The earnings on government bonds dropped down this week. The investors are afraid of the recession and that is why they started to buy so many government bonds. They rather prefer safe investments than shares at the moment. Because of the recession, the inflation reduces and that is what makes bonds more attractive.
This is very good news for the governments, they receive a lot of money to help the economies and financial institutions.
But there is also a negative side. George Buckley, economist at Deutsche Bank, said that the amount of bonds sold has almost doubled. He wonders if the government will be able to offer an attractive yield for them, so that the buyers will still be interested. This rising demand causes an increase of the prices which has its effect on the yields. If the price becomes higher, the yield drifts down. This is often a sign of recession.
For instance the British yields are under constant pressure because of the negative results of certain important sectors, such as the construction and manufacturing industry.
A second example are the 10-year Treasury yields of the US. They plummeted to the lowest level in 50 years, the most important reason is the recession.
Experts and economists fear that the yields will continue to slip back as the whole world goes into a recession.
Alistair Darling revealed in a budget report that he wants to lift up taxes and cut the spending growth. He gave the indication to the markets that he won’t allow the government’s largesse to last for a long time.
But analysts doubt the fact that the markets are convinced. Investors worry about the risk the government might take by have so much debt, that they could have problems paying the interest on the bonds.
I can agree with the investors that they choose for a safe investment at the moment. I would also be more cautious and buy more bonds then before the crisis. Although, I think that now is the moment to buy shares of certain companies.
For the governments it is indeed a good situation that the bonds have so many success. They receive a lot of money which can be used to restore the economy.
But I think that they have to be careful and not sell too much bonds. Because if they do that, their debts will become too high and the governments will get into problems themselves. That is the last thing we want to happen right now.
I hope that Mr. Darling is right and that he does what he said. Then the markets can become confident again, which is necessary for them in order to restore and become healthy. Without it, the crisis won’t be solved!
Source: The Guardian - People rush for government bonds, but experts fear they will become part of the problem -
http://www.guardian.co.uk/money/2008/dec/04/government-bonds-investments
zaterdag 6 december 2008
vrijdag 5 december 2008
New breed of trader heads for Europe
During these financial difficulties we are witnessing the upcoming of a whole new breed of traders. I am talking about a small but progressively more important group of electronic trading firms. These firms have built up a great presence in the US equities markets.
It are young firms and are mostly managed by private owners. Although they are young, they already have a global presence. For example, Getco or Global Electronic Trading Company, trades equities, foreign exchange, fixed income and commodities products on about 30 markets all over the globe. These type of firms are already good for 30-40 per cent of all equities trading volume in the US. These firms can also mean big revenues for European exchanges if they can get the firms to trade on their system. The European exchange needs this new breed of traders because the traditional customers is pulling back a lot of his capital.
But there is also competition from new platforms such as Chi-X. Marketmakers are firms that quote both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the turn or the bid/offer spread. This competition broke the exchange trading monopolies and the exchange is now also very engaged with these marketmaking firms. This attraction is mutual. The European market is very attractive for these firms because they are now able to trade on multiple platforms and arbitrage between price differences. This comes out very handy to their trading strategies.
The firms are very excited about the evolutions on the European markets. They see a change in the market structure, and this will make their processes more efficient, and this will benefit all investors in the long term. But the traditional players will always stay very crucial in the financial system. Euronext is also trying to attract these kind of firms out of the US, and in Chicago they have found a lot of potential. They are very enthusiastic about coming over to Europe. This type of liquidity provider does not trade on a particular stock, they spread their capital to post bids and offers on various exchanges. In this process they use very sophisticated technology and data analysis to trade more efficiently, make more money on the spread between the bid and offer, and they also make price discovery more efficient.
Despite the restrained outlook for the markets, the optimism over these firms has not been affected. Liquidity providers have always been very important for the entire market by improving the quality of the prices on the exchanges by lowering the bid-ask spread. Even when there is a lot of volatility, the market can always count on the firms to execute trades all day long.
This new breed of traders an liquidity providers can give a new boost to the financial sector. These firms bring a lot of advantages with them to the exchange markets. The markets can always count on these firms, because they trade all day long. It is good that there are structural changes happening on the financial markets, because during this financial crisis we need to attract the traditional customer again, because now they are all pulling back their investment. I believe that these firms can also bring more confidence on the markets, because they work on a highly professional basis with a lot of knowhow.
The fact that they are very popular in the US means that they are effective. I hope Europe succeeds in bringing these firms to our European markets. Euronext can certainly use a boost right now and when these firms are interested as well in coming over to Europe this could mean that the damage of the financial crisis could be controlled.
