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International Shares & Bond Fund
early birds
post Posted: Mar 9 2021, 05:03 PM
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https://au.yahoo.com/finance/news/peter-cos...-042247171.html

I understand whats going on, that were trying to reassure everybody that monetary policy and fiscal policy will be supportive for as long as it is needed. But I think the critical thing at the moment for central banks and governments is to think of the exit strategy, Costello said in Sydney today at the AFR Business Summit.

Because if we dont have an exit strategy, we will be building up the next financial crisis, and you know what the next financial crisis will be? It will be asset bubbles.

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Mr. Costello speak for us!! i'm fan of him when he was on the job for the country . tongue.gif



 
early birds
post Posted: Mar 8 2021, 07:43 PM
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https://www.afr.com/companies/financial-ser...20210308-p578pi

And so while its true that central banks can achieve whatever bond rate they want, at some point there is the risk that bond yields lose their credibility as a benchmark if central banks intervene too aggressively.


But a more likely explanation is that investors are increasingly of the view that central banks bond buying programs have manipulated the US 10-year bond yield to such an extent that it is no longer a valid benchmark.

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time for the recognition of all the major central bankers try to fooling markets!! cool.gif



 
early birds
post Posted: Mar 6 2021, 11:41 AM
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In Reply To: early birds's post @ Mar 2 2021, 09:38 AM

bought tiny stake of US 10 years note on leverage , the spread of 10 years yield and Fed fund rate is too wide, and Powell hinted that Fed not gonna raise rate in a hurry ,
expecting US 10 year's yield to drop back to 1.3%ish [ currently 1.57%ish]
will add more if market settles little bit on Monday!!



 
early birds
post Posted: Mar 2 2021, 09:38 AM
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https://www.afr.com/markets/debt-markets/al...20210301-p576of

my guess is a lot of you guys understand how bond market functions and what is it eg......

but might be few readers don't have enough knowledge about it......


this is really educational stuff for bond market...... take 5--10 minutes to read though then try to understand it, it's important for stock market traders imho.



 
early birds
post Posted: Mar 2 2021, 08:34 AM
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RBA Props up Bond Market for Third Straight Session

For the third session in a row the Reserve Bank has bought up billions of dollars of government bonds and in doing so choked off a silly surge in interest rates and in fact sent yields tumbling.

After buying $3 billion worth of three-year bonds on Thursday and another $3 billion in a surprise move on Friday (as yields surged), the central bank was back in the market on Monday looking for a further $6 billion of 10-year bonds.

The bond buying and the rapid move in yields and the Aussie dollar will be high on the agenda at the March monetary policy meeting of the Reserve Bank board today.

After the banks Friday move capped a surge in 10-year yields at around 1.80% and choked off a move in three year yields above 0.10% (the official cash and three year rate), the RBAs purchases on Monday sent 10-year yields sliding by 20-25 points.

That was after the silly 48 point (0.48%) rise in 10 year yields last week which also saw a surge in the value of the Aussie dollar to 80.08 US cents, before it slumped on Friday to end last week at just over 77 US cents.

It was around 77.50 US cents late yesterday after the strong house price figures for February were released showing the strongest gains in 18 years.

The yield on 10-year bond yields fell to 1.65% yesterday after the third round of bond buying by the RBA.

That surge in house prices in CoreLogics February report grabbed headlines yesterday morning but the companys head of research questioned if the rally can be sustained for much longer.

At this current rate of appreciation, it wont be long before Australias two most expensive capital city markets are moving through new record highs, Lawless added.

With household incomes expected to remain subdued and stimulus winding down, it is likely affordability will once again become a challenge in these cities, he wrote on Monday.

On top of that the great driver of housing and apartment demand, migration, has disappeared and the Australian population is projected to rise by just 0.16%, one 10th its 2019 rise in what would be the smallest rise since the middle of the First World War in 2016, according to RBA data.

Record low borrowing rates and government incentives aimed at helping first home buyers in particular (such as not needing Lenders Mortgage Insurance) helped house prices in metro and regional markets rise sharply in February.

CoreLogic said that for the first time in more than a decade housing values rose across each of the capital cities and regional Australia in the same month.

The CoreLogic data showed national home prices rose 2.1% in February, from January when they were up 0.9%. Values were up 4.0% on the previous February.

Prices across the major capitals rose 2% in January from the previous month, to be up 2.6% on the year.

The regional market surged 2.1% in the month and 9.4% for the year as city dwellers, hiding from coronavirus lockdowns, sought more living space and houses with gardens.

Sydney and Melbourne were among the strongest markets last month, recording a 2.5% and 2.1% lift in home values, respectively, as Australias two largest cities catch up from weaker performance throughout 2020. Prices in Brisbane and Perth rose by 1.5% each and Hobart saw a 2.5% surge.



