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  • Short term US T-bills almost back to zero

    Alexander Gloy

    Look at 1-month yield for US Treasury bills: almost back to zero. Risk is out – everyone wants to be in a (presumably) safe place (even if there is basically no interest). $1,000,000 invested at 0.02% for one months yields less than $20. Pays for the cab ride home. With Libor steady at above 0.5%…

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  • Belgium CDS rise after election – Moody’s downgrades Greece to “junk”

    Alexander Gloy

    Decent move in Belgian CDS (credit default swaps) today (+16% to 130bps) after Flemish separatists emerged as strongest party in Sunday’s elections. After elections in 2007 it took nine months to form an unstable five-party coalition (leading to three governments in as many years). Fears are the highly indebted country might break up leaving the French…

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  • Another red flag: Commercial Paper (CP)

    Alexander Gloy

    What are CP’s? They are unsecured “promissory notes”, sold by large companies and banks with excellent credit ratings to finance short-term needs. They mature within 1 to 270 days (35 on average). Unsecured means there is no collateral (except asset-backed CPs). If the issuer goes belly-up while you hold a CD the joke’s on you.…

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  • A rising TED spread signals red flag for banks

    Alexander Gloy

    Introducing: the TED spread. It’s the difference between (formerly) risk-free 3-months Treasury Bills (hence the “T”) and the 3-months Eurodollar Libor (London Interbank Offered Rate, ticker symbol “ED”). The Libor is an average of interest rates banks charge each other for borrowing money. Currently 3-months Libor is at 0.54%, T-bills at 0.12%, hence difference = 0.42%…

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  • LQD: sold all positions, closed short puts

    Alexander Gloy

    Update May 5, 2010: We have closed all our short puts on LQD (June 105, September 106) with nice profits on May 4. We also sold all LQD (US Investment Grade Corporate Debt ETD) in our cash accounts (May 4 + 5). Reasoning: We are uneasy regarding the high proportion of bank debt in LQD.…

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  • A Greek Drama

    Alexander Gloy

    Monday the S&P 500 made a new 52-week high. On Tuesday hell broke lose after S&P downgraded Greece by 3 steps to junk (from BBB+ to BB+) with negative outlook. Expected recovery in case of default: 30-50%. Greek government bonds (10yr yield 10.5% this morning, 2yr above 18%) would no longer be eligable as collateral…

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  • Recent rise in bond yields might offer decent real returns

    Alexander Gloy

    Despite the Fed’s continued ZIRP (zero-interest rate policy) US government bond yields have recently shot up across the curve (see below). A 28-year US Treasury STRIP (zero coupon) can be bought at 24.30%, yielding 5.09%. With inflation to remain subdued due to constrained consumer spending real return on such an investment might be as high…

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  • Investor Presentation: Outlook March 2010

    Alexander Gloy

    Investment Outlook 2010 03 For Public View more presentations from Gloeschi.

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  • Risk premium back to pre-Lehman levels

    Alexander Gloy

    Government bonds are considered risk-free (governments can always print money to pay off debt – this is particularily true for the US as it issues its debt in US Dollars. Countries mostly go bankrupt because they issued debt in foreign currency and then have a currency crisis – which makes their foreign debt increase in…

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  • Real Treasury yields higher than a year ago

    Alexander Gloy

    Here’s the current yield curve (blue) compared to 4 (black) and 52 weeks (orange) ago. Not much difference other than the short end (0-2 years):   Source: www.TheChartStore.com   Now let’s look at it in real terms (after subtracting inflation):   Source: www.TheChartStore.com Real yields were negative a year ago (due to the still high…

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