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8/58
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In recent months the uncertain financial situation in Greece has had some influence on the global financial markets, but not until the recent turmoil did it cause such substantial impact on various financial markets.
The Greek Turmoil
The end of June was the deadline for Greece to make further payment to the International Monetary Fund in the amount of 1.6 billion euros. Greece doesn’t currently have this kind of money so in order to pay up this debt on time Greece has to obtain further funding from the three sources which have bailed out Greece already twice, in 2010 and 2012, that is the IMF, ECB and European governments. Maybe it would have been better to have let Greece default atone of those times instead of lending them more. Afterall it has has defaulted 4 times since 1800. However, letting it go bankrupt with the European economies not fully yet recovering from the financial crisis, it could have had a disastrous impact on those economies. The financial markets seem to be much better prepared for a potential default now as the exposure of international financial institutions (except ofcourse for the main creditors: IMF, ECB and European governments) is very limited. The imp…
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al_dcdemo avatar
al_dcdemo 28 July

Useful information and very well written. Great article!

Milian avatar
Milian 28 July

great work!))

tatskiyd avatar
tatskiyd 29 July

interesting work

Margoshka avatar
Margoshka 30 July

good

Tach avatar
Tach 29 Aug.

super

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7/19
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Abstract

Verbal stance as a viable tool of monetary policy is described. Immediate risks of rate hike for leveraged financial institutions are outlined. The root causes of sovereign debt crisis in Europe are outlined. The future course of Fed`s actions on interest rates is proposed; the feasible downsides of such policy for USD are put forward.

The unconventional measures deployed by the Fed in the wake of financial crisis of 2007-09 were initially sold to public as transient means to enhance liquidity in the markets and prevent total collapse of banking system in the US. While some programs, implemented by the Fed, were transitory – TARP, TALF, CPFF etc. were unwound at some point, the main tool of monetary easing – the fed fund interest rate is being kept intact at 0.25% for over 5 years. This Fed`s persistence, inexplicable by any traditional arguments, raises pertinent questions from general public, forced to forgo risk-free return on its savings, and provides endless fodder for financial commentators, speculating on the future course of Fed`s actions.
Verbal stance – essential tool of monetary policy
In current conditions of artificially depressed interest rates, every F…
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ANABEVZ avatar
ANABEVZ 27 Oct.

my best wishes for you with your article!

Elani avatar
Elani 27 Oct.

very informative!!

VictoriaVika avatar


speculo_ergo_sum Thank you for article! Only now I sow it and its late to put like ((( It is so nice of you to share your great dedication and effort! Also we can see here detailed description of the method, very informative.  Great work, keep going.  Victoria

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5/38
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Introduction:
At the beginning of the year, everyone (myself included) expected to see rates push higher and higher. The US 10 year yield started at around 3%, and currently sits at 2.5%... 90% of the market participants were expecting to see 3.5%, not 2.5! And here lies the problem, consensus trades have been failing miserably this year, and frankly don't look goof for the rest of the year.
The consensus trades that nearly everyone believed in going in to 2014 were as follows, as they thought at the time:
1.) Sell bonds - With the Fed tapering, and the US growing well, interest are surely going to rise in the not too distant future. As such, we will have higher yields on Government bonds across the curve.

2.) Buy Equities - The so called "great rotation", sell bonds and buy equity. The US is growing, the world is recovering, buy stocks. Corporate default rates are historically low, and their profit margins have never been higher!

3.) Sell the EUR, buy the USD - With the ECB acting very dovishly, the EUR will fall... ignore the growing current account, or financial stability, the ECB will force the EUR lower. For the USD, the US could grow >3% this year, and interest rates could
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mimuspolyglottos avatar

Vix, Gold, Cad, we could put here much more whereat six figures guys were not precise. I am impregnated by the feeling that the whole situation is just slipping out of the US hands, no matter geopolitics or economy we are talking about. Baltic Dry Index stays below the cellar, capex is subdued, too much of ''Too Big To Fail'' in politics and in economy. Where the hell is my sell in May and go away, aaa? ZH and its armageddonian rap fails again? Fat cats overshadow tigers! CBs are offering only the blue pills, not the red pills. Thank You for the relevant one, Adrian. Best Regards.

Daytrader21 avatar

Great article as always. I couldn't agree more with what you have already said. US 10Y yields was the biggest surprise as Fed is moving away from his easing cycle I was expecting US rate to soar and breaking below 2.6 the previous days was quite a big surprise.I guess the market has to force weak hands out before moving in the right direction. Right now EUR/USD is the one to watch but until we see some raise in volatility I'm not expecting any powerful down trend to start anytime soon.

