Thursday, 8 January 2009

The Power of the Bond Market, Uk and the Euro

Two days ago I wrote about the overwhelming power of bond market. At yesterday's Bund auction reported in today's Telegraph,

33% of Germany's 6bn Euro offering of 10 year bonds were left on the shelf. The yield on these bonds jumped 34 basis points to 3.29% later pared back to around 3.20%. Every other Eurozone countries' bond yields shifted up in parallel. Even mighty Germany has to bend the knee to the bond market and pay up more to borrow. What hope for the PIGS?

German bond auctions are usually oversubscribed by a factor of two or more and I cannot recollect any auction where bunds have been left unsold.

As AEP says in his piece,

'Traders will be watching very closely to see whether today's bond auctions in Spain and France go ahead as planned, or whether the world is starting to see a "buyers strike" as deluge of sovereign debt floods the market.'

I will also watch this closely.

This will push up rates in the swap market which will be passed straight through to the EU fixed rate mortgage market and also the UK mortgage market.

Darling Brown's quantitative easing solution amounts to nothing more than printing more money. This was Mr Mugabe's 'solution' in Zimbabwe but Darling Brown has already followed Mr Mugabe's example on how to rig ballots and avoid democracy in the Lisbon Treaty fiasco.
Darling Brown can pressure our seriously non-independent central bank, the Bank of England to print this inflationary money. The ECB will never do this. The Germans have been burnt twice in living memory by the consequences of this lunatic policy and will never agree to it. The Bundesbank is a true independent central with the dominating voice in the ECB. Our lot of course can be bent, bought and manipulated at will by Darling Brown and we could end up like Zimbabwe, a once rich country living on handouts like Darling Browns payroll vote. Politicians will say it can never happen in the UK but never is a long time. We have lost our democracy and our politicians are answerable only to themselves.

The second intersting piece by AEP in todays Telegraph quotes the ECB as saying, "Britain not fit for Euro membership". Click on link for full article:

This will come as a shock to the Europhiles but not to me. The ECB's view is rightly based on the UK's spiralling public debt but even if this were magically fixed there is a further deep seated and more dangerous ECB objection to UK joining the Euro. Euro membership requires under the Maastricht Treaty an independent national central bank, an NCB. It is not clear to me that Darling Brown's Bank of England would satisfy the ECB interpretation of the Maastricht rules on NCB independence. I remember this happened with Hungary and it led to the NCB governor being giving a longer single term to put him beyond political control. I can't see Darling Brown, guru Mr R Mugabe, buying this diminution of their power and control.

I turn to UKIP matters. Yesterday I attended a meeting of the South West European Election Steering Committee. Ken Irvine, the National Strategist also attended. It was good to know how well advanced and funded we are in the South West. Trevor Colman, Malcolm Wood and Alan Wood deserve great credit for this and we, in the South West, can look forward to the June election with some confidence.

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