House prices have now regained and topped the September 2019 all time high and driving that has been the explosion in demand and finance, as the latest lending indicator from the Australian Bureau of Statistics on Monday showed.

New housing finance commitments rose another 10.5% in January and is now up 44.3% from a year ago.

First home buyer finance surged 10.1% from December and is up a huge 73% on a year ago to a new record high.

Excluding first home buyers, owner occupier finance was up an even stronger 11.3%. The first home buyer share of new loans slipped from a record 25% to 24.9%.

Investor finance is now picking up and rose 9.4% in January to reach $6.6 billion.

The ABS said investor lending has rebounded 62.4% since reaching a 20-year low in activity in May of last year.

The AMPs Dr Shane Oliver says the continuing strength in finance commitments points to more solid house price gains in the months ahead.

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so, this RBA " whatever it takes" moment??!!! lmaosmiley.gif just can't fight the central banks!! devilsmiley.gif

 
mullokintyre
post Posted: Mar 1 2021, 08:35 AM
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In Reply To: mullokintyre's post @ Feb 27 2021, 09:29 AM

Yikes, this issue has become mainstream.
Even Our ABC is reporting on it.
And they don't hold back on the genius that runs the RBA either.
QUOTE
In the past fortnight, and especially last week, global money markets have cratered and interest rates have soared. For many, it's a shrug-your-shoulders incident, an obscure and esoteric event that has little bearing on everyday life.

What has just occurred could have a profound impact on our future. It has the potential to delay and possibly derail the economic recovery now underway across the developed world. And, if it continues, it will wreak havoc with global stock markets during the next few months.

It also is a direct assault on the power and authority of central banks, including our own Reserve Bank. For the past year, across the globe, they've acted in unison, throwing everything at their disposal at an unseen enemy in a desperate effort to stave off the most serious economic collapse in more than a century.

Suddenly, they've been left bruised and bloodied, run down by a growing mob that has flagrantly ignored their predictions and overturned their view of the world and our future.Central bankers like America's Jerome Powell, our very own Philip Lowe and their counterparts from Japan, Europe, Canada and the UK have for the past month been on message.
nterest rates would not rise for years, they've decreed in unison. The economy is in the early stage of recovery but we have a long way to go.

But money market traders, who buy and sell the $US90 trillion odd worth of government debt swirling around on global markets, decided they were wrong. All of them.

As new US President Joe Biden finalised his plan to splash around $US1.9 trillion on a stimulus package the biggest on record the market decided that all this stimulus, both monetary and fiscal, could only lead to one thing; inflation.

And that meant central banks would have to abandon their ultra-loose interest rate policies earlier than expected. The trickle of selling on bond markets suddenly swelled. By late last week, it was a tsunami. Bond prices collapsed forcing the yields market interest rates to soar.

Last November, if you bought an Australian government 10-year bond (essentially a government IOU) on the open market, you'd have been lucky to get an interest rate of 0.8 per cent.

A fortnight ago, you could get a touch above 1.2 per cent. By Friday, it was just shy of 2 per cent. To put that into perspective, that's the equivalent of almost five official RBA interest rate hikes in four months, with two and a bit just last week.

You'd expect rates to move higher as the economy recovered. But it was the speed and the severity of the movements, the likes of which haven't occurred for decades, that stunned onlookers.

If sustained, it will lead to higher borrowing costs because banks will have no option but to pass those rate hikes on. And should Federal Treasurer Josh Frydenberg need to raise more debt, to extend JobKeeper for instance, he'll suddenly be confronted with a much higher bill.

Then there are the follow-on effects. Stock markets hate higher interest rates. Suddenly, the boom that has been underway ever since central banks cut rates to zero last year has been knocked sideways.

The article is one of the better explanations for the problem, and for once, somebody at the Our ABC has a better than basic understanding of macro economics.
So, to be on the safe side and protect my capital, I will be returning to 75/25 bias towards cash.
Those stocks I do own will be mostly commodity driven (especially gold).
What this will do in the medium to long term is always open to debate.
Powell, Yellen and the other crims that run the US economy will wait too long to raise rates, as (a) it would admit defeat and the acknowledgement of failure (b) because it will give them time to back out of the stock market they artificially inflated, thus preserving their own wealth.
AUD will go up, as RBA, despite their denials will be one of the first to raise rates, and we will return to that interest rate differential that supported the AUD for so long. AUD will also be supported by the commodity increases that we have already seen, especially for foodstuffs. Putin putting an export tax on wheat to keep the price down in Russia has already caused wheat prices to soar on the back of an excellent harvest in OZ this year. As the inevitable push to more and more EV's, prices for copper, Zinc, silver, Cobolt, Lithium are only going to increase, further strengthening the AUD.
Of course, there is every possibility I may be completely wrong (again).
Mick



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mullokintyre
post Posted: Feb 27 2021, 09:29 AM
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In Reply To: mullokintyre's post @ Feb 26 2021, 08:05 PM

Further to yesterday Post on bond yields, Wall street on Parade highlights just what happens when the bubble starts to deflate.