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13/46
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I felt the need to cover this subject as well before the year end, because in my humble opinion it will be the dominant market driven theme of 2014, and if you're an investor or an active trader you want to make sure you understand the market implications of such a big event, because it will dictate the market tone for the next year. Even if you're only a technical analyst trader there is no way you haven't heard at least one time about "Taper", so have you ever asked yourself what does it mean and how it will affect your trading operations? The sole purpose of this article will be to answer precisely to that question.
The word tapering in financial terms is increasingly being used to refer to the anticipated reduction of the Federal Reserve's quantitative easing(QE), or bond buying program. The current Federal Reserve quantitative easing (QE3) accounts for purchases amounting to $85 billion in Treasuries and Mortgage Backed Securities (MBS) per month, with the main scope lower interest rates and therefore bolster growth.
  • What is Quantitative Easing?
Since the global financial crisis of 2007–2008 the FED has begin using new type of market policy like Quantitative Easing to try to
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Daytrader21 avatar

Update: For the December meeting the market expectation for a taper where considerable low, however FED is shocking the market again with a taper decision. If you try to make a reasoning of WHY now tapering? my take is that this was last appearance for Bernanke and his last change to make a good impression in front of the public, and it was also a good strategy for the Fed because if something would have gone terribly wrong, Yellen the New Chairman could have promise that she will do changes and fix the problem, and this would certainly send confidence signals to market participants (2)

Daytrader21 avatar

Update: As expected market reaction was in both direction and we saw a big whipsaw as volatility was very high during the news release and also during the Q&A session. Although Fed decided to do a small tapering and only cutting back their stimulus programs by a minor 10B, Ben Bernanke has said during the press conference that any further cut in QE is data depending and "end of QE certainly won't be at mid-year" suggesting that it will take longer before they will end the QE programme for good. And this can easily extend through the whole 2014 year and beyond, but that remains to be seen.(3)

Metal_Mind avatar
Metal_Mind 19 Dec.

Thanks bro.....I owe my 210 pips on gbp /jpy..hope to get 2000 pips until i closed it ... to your article. I sow the third picture of what was the reaction of no tapering on euro usd,,,,whatch it on gbp usd and correlated with gbpjpy because beiing a cross is more volatile and i kinda anticipated this move. Thanks again.

FXdream avatar
FXdream 20 Dec.

nice++++

ilonalt avatar
ilonalt 26 Dec.

well done!

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18/43
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Introduction:A credit default swap, also known as a CDS, is in effect a form of insurance. As the name suggests it acts as insurance against defaults from various forms of bonds. As in insurance, the buyer of the CDS will be given a lump sum upon the event of a default in the underlying bond and the seller is the one who has to pay up.Normally a CDS is issued at a notional value of $1 - 10 million and then is always shown to be trading at a % of the notional value. For example, if the CDS is for $1 million and is trading at 50 BPS you would have to pay a premium of $5,000 per annum, in quarterly installations.CDS' are a derivative of Bonds and as such they move in very similar ways, but unlike Car insurance or Home insurance you don't have to own the underlying asset to buy the CDS. Due to this the total exposure of CDS' can be greater than the values of the bonds in question.Here is a chart of 5yr CDS for the US government debt, as you can see it trades around 50 BPS showing the chance of default is very low.*chart from BloombergHow they work:Lets imagine there are 3 parts to this; the Investor, Company XYZ who issues a bond and finally an insurance company (similar to that of AIG…
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Edziukas12345 avatar

thank you. nice article +1

AdrianWS avatar
AdrianWS 9 July

Thank you all.

madihazulfiqar avatar

informative article

OneGoodTrade avatar

I like it ! Great work.

adask avatar
adask 30 July

Very good article! One of the best this month! Even if it's not about Forex, but it's "must know" article.

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26/48
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Introduction:This article is all about bonds and in general the fixed income markets. To start with, a bond is effectively an IOU from one person to another. There is a legal obligation from the issuer to repay the investor. If this is not fulfilled the issuer default on his debts.Components:There are many components in bonds that you should be familiar with, even when it comes to trading Forex. Firstly;Principal : Also commonly known as the Par value is the value that the issuer will have to pay back to the lender upon maturity. This ranges from $1,000 to $100,000 depending on the type of bond. This is also commonly the same value that the investor lends to the country or corporation.Price : This aspect changes just as the price of a stock would, upon issuance price is normally  100. Throughout the life of the bond this price may vary due to demand for the bond. Any price above 100 is seen to be trading at a premium and anything below is at a discount. Normally it is quoted as the "clean" price, or the price without any interest that has accrued. If there is a $10,000 bond and the price falls from 100 to 90, it costs you $9,000 to buy an IOU for $10,000. This means that if you hol…
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AdrianWS avatar
AdrianWS 19 June

Spanish 10 year's caught a decent bid today forcing yields down 17 Bps at one point, bids seen from arbitrageurs trading compression movements with CDS'. - http://www.bloomberg.com/quote/GSPG10YR:IND

Risk on across market but all rest on QE hopes. All things considering, do you personally value the SP500 at 1350 without QE, I think the answer is no, seems to be pricing in QE to me.

