Bonds/Interest Rates

Last night the ECB made a startling move by injecting E95bn into the banking system as BNP Paribas froze three hedge funds through lack of liquidity. The Dow fell 387 points.

Recent economic data show gearing levels have increased for both home buyers and corporates. At the same time, interest rates have now risen and corporate borrowing spreads have widened. Not good.

The Dow rose 153 points last night, but it wasn’t all smooth sailing.

Weekly musings from your editor. This week he shares some thoughts about a meeting with two experts out of the FNArena database of readers.

According to TD Securities today’s housing finance data for June supports the RBA’s decision to lift rates as it implies ongoing inflationary pressures in the economy.

As the US deals with a credit crunch, it would not be a good time for China to start dumping US Treasuries. But it is threatening to do so if the protectionist groundswell is not addressed.

The RBA this morning raised official interest rates from 6.25% to 6.50%.

It was a case of bad news can be good news on Wall Street as the Fed decided not to ease rates in the face of the credit crunch. The Dow pulled back losses to be up 35 points.

Politicians and bankers are at pains to point out that Australia cannot suffer a mortgage crisis due to the low level of subprime loans. As the crisis moves beyond subprime, just how immune is Australia really?

I was the biggest up-tick since October 2002, but traders remained unconvinced of the integrity of last night’s rally. Oil finally tipped over.