QUOTE
The action in the U.S. Treasury market yesterday reminded us of the classic I Love Lucy episode at the chocolate factory. As the conveyor belt churns out chocolate balls faster than Lucy and Ethel can handle them, they resort to stuffing them in their mouths, their hats, and their shirts. Lucy remarks: I think were fighting a losing game. (See video clip below.)

That was the scene in the Treasury market yesterday too much supply and no where to stuff it, causing a sharp spike in yields which set off a stock market selloff that left the Dow down 559.8 points or 1.75 percent on the day, while the tech-heavy Nasdaq fared far worse, losing 478.5 points or 3.52 percent.

That the Treasury market is now projectile vomiting T-notes should come as a surprise to no one. As the chart above indicates, yields on the 10-year note have been rising sharply since early August, with the yield more than tripling from 0.50 percent to an intraday spike yesterday of 1.61 percent. The 10-year note opened this morning at 1.52 percent.

The sharp and persistent rise in yields have left those who bought the T-notes at dramatically lower yields licking their wounds from heavy losses. (Prices of notes and bonds move inversely to their yields.) That has also dramatically lessened the appetite to buy more Treasuries at the current yields when the supply is expected to continue to increase as a result of rising government deficits and stimulus spending.

Another catalyst for yesterdays selloff in Treasuries was a very sloppy Treasury auction where the government attempted to stuff $62 billion of a 7-year Treasury note into an already over-supplied market.


That in itself is not a good sign, but then on top of the over supply

QUOTE
The spike in yields comes despite the fact that the Federal Reserve itself has been buying $80 billion each month in various maturities of Treasury notes and bonds. That started in June of last year. As of this past Wednesday, the Fed owned $4.8 trillion of Treasury securities, part of that resulting from its purchases of Treasuries (QE programs) after the 2008 Wall Street crash.

In an additional effort to hold overall interest rates down, the Fed is also buying $40 billion each month in agency mortgage-backed securities (MBS). It owns $2.18 trillion of those, much of that also resulting from the aftermath of the 2008 crash.

The Feds Federal Open Market Committee (FOMC) has also directed the New York Feds trading desk to increase holdings of Treasury securities and agency MBS by additional amounts and purchase agency commercial mortgage-backed securities (CMBS) as needed to sustain smooth functioning of markets for these securities.

Aside from the Fed, the other big domestic buyers of Treasury securities are the mega Wall Street banks. These banks are known as Primary Dealers and are contractually bound to have to buy at Treasury auctions.
On top of the problem of a supply glut is the fact that these mega banks/Primary Dealers have been allowed to gobble up other banks over the years, leading to a dramatic decline in the number of Primary Dealers available to bid at Treasury auctions. In 1988 there were 46 primary dealers. By 1999, there were only 30. Today, there are just 24.


So, if as seems highly likely that the US treasury is going to have to create somewhere in excess of 1.9 trillion more bonds to pay for the Biden administration's covid stimulus package, things are not going to get better any time soon.
Welcome to NMT.
Mick



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mullokintyre
post Posted: Feb 26 2021, 08:05 PM
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From Zero Hedge
QUOTE
Three weeks after Australia's central bank announced on Feb 1 an extension to its QE program by a further A$100 billion (when it also said it doesnt expect to increase interest rates until 2024) in the pursuit of the central bank's yield curve control - as a reminder Governor Philip Lowe had previously set the three-year yield target at 0.10% - overnight the RBA purchased a whopping (for Australia) $3BN in three-year government bonds in the secondary market on Thursday triple the amount it bought on Monday and the most since the bond market turbulence during the COVID-19 panic last March.And all in the name of preserving the RBA's credibility and keeping the 3Y yield around 0.10%.

Unfortunately, it increasingly appears that the RBA's Yield Curve Control is failing as the market is pressuring the central bank's commitment to the point of failure. When the RBA announced to the market at 11:15am on Thursday that it would purchase $3 billion of three-year bonds, the yield on the April 2024 bond declined slightly from 0.13 per cent to 0.125 per cent. But yields soon after jumped as high as 0.14 per cent, before settling back at 0.13 per cent.

According to ANZ economist David Plank, the RBA had been unsuccessful in dampening bond yields at the short and long end of the curve and the RBNZs move had made the RBAs task more difficult. There is upward pressure on market interest rates and that will flow through into quite a bit more expensive borrowing rates for states and corporates for 10-year money compared to the start of the year (mortgage rates are not priced off the long-term, 10-year bond yields).

