Monday, Jan 19, 2015

We are seeing the Eurozone transform real time

Zero Hedge: Denmark Goes NIRP-er; Slashes Rates To -20bps Amid Currency Peg Fears

Another buyer of Euros will disappear if Denmark breaks its Euro peg. I doubt it can survive QE. Basically, ECB has lost Switzerland and possibly Denmark, to gain, Greece? Chump change?! Terrible investment!

Posted by libertas @ 03:31 PM (2164 views)
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5 Comments

1. libertas said...

Again, they report this as if the Danes had any control over global capital flows. Following the Swiss debacle, speculators are smelling blood, and the flows of capital seeking a quick buck in Danish currency will be difficult if impossible to stem. The Danes are reacting rather than pre-empting, and at some point they are likely to decide that purchasing that much Euros, with QE on the horizon, is unsustainable for their balance sheet.

Do not listen to their intentions, since they do not control the situation nor outcome and should never have created the peg in the first place.

Monday, January 19, 2015 05:31PM Report Comment
 

2. libertas said...

Sweden and their peg leg are not far behind. Down to minus 0.075 today on the 2yr:
http://uk.investing.com/rates-bonds/sweden-2-year-bond-yield

Speculators have shifted from short the pegged currencies to long, and ECB's actions can only accelerate that. Looks like Germany was right and ECB should have been run by Bundesbank.

Monday, January 19, 2015 06:43PM Report Comment
 

3. libertas said...

Finland seriously negative at minus 0.139
http://uk.investing.com/rates-bonds/finland-2-year-bond-yield

The Euro core, that would have strong currencies outside a Euro are also seeing seriously negative rates:

Germany, minus 0.168
http://uk.investing.com/rates-bonds/germany-2-year-bond-yield

France, minus 0.093
http://uk.investing.com/rates-bonds/france-2-year-bond-yield

What surprises me is that the pound is not more bid, because it has a floating exchange rate, and so ploughing money into Sterling nigh on guarantees appreciation relative to Euros. Maybe uncertainty around Scotland cast a shadow, and maybe they believe the baloney about rates going up?! But UK 2yr rates are hanging around at just under 0.4%, just below base rate. Much further and BOE will have to cut rates to avoid Gilt auctions being over-subscribed, resulting in excess currency appreciation. Chelsea's 1.24% rate may yet look expensive in a year's time, and I suspect that houses will start slowly rising up until the election and, following a Tory win, will take off.

Monday, January 19, 2015 10:26PM Report Comment
 

4. libertas said...

Denmark down to MINUS 0.235 now. Negative rate doubling in a day. This could become exponential.

Tuesday, January 20, 2015 06:07PM Report Comment
 

5. libertas said...

Germany smashing down to MINUS 0.175

Record negative.

Tuesday, January 20, 2015 06:11PM Report Comment
 

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