One key factor though is the diminishing returns of each successive intervention and that suggests QE3 will last for less than 1 month and give no more than 100 points. we will see.

scramble avatar
scramble 20 June

Another great article! Very well explained one of the most important (and very actual) aspects involved in trading financial markets! Well done!

AdrianWS avatar
AdrianWS 26 June

RBS say long core, short periphery into the weekend. as it stands 10yrs of European bonds are : 9.65% - Portugal // 6.72% -Spain // 6.06% - Italy // 1.52% - Germany // Netherlands - 2.06% // Finland - 1.9%.

Some pretty sizeable moves in these yields in the past few days, will be interesting to see where it goes from here.

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6/48
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Introduction:After writing my previous article on Risk Management I received some questions about how I use it and how successful it is. So I thought that this, my next article, could address some of those points and could be used to show you a "model Portfolio" likened to those seen at hedge funds and large mutual funds.To start with this isn't really a set and forget portfolio where I am setting out to achieve high yield via dividends, or protect my capital with low beta investments. Instead in this it requires daily monitoring and constant buying and selling of various securities.Portfolio:As mentioned in my previous article, I split up my portfolio into different areas defined by Percentages of total account value, as seen below.DJIA - 25%US 5YR - 15%Gold - 25%USDJPY - 10%US 10 YR - 15%High beta - 10%I will go through each section and show why I have these and why their weightings are as such.DJIA - Dow Jones Industrial Average:This basically contains 30 of the largest companies within the US which is indexed. There are many ways to trade it from owning individual stocks within it or trading forms of derivatives such  as Leveraged ETF's or Futures contracts.Personally I have my…
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AdrianWS avatar
AdrianWS 19 June

Thank you all for the kind words, and @Nicco - Yes.

fifty_fifty avatar

Brilliant! Thanks for sharing your experience! +1

AdrianWS avatar
AdrianWS 24 June

Since Last time I updated it, This is the Percentage change from then.

DJIA - 1.8% / / US 5YR - 0.1% / / Gold - -1.6% / / USDJPY - 1.4% (~7% levered) / / US10YR - 0% / / High Beta - 2.1%

doctortyby avatar
doctortyby 27 June

Congratulations for this article. You use only the Usd/Jpy pair in your basket. Why not Eur/Usd and Eur/Jpy?

AdrianWS avatar
AdrianWS 27 June

@doctor - Good question, I feel that in the long term this is going to be easiest to predict and I feel we could see 90-100 next year. I did (last summer) have short EURUSD from 1.4550 and held with low leverage but covered that at 1.27 and believe the direction in the long term is going to be harder to predict as it could see a short cover over 1.30 or could drop to 1.15. Also USDJPY acts as a partial hedge against treasury exposure. In my opinion USDJPY is going to be most predictable over next year.

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18/108
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Why are we trading FX? Is it just because of the low transaction cost? Is it because the FX manager area used to be unregulated?Nope. Here's why we trade it. Here's why no investment manager can not afford not to invest in FX as a source of uncorrelated alpha.FX is the largest market in the world. It trades more than 4.000 billion USD per day. It's liquid, the amount of market participants is high, there is a natural trading demand (from corporates, individuals, businesses that need to buy other currencies), it's easy to price/value.FX has been a cash cow in investment banking for decades. Investment banks have had always FX prop and FX flow trading and it is a core element of investment banking. In Asset Management FX it's only something to hedge, to control exposure, to be aware of the risk – rarely traditional asset managers see FX as a core source for yield. Strangely only few managers have discovered FX investment products as a source for uncorrelated yields....yet. Today fixed income rarely lives up to the asset-liability-management (ALM) requirements (approx. 4% p.a.), equities are too volatile and the returns are too unstable, alternatives are often illiquid and hard to pri…
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ritesh avatar
ritesh 12 Oct.

Nicely written, quite detailed and informative article. Nice on bro, keep more coming. Best of luck and +1

Barney avatar
Barney 19 Oct.

nice job

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