Similar to his Fed peers, RBA governor Philip Lowe has said he doesnt expect the cash rate to rise until at least 2024, but his guidance is being challenged by bond traders who are observing the scorching inflation everywhere and are convinced it is only a matter of time before Australia yields.

As shown below, the yield on the three-year government bond remained stubbornly elevated at 0.13%, 3 basis points above the RBAs 0.10 per cent target.But the biggest shock, according to Bill Bovingdon, ALTIUS Asset Managements chief investment officer, is that the market barely moved on what should have been a pretty positive surprise."

I think they might need to intervene at the longer-end with more QE because otherwise this will have unhelpful spillover effects in the currency and start to impact on things like property trusts and a broader contagion into equities.

Australia's 10-year borrowing cost has jumped to 1.72% a doubling of the yield since the RBA officially unveiled its QE program last November. ANZs Plank said the rise in global long-term yields was a good news story about the success of fiscal and monetary policy stimulus.

But there has been a lift in Aussie rates quite a bit higher than US yields and that means that there will be more buying of Australian bonds and push up the Australian dollar. As a result, The market is confused about the RBAs messaging.

The Australian 10-year yield has jumped 0.31 of a percentage point (31 basis points) about the equivalent US Treasury rate, higher than the gap of 0.16 of a percentage point (16 basis points) when deputy governor Guy Debelle began signalling last September that QE was coming. Then, soon after officially announcing an initial $100 billion QE program in November, the Australian long-term bond yield fell 0.07 of a percentage point (7 basis points) below the US Treasury.

A big reason for the lift higher in yields is surging commodity costs: iron ore prices have surged to above $US175 a tonne - the highest level in a decade which has contributed to upward pressure on the local exchange rate.

Meanwhile, with virtually all RBA ammo used, the Australian dollar is on the cusp of breaking above US80, despite renewed ultra-easy monetary policy commitments by all central banks. This is becoming a major headache for export-heavy Australia.

And as it watches its policy have less and less impact, the RBA now owns $18.5 billion of the $33 billion April 2024 bond. The market is pricing in a jump in rates, with the yield on the November 2024 bond blowing out to 0.36 of a percentage point (36 basis points).

A market participant quoted by Financial Review, said there was not huge selling of local government bonds in recent days, but there was not a lot of buying. When there is less demand for bonds, bond prices fall and yields rise.

Ultimately, there is just one "solution" - the RBA will have to step in and buy much more bonds... which incidentally is how the surge in US Treasury yields will also end, with the Fed capitulating and realizing it too has to join the rest of the world in (at least trying to) control the entire yield curve. At that point, capital markets will officially die.


What is not unusual is that the RBA govenor has no more clue than the rest of us, he just gets paid more and gets more attention.
What is most unusual about this is that for once, OZ is leading the US.
Mick



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early birds
post Posted: Feb 26 2021, 11:54 AM
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https://www.afr.com/wealth/personal-finance...20210225-p575nn

This has resulted in the yield differential between Australian and US government bonds rising to 40 basis points on Thursday night, in what some have superficially, and incorrectly, claimed negates the benefits of the RBAs first round of QE.


Yet the fact remains that when the RBA started jaw-boning about QE in September, the 10-year government bond yield was trading around 0.89 per cent.

In the past 24 hours it has punched through 1.90 per cent.


============================

it worth you few minutes time to read through the link.

 
nipper
post Posted: Sep 3 2019, 08:01 PM
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QUOTE
I think it’s always a good idea to buy shares when they are trading at an attractive valuation.

It can be quite hard to accurately price assets when they’re not shares – buildings or private businesses can only be priced when they’re sold, whereas shares have a valuation every day. That’s why it’s fairly easy to decide if the share price of listed investment companies (LICs) and trusts (LITs) are trading cheaper than their assets or not.

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Some of the fund managers involved include a 12.1% allocation to Magellan Financial Group Ltd (ASX: MFG), 10.9% in Cooper Investors and 9.8% in Antipodes.

Since inception in September 2015 the Future Generation Global portfolio has generated an average return per annum of 10%, with less volatility than its global benchmark.

Foolish takeaway

I am a great believer in what Future Generation is doing to support younger Australians to receive help if it’s needed. Being able to buy shares at a discount is a great incentive, particularly as Future Generation Global has just increased its dividend in the half-year result.
Motley Fool



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"Every long-term security is nothing more than a claim on some expected future stream of cash that will be delivered into the hands of investors over time. For a given stream of expected future cash payments, the higher the price investors pay today for that stream of cash, the lower the long-term return they will achieve on their investment over time." - Dr John Hussman

"If I had even the slightest grasp upon my own faculties, I would not make essays, I would make decisions." ― Michel de Montaigne
 
 


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