June Bond closed at 107'07
Strong resistance found at 107'24-26 on Monday, we'd taken the profits from our long positions MOC. And here are some thoughts from Manfinancial:
In Monday’s report, MGR outlined some of the factors which signaled tighter global monetary policy. The Fed was being pushed to tighten due to a higher than expected CPI and the BOJ was working to drain excess reserves. Additionally, the ECB is likely to tighten monetary policy in June. Monday brought factors from China and India, which hint that the landscape for liquidity is likely to tighten further. Think about the following:
· The PBOC said it may raise reserve requirements in order to slow lending and fixed asset investment. M2 has been running faster than target. The move should slow global liquidity growth, economic growth, and demand for commodities.
· India said it cannot afford to subsidize energy prices at current price levels. The price increase is expected at the end of May. It will likely raise the cost of fuel and thus shrink demand for energy. At the same time, the economy is likely to slow. There will be less money to buy non-energy related goods and services. Although not an issue of monetary policy, the lack of a fuel subsidy will act like a tax and slow the Indian economy.
There has been a heavy flow of money into both international shares and commodities during 2006 on the Chinese/Indian growth stories. The events above are not a surprise, but have been brewing for weeks. India raised mortgage rates 50 bps a few weeks back and warned of higher fuel prices. The PBOC had raised the 1 year rate 27 bps in the wake of the G7 meeting. As the moves by China and India to slow their economies become better known, demand for international equities and commodities could be undercut. The markets have gone a long way toward discounting the bearish actions, but some of the bullish outlook has been tempered. This may create a more two way trade in commodities and international equities over the next few months.
In Monday’s report, MGR outlined some of the factors which signaled tighter global monetary policy. The Fed was being pushed to tighten due to a higher than expected CPI and the BOJ was working to drain excess reserves. Additionally, the ECB is likely to tighten monetary policy in June. Monday brought factors from China and India, which hint that the landscape for liquidity is likely to tighten further. Think about the following:
· The PBOC said it may raise reserve requirements in order to slow lending and fixed asset investment. M2 has been running faster than target. The move should slow global liquidity growth, economic growth, and demand for commodities.
· India said it cannot afford to subsidize energy prices at current price levels. The price increase is expected at the end of May. It will likely raise the cost of fuel and thus shrink demand for energy. At the same time, the economy is likely to slow. There will be less money to buy non-energy related goods and services. Although not an issue of monetary policy, the lack of a fuel subsidy will act like a tax and slow the Indian economy.
There has been a heavy flow of money into both international shares and commodities during 2006 on the Chinese/Indian growth stories. The events above are not a surprise, but have been brewing for weeks. India raised mortgage rates 50 bps a few weeks back and warned of higher fuel prices. The PBOC had raised the 1 year rate 27 bps in the wake of the G7 meeting. As the moves by China and India to slow their economies become better known, demand for international equities and commodities could be undercut. The markets have gone a long way toward discounting the bearish actions, but some of the bullish outlook has been tempered. This may create a more two way trade in commodities and international equities over the next few months.
posted by CODACap at
8:22 AM
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