Source: Financial Times: New breed of trader heads for Europe
http://www.ft.com/cms/s/0/c28e8908-c1a4-11dd-831e-000077b07658.html
It are young firms and are mostly managed by private owners. Although they are young, they already have a global presence. For example, Getco or Global Electronic Trading Company, trades equities, foreign exchange, fixed income and commodities products on about 30 markets all over the globe. These type of firms are already good for 30-40 per cent of all equities trading volume in the US. These firms can also mean big revenues for European exchanges if they can get the firms to trade on their system. The European exchange needs this new breed of traders because the traditional customers is pulling back a lot of his capital.
But there is also competition from new platforms such as Chi-X. Marketmakers are firms that quote both a buy and a sell price in a financial instrument or commodity, hoping to make a profit on the turn or the bid/offer spread. This competition broke the exchange trading monopolies and the exchange is now also very engaged with these marketmaking firms. This attraction is mutual. The European market is very attractive for these firms because they are now able to trade on multiple platforms and arbitrage between price differences. This comes out very handy to their trading strategies.
The firms are very excited about the evolutions on the European markets. They see a change in the market structure, and this will make their processes more efficient, and this will benefit all investors in the long term. But the traditional players will always stay very crucial in the financial system. Euronext is also trying to attract these kind of firms out of the US, and in Chicago they have found a lot of potential. They are very enthusiastic about coming over to Europe. This type of liquidity provider does not trade on a particular stock, they spread their capital to post bids and offers on various exchanges. In this process they use very sophisticated technology and data analysis to trade more efficiently, make more money on the spread between the bid and offer, and they also make price discovery more efficient.
Despite the restrained outlook for the markets, the optimism over these firms has not been affected. Liquidity providers have always been very important for the entire market by improving the quality of the prices on the exchanges by lowering the bid-ask spread. Even when there is a lot of volatility, the market can always count on the firms to execute trades all day long.
This new breed of traders an liquidity providers can give a new boost to the financial sector. These firms bring a lot of advantages with them to the exchange markets. The markets can always count on these firms, because they trade all day long. It is good that there are structural changes happening on the financial markets, because during this financial crisis we need to attract the traditional customer again, because now they are all pulling back their investment. I believe that these firms can also bring more confidence on the markets, because they work on a highly professional basis with a lot of knowhow.
The fact that they are very popular in the US means that they are effective. I hope Europe succeeds in bringing these firms to our European markets. Euronext can certainly use a boost right now and when these firms are interested as well in coming over to Europe this could mean that the damage of the financial crisis could be controlled.
Source: Financial Times: New breed of trader heads for Europe
http://www.ft.com/cms/s/0/c28e8908-c1a4-11dd-831e-000077b07658.html
donderdag 4 december 2008
UAW agrees to help automakers
The United Auto Workers said that they will help 3 important automakers: General Motors, Ford and Chrysler.
They agreed to work together with the embattled U.S. automakers about changing their labor contract so they win 34 billion dollars with this action.
This news was made Wednesday by the president of the United Auto Workers after he had a conference with the presidents of Ford, Chrysler and General Motors.
General Motors was the first one to say that they are in bad papers, they said that they need some financial help otherwise the bankruptcy wasn’t far away. They needed 4 billion dollars by the end of the year. Also Chrysler warned their investors and asked for help, they said that they would run out of cash in the first quarter of next year so they really needed some help because bankruptcy wasn’t far away.
The companies were asked to go to the Congress on Tuesday to talk about their problems and to say how they will use the federal loans and to return them profitable.
The Union came with a “jobs bank” this means that the jobs are saved in General Motors and that they will pay them. This action isn’t only for General Moters. Ford and Chrysler would get the same if they need this. But the president of UAW is not convinced, according to him their need to be more actions to save the automotive sector in these crisis.
He also said that there need to be investments in the retiree health but because of this crisis and the help of the Union this would be difficult.
According to me this is a positive news item. The automotive sector is in problems and they will be the first victims of the global recession and financial crisis. The Union needs to invest money but it’s impossible to give money all the time. We need to learn about this crisis, we need to learn that we have to control much better about the companies and that the governments and other institutions will not always be paying when they are in difficulties.
These are hard times but we have to look forward and when they save these 3 big companies a lot of jobs are saved and the economy can recover again. But we have to learn, stronger regulations are necessary.
