2016 watching oil tumble are swapping crude from their monitors and loading their panels with bond metrics, said John Gorman, the head of dollar debt trading for Asia and the Pacific at Nomura Holdings Inc. in Tokyo. Nomura is another primary dealer. The flight to quality gained momentum Monday because of speculation Deutsche Bank AG would have trouble paying its debts,* Gorman said. Germany’s biggest bank said in a statement it has more than sufficient means to pay coupons on its riskiest debt both this year and in 2017. “That really spooked the market,” he said. “People immediately thought there’s a problem where banks can’t pay and they can’t fund themselves to pay. It does feel like we’re reaching a point where the market is panicked.” ----------------I (editorial note by JJP....... If Deutsche Bank is the next Bear Sterns / Lehman......... that is 10 times worst..... It is Germany's Largest BANK........ No Global mechanism to contain the domino knock on effect... and remember Germany as a country has a much stronger balance sheet than the US, Japan, Britain....... and forget about the PIGS....)