Annonce

Log ud Log ind
Log ud Log ind
Finans

Blog: Centralbank-penge har smadret finansmarkederne

Morten W. Langer

onsdag 06. april 2016 kl. 17:46

fra Libertyblitzkrieg

The ECB’s Monetary Policy Is Now Creating a Rush Into Derivatives

One of the most catastrophic things central banks have done in the post financial crisis period is destroy financial markets. Investors are no longer investors, they’re merely helpless rats running around the lunatic central planning maze desperately attempting to survive by front running the latest round of central bank purchases.

While actual macroeconomic and corporate fundamentals do still exert influence on financial asset prices from time to time, the far bigger driver of performance over the past several years is central bank policy. To understand just how destructive this is, recall what we learned in last month’s post, Japan’s Bond Market is One Gigantic Joke – “No One Judges Corporate Credit Risks Seriously Anymore”:

 

TOKYO — Fixed-income investors in Japan are increasingly assessing bonds based on their likelihood of being bought by the central bank, rather than the creditworthiness of the issuers.

 

Still, the fund manager desperately wanted to get hold of the bond because he bets that debt issued by Mitsui and other trading houses will be picked up by the Bank of Japan in its bond purchase program.Even if an investor buys a bond with a subzero yield, the investor could sell it to the central bank for a higher price, the thinking goes.

 

It goes to show that no one judges corporate credit risks seriously anymore,” said Katsuyuki Tokushima at the NLI Research Institute.

As insane as it may be, investors now acknowledge that fundamental analysis is merely an afterthought when compared to the far bigger influence of central bank buying. While this destroys free markets, fuels malinvestment bubbles and rewards cronyism, it doesn’t stop central planners — it merely emboldens them. The latest example of such hubris was on full display last month when the ECB’s Mario Draghi increased QE by a third. Here’s some of what’s happened since.

From Bloomberg:

 

A rush for credit exposure in Europe is manifesting in the swaps market because investors are struggling to find enough bonds to satisfy their demand.

 

The European Central Bank’s plan to purchase corporate bonds is fueling demand for securities in anticipation of a rally when the purchases start. Investment-grade bond funds in euros had inflows each week since the ECB said on March 10 that it would expand measures to stimulate the economy. That’s already suppressed yields and made it harder to obtain the notes, making credit derivatives more attractive.

 

Wagers on European credit-default swap indexes have more than doubled since the ECB’s announcement. Investors had sold a net $25 billion of protection as of March 25, near the highest since at least December 2013 and up from $11 billion as of March 4, according to Bank of America’s analysis of data from the Depository Trust & Clearing Corp.

 

“There’s a dearth of bonds investors can get their hands on,” said Mitch Reznick, the London-based co-head of credit at Hermes Investment Management, which oversees $33 billion. “In this liquidity vacuum, managers can use credit-default swaps as a proxy for the bonds that they can’t obtain in order to get longer in credit.”

This behavior is a lot of things, but “investing” is not one of them.

 

“The quickest way to go long credit is by selling contracts tied to indexes in large size,” said Roman Gaiser, who oversees 3.5 billion euros ($4 billion) of assets as the Geneva-based head of high yield at Pictet Asset Management SA. “That’s easier than buying lots of individual bonds. It’s a quick way of getting exposure to credit.”

 

Gaiser said he increased a long position in European credit-default swap indexes after the ECB announcement.

 

Though the ECB hasn’t said which bonds it plans to buy, some investors are holding onto securities they expect to be on its list, according to Rik Den Hartog, a portfolio manager at Kempen Capital Management in Amsterdam. Kempen, which oversees about $5.5 billion of credit, sold bonds and derivatives on Italian utility Enel SpA last month because the default swaps paid almost three times the spread on the notes, Den Hartog said.

So “investing” has morphed into simply front-running the decisions of unelected central planners. That’s all there is to it, and while that’s disturbing enough, there may be another unappreciated angle to this mess. When QE was rolled out by Bernanke, many of us assumed that printing money to buy bonds would be immediately devastating for the currency in question. The current state of affairs makes me question whether this assumption still works going forward.

If investors are merely looking to front run central banks, you could make an argument that QE can strengthen a currency, at least in the short run, as global fund managers move into the QE producing nation’s currency in order to front run central bank purchases.

So in the short-term, will further QE weaken a nation’s currency or strengthen it? It’s an important question to ask in this increasingly twisted world of global finance

Tilmeld dig vores gratis nyhedsbrev
ØU Top100 Finansvirksomhed

Få de vigtigste om bank, realkredit, forsikring, pension
Udkommer hver mandag.

Jeg giver samtykke til, at I sender mig mails med de seneste historier fra Økonomisk Ugebrev. Lejlighedsvis må I gerne sende mig gode tilbud og information om events. Samtidig accepterer jeg ØU’s Privatlivspolitik.

Du kan til enhver tid afmelde dig med et enkelt klik.

[postviewcount]

Jobannoncer

Grønborg: Bankernes rejse nærmer sig afslutningen
Udløber snart
Forretningsudvikler til Pension og Formue
Pension, Formue
Aabenraa
Grønborg: Bankernes rejse nærmer sig afslutningen
Udløber snart
Formuerådgiver
Formuerådgiver
Midt- og Nordjylland
Grønborg: Bankernes rejse nærmer sig afslutningen
Udløber snart
Afdelingsdirektør for forretningsudvikling Private Banking
Private Banking
Aabenraa
Grønborg: Bankernes rejse nærmer sig afslutningen
Udløber snart
Formuerådgiver
Formuerådgiver
Region hovedstaden og Sjælland
Regnskabsassistent til Pharma Nord
Region Syddanmark
Generalsekretær i Folkekirkens Nødhjælp
Region Hovedstaden
ØKONOMIMEDARBEJDER – Carlsbergfondet
Region Hovedstaden
Kontorchef for økonomi, analyse og kunder i Færdselsstyrelsen
Region H
DIGITALISERINGSCHEF – Muskelsvindfonden
Region H
Direktionskonsulent med flair for økonomi og udviklingsprojekter
Region Sjælland

Mere fra ØU Finans

Log ind

Har du ikke allerede en bruger? Opret dig her.

FÅ VORES STORE NYTÅRSUDGAVE AF FORMUE

Her er de 10 bedste aktier i 2022

Tilbuddet udløber om:
dage
timer
min.
sek.

Analyse af og prognoser for Fixed Income (statsrenter og realkreditrenter)

Direkte adgang til opdaterede analyser fra toneangivende finanshuse:

Goldman Sachs

Fidelity

Danske Bank

Morgan Stanley

ABN Amro

Jyske Bank

UBS

SEB

Natixis

Handelsbanken

Merril Lynch 

Direkte adgang til realkreditinstitutternes renteprognoser:

Nykredit

Realkredit Danmark

Nordea

Analyse og prognoser for kort rente, samt for centralbankernes politikker

Links:

RBC

Capital Economics

Yardeni – Central Bank Balance Sheet 

Investing.com: FED Watch Monitor Tool

Nordea

Scotiabank