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Bonds – this is not 1994

| Posted by: Paul Donovan | Tags: Paul Donovan

  • It is a relatively quiet day for data. The winner of the Nobel Prize for Economics is to be announced (sadly, this does not tend to go to market-based economists). The media continue to give the US government bond sell-off a level of attention that is out of all proportion to the actual move in yields (which has very little economic relevance).
  • China has returned from holiday to a weaker equity market (expected), a reserve requirement ratio reduction (increasing liquidity in the economy, not a real surprise), and a visit from the US secretary of state (not really relevant to anyone).
  • Brazil's first round presidential election race has advanced relatively extreme candidates (of the left and the right) into the second round. The right wing candidate won over 46% of the vote, with the left wing candidate winning around 30% of the vote. This was generally expected by investors.
  • On Friday, the EU wrote a stern letter to the Italian finance minister saying that the Italian budget is off track. The Italian finance minister probably knew this already. The Italian position is that they don't care, and that everything will change after next year's European elections.