Source: http://money.cnn.com/2008/12/03/news/companies/uaw/index.htm?cnn=yes
They agreed to work together with the embattled U.S. automakers about changing their labor contract so they win 34 billion dollars with this action.
This news was made Wednesday by the president of the United Auto Workers after he had a conference with the presidents of Ford, Chrysler and General Motors.
General Motors was the first one to say that they are in bad papers, they said that they need some financial help otherwise the bankruptcy wasn’t far away. They needed 4 billion dollars by the end of the year. Also Chrysler warned their investors and asked for help, they said that they would run out of cash in the first quarter of next year so they really needed some help because bankruptcy wasn’t far away.
The companies were asked to go to the Congress on Tuesday to talk about their problems and to say how they will use the federal loans and to return them profitable.
The Union came with a “jobs bank” this means that the jobs are saved in General Motors and that they will pay them. This action isn’t only for General Moters. Ford and Chrysler would get the same if they need this. But the president of UAW is not convinced, according to him their need to be more actions to save the automotive sector in these crisis.
He also said that there need to be investments in the retiree health but because of this crisis and the help of the Union this would be difficult.
According to me this is a positive news item. The automotive sector is in problems and they will be the first victims of the global recession and financial crisis. The Union needs to invest money but it’s impossible to give money all the time. We need to learn about this crisis, we need to learn that we have to control much better about the companies and that the governments and other institutions will not always be paying when they are in difficulties.
These are hard times but we have to look forward and when they save these 3 big companies a lot of jobs are saved and the economy can recover again. But we have to learn, stronger regulations are necessary.
Source: http://money.cnn.com/2008/12/03/news/companies/uaw/index.htm?cnn=yes
zondag 30 november 2008
Wall Street ends week with more gains
This week shares on Wall Street made strong gains this week. The reason is the rescue of Citigroup by the US government. This action has strengthen the confidence on the market.At the end of the week, shares were growing less because investors want to know how large the financial crisis actually is. The indicator for knowing that is the shopping habits of people at the start of the holiday season.
Thanks to the rescue action of the US government to save Citigroup, all bank shares gained some extra profits. Citigroup itself rose again to 8.36 dollar. The government has taken over the toxic mortgage of Citigroup. That cost was about 300 billion dollar.
The Federal reserve is also responsible for the good results on Wall Street this week. They keep 800 billion dollar available to help people with getting a loan for a house, a company or for consumers.
Another positive signal was the announcement of President Obama that his team of economists will continue searching for new ways to end this financial crisis.
Because of these good results, some negative news in the economic sector was set aside.The orders for durable goods dropped down with 6.2%.Consumers spend this month one percent less than previous month, but the personal income rose with 0.3 percent.
Like I said in my previous blogs, confidence in the market is the most important fact in the financial crises. Without that companies can’t gain some new capital. I think a lot of people will look very carefully over their budget this holidays. That could have an negative impact on the stock markets.The government of the US did a good job with the help they gave to Citibank. But I ask myself the question were they get all that money. Government all over the world are helping their banks, but they should get their money from somewhere. I think that only helping the banks will not be enough to get out of this crises. Other industries are suffering to and they don’t receive any help.
source: http://www.ft.com/cms/s/0/858d7cf0-bd51-11dd-bba1-0000779fd18c.html
Thanks to the rescue action of the US government to save Citigroup, all bank shares gained some extra profits. Citigroup itself rose again to 8.36 dollar. The government has taken over the toxic mortgage of Citigroup. That cost was about 300 billion dollar.
The Federal reserve is also responsible for the good results on Wall Street this week. They keep 800 billion dollar available to help people with getting a loan for a house, a company or for consumers.
Another positive signal was the announcement of President Obama that his team of economists will continue searching for new ways to end this financial crisis.
Because of these good results, some negative news in the economic sector was set aside.The orders for durable goods dropped down with 6.2%.Consumers spend this month one percent less than previous month, but the personal income rose with 0.3 percent.
Like I said in my previous blogs, confidence in the market is the most important fact in the financial crises. Without that companies can’t gain some new capital. I think a lot of people will look very carefully over their budget this holidays. That could have an negative impact on the stock markets.The government of the US did a good job with the help they gave to Citibank. But I ask myself the question were they get all that money. Government all over the world are helping their banks, but they should get their money from somewhere. I think that only helping the banks will not be enough to get out of this crises. Other industries are suffering to and they don’t receive any help.
source: http://www.ft.com/cms/s/0/858d7cf0-bd51-11dd-bba1-0000779fd18c.html
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