David Fuller and Eoin Treacy's Comment of the Day
Category - General

    Yen's Tumble Ends Up Helping Japan Bonds Outperform Major Peers

     This article from Bloomberg may be of interest. Here is a section:

    The fattening up of currency-hedged, volatility-adjusted yields comes as the BOJ’s minus 0.1% policy rate and extra discounts on yen interest rates in the market — the so-called currency basis — make it even more lucrative for investors to short the yen for hedging.

    “The yield pickup will remain attractive for foreign investors if the currency basis stays wide as a result of a cheaper yen,” said Shoki Omori, chief desk strategist at Mizuho Securities Co. in Tokyo. That’s the case “despite the risk of yields falling across the curve” as the BOJ may avoid changes to its easy monetary policy, he said.

    The combination of holding Japanese debt with hedging against a weaker yen doesn’t come without risks, though.

    Should the BOJ lift its 10-year yield cap, it would cause capital losses. An end to the negative-rate policy makes it less lucrative to short yen, though most economists don’t see that coming this year. Hedging may also backfire if Japan intervenes to limit yen weakness, with chief currency official Masato Kanda warning last week of an appropriate response to any excessive moves in the market.

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    Bitcoin Bulls Are Testing The Year's High With Liquidity Light

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    “Historically liquidity is definitely lower around holidays and combined with a relatively large increase in leverage recently, prices will be more susceptible to sharp movements,” said Kyle Doane, a trader at Arca. “The market is still leaning bullish and overall sentiment continues to improve.”

    BlackRock refiled paperwork with the US Securities and Exchange Commission on Monday through Nasdaq to add new details to its proposal for an ETF. 

    A spot Bitcoin ETF has long been seen as the holy grail for the crypto industry, as a way to reach a broader swath of consumers, but the SEC has repeatedly rejected prior filings. Bitcoin reached almost $69,000 in late 2021.

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    Pakistan Stocks Surge Most in 15 Years After IMF Loan Deal

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    Financial support from multilateral lenders has boosted investor confidence — and returns — across troubled emerging and frontier markets in recent months, as funds were approved or disbursed for countries including Kenya, Tanzania, Senegal, Ukraine, Ghana and Ivory Coast. Other sovereigns in Africa, including Egypt and Mozambique, are expected to have their loans approved soon.

    Inexpensive valuations are helping Pakistan’s market as well. Concerns related to the slew of negative headlines recently ranging from political turmoil to the risk of a debt default and sinking rupee had sent investors fleeing, with the KSE-100 Index becoming the world’s cheapest equity benchmark.

    “Overall, the valuations are dirt-cheap with significant room for rebound,” said Ali Raza, head of international equities trading at BMA Capital, in Karachi. 

    Pakistan dollar bonds advanced, with the paper due in 2024 gaining 17 cents in the past week. The 8.25% 2024 bond was indicated 3.1 cents higher to trade at 73.6 cents on the dollar on Monday, a level last seen about a year ago in August. The gains come after dollar bonds notched their best-ever week. Pakistan’s currency market opens Tuesday.

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    China's Economic Woes Are Multiplying and Xi Has No Easy Fix

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    If the government continues to sit on its hands, things could get worse. In a scenario where property construction crumbles, reduced land sales hit government spending, a US recession weakens global demand and China's markets shift to risk-off mode, Bloomberg's SHOK model shows another 1.2 percentage points shaved off growth.

    “We’re caught in a kind of vicious circle in the sense that you need a massive stimulus to create a little moderate impact," said Keyu Jin, an economics professor at the London School of Economics and Political Science who wrote The New China Playbook: Beyond Socialism and Capitalism.

    “We have to be prepared for slower growth in the future because China is really in transition right now from industrialization to innovation-based growth," she said. "Innovation-based growth is just not that fast.”

    To be sure, China's policymakers have defied the doomsayers before and could do so again. A bigger-than-expected stimulus, proactive moves to resolve bad debts, a commitment to support entrepreneurs and extending an olive branch to the US could dispel some of the pessimism.

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    Apple Attains Historic $3 Trillion Milestone as Tech Stocks Boom

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    Apple Inc. made Wall Street history as the first company with a market value over $3 trillion, the latest sign of big tech’s seemingly unstoppable dominance in equity markets.

    The iPhone maker gained 2.3% on Friday, adding to a rally that’s added more than $983 billion to its size this year and leaving it roughly a half-trillion dollars above the next-largest company. Apple’s ascent to the milestone helped the Nasdaq 100 Index to its best-ever first half ever, driving a broader stock rally that underscored the dominance of tech megacaps

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    The Giant Grid Bottleneck Threatening Climate Goals

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    2. What will that entail?
    It means building grids dense enough to absorb these renewable sources while still achieving the stable frequency that’s vital for the smooth functioning of electrical equipment and electronics. It will also require more high-voltage lines to carry surpluses from regions where the sun is shining and the wind blowing to meet demand elsewhere. Right now, the lack of long-distance transmission means a lot of recently installed renewable capacity is going to waste. BNEF estimates it will cost around $21.4 trillion to adapt grids to a net zero world and require 152 million kilometers of new cables — enough to stretch from Earth to the Sun if laid end to end. That implies a surge in consumption of copper — more than the mining industry can currently supply. But the biggest obstacle to grid development right now isn’t sourcing the materials or finding the money to pay for it all. 

    3. What’s the hold-up?  
    Local communities often oppose new wind farms, solar arrays and power lines and projects can face years of consultations involving multiple stakeholders. State regulators impose detailed technical studies and other bureaucratic hurdles. There are almost 1,000 gigawatts of solar projects stuck in the interconnection queue across the US and Europe, close to four times the amount of new solar capacity installed around the world in 2022. If all the wind and solar projects stuck in limbo were completed and connected to the grid, they’d add up to more than the present electricity generation capacity of the US. 

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