Posted on 01/05/2010 9:17:12 AM PST by marshmallow
Fears that Britain may be heading for its first sovereign debt crisis since the 1970s hit a new intensity after Pimco, the world's biggest bond house, declared that it is starting to sell off its holdings of gilts.
The American investment group said it will be a net seller of UK Government bonds this year, at the very point when the Bank of England brings its £200bn programme of purchases to and end and the Treasury attempts to raise unprecedented sums through the capital markets.
The move is doubly embarrassing for the Government because the head of Pimco's European investment team is Andrew Balls, brother of Schools Secretary Ed Balls, who is mastering the Government's re-election strategy. The move will be seen as a financial vote of no-confidence in the Government's handling of the economy.
Paul McCulley, a managing director at Pimco, said: "We are currently cutting back in the US and UK because... supply and demand dynamics are likely to be negatively affected as borrowing rises and central bank buying declines."
The yield on the benchmark 10-year gilt has leapt from below 3pc to above 4pc in the past year amid concerns about the Government's capacity to bring its budget back under control, and worries about the coming end of quantitative easing (QE), under which the Bank has been buying massive numbers of gilts. However, UK equities staged a strong start to the year, with the FTSE 100 up 87.46 points to a 16-month high of 5500.34.
(Excerpt) Read more at telegraph.co.uk ...
Tell ya what.....they’re gonna have to sell a whole lot of them there quilts to take care of their problems!
Militant
Iceland...England...what’s the big deal? They are just two islands. No big deal. Right?
Pimco is big player in the bond market, maybe the biggest. This foreshadows similar moves in the U.S. When you have plan like Obama’s that requires that you borrow over a $1 trillion every year into the indefinite future you are going to find bond buyers getting pretty scarce. So we will just have to let the Fed create some or most of this annual $trillion out of thin air. Or we could have the Fed raise interest rates. Choose your poison.
They will always choose thin air money.
"There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved."
~~Ludwig Von Mises
If TS indeed HTF, the only currency that will be worth anything is steel and lead. Count on it.
In the US: The yield on the benchmark 10-year T BOND has leapt from below 2.8pc to above 3.8pc in the past year amid concerns about the Government's capacity to bring its budget back under control, and worries about the coming end of quantitative easing (QE), under which the FED has been buying massive numbers of MBS & Treasuries. However, US equities staged a strong start to the year, with the S&P 500 up over 400 points points to a 16-month high of 1120.
It's like looking in a slightly heavier mirror.
Bold letter in the original post...
What would prompt "someone" to unload nearly $80 million bucks worth of this issue more-or-less "all at once" earlier today - and with what looks like a market order - a "get me out right now irrespective of price" sort of circumstance? I have no clue, but this sort of closed-end fund doesn't normally see this kind of volatility, and a quick perusal of the credits in their latest disclosure leads one to wonder: does someone smell smoke - serious smoke - in enough of this fund's exposure to be willing to accept a price SOME TWENTY PERCENT OFF ITS CURRENT TRADING LEVEL to get out RIGHT NOW? Sure looks that way to me.
This guy has been bashing PHK from $7 all the way up to $12...now its at $10.85, + $.63 today.
Could it have been a year end seller that dumped?
PHK just declared its regular monthly divident of $.122/share, giving it a 13.5% yield.
There’s always risk, so we cannot ignore this sale, but risk-free doesnt exist.
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