From Bloomberg:
Dec. 18 (Bloomberg) -- The extra yield Treasury investors demand to hold 10-year notes over 2-year securities touched the widest since February on speculation an extension of tax cuts will spur growth and increase deficits.
The benchmark 10-year yield rose this week to the highest level in seven months as retail sales advanced in November more than economists forecast and the Federal Reserve said the recovery is continuing. The U.S. economy grew at a faster pace in the third quarter, a report is forecast to show next week.
“The market will be subject to selling,” said Brian Edmonds, head of interest rates in New York at Cantor Fitzgerald LP, one of the 18 primary dealers that trade directly with the Fed. “It’s hard to think of anything good for bonds coming out of the tax-cut extension. Something has got to give.”
Questions to think about:
Why would the tax extension cause bond yields to increase? What impact do you think this should have on the USD? Try to trace through the impact through the money ( bonds), goods and services, and forex markets.
Why would better than expected retail sales figures cause bond yields to rise?
What impact will this have on the public debt: GDP profile in the US?
This blog is intended for students--present and past--of our macro class. Will post stuff here that we will be using in course as well as comments and articles on things macro of interest.
Saturday, December 18, 2010
Friday, December 10, 2010
EMBA group assignment
The objective of the assignment is for you to apply and link some of the macro you learned in class to your business. Work in your assigned groups. The assignment is due by COB on 30 December 2010. Click on title to link to file for full details. Have fun!
Tuesday, December 7, 2010
China liquidity outstrips Fed
Interesting article from Bloomberg. Based on what we discussed in class about intervention in the forex markets, why do you think liquidity (money supply for our purposes) growth is so rapid in China? Is it the same reason as why the Fed in the US is injecting so much liquidity into the system?
Friday, December 3, 2010
The 2 trillion baht question
Most of us in Thailand celebrate New Year's two or three times a year: the international one in January; the Chinese one in February; the Thai one in April. But some in Thailand also get to celebrate the Fiscal New Year in October. For them, the fiscal or budget season is also a time of celebration and gift-giving, a time to dispense favors and largesse. Our government budet passed a milestone this yea. The annual budget exceeds two trillion baht for the first time ever. Two trillion is a lot of baht. It is about 20% of GDP. It is enough to build another 17 Suvarnabhumi airports. Ten years ago, the budget was only 910 billion baht. It has more than doubled. Where has all the increased spending gone?....
Click on link in title for full article. First published in Bangkok Post, 14 July 2010.
Click on link in title for full article. First published in Bangkok Post, 14 July 2010.
Caught between a rock and a hard baht
Thailand is experiencing a flood of inflows. Not just of water, but of funds. As a result of these inflows, the baht has appreciated by over 12% this year. We usually try to comfort ourselves with the thought that our appreciation is "in line" with the region. But in this case, we have appreciated by more than everyone else. What to do? There are no easy options. Each option has its drawbacks....
To read full article, click on title. First published in Bangkok Post, 9 November 2010.
To read full article, click on title. First published in Bangkok Post, 9 November 2010.
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