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How do you calculate the values in the RED series?

Yes on 1, not exactly, but sorta close on 2. And yes, dramatically tighter spreads might be an indication of an improving economy. Marginally tighter spread, on the other hand, might not imply and improvement, but rather the need by the govt to issue a lot more paper.

Japan has been spiraling for arnd 20 years now. Every year, it's one of the more popular trades among the Western hedge fund types (e.g. Julian Robertson) out there to short JGBs. Every year, like clockwork, these Western hedge fund types get spanked by japanese domestics and leave with their...

1. No 2. These trades are always directional. When you trade bond futures vs euribor, you're, simplistically, expressing a view on bank credit (it's not the only factor, but it's one of them). That's the fundamental bit. Short-term there's also some directionality that's simply due to bond...

I'm not sure I see it this way... If anything, I'd be inclined to think it's the other way round. It's been demonstrated before (e.g. Callaghan's Winter of Discontent) that it's normally political suicide to default on what your citizens believe to be government obligations. IMHO...

Why? Are you suggesting it's easier and less painful to default on the obligations to your own citizenry than to external creditors?

Not sure I'd agree with this... I think I am more with this Sprott feller: http://www.sprott.com/Docs/MarketsataGlance/MAAG_10_2009.pdf Timing is the big question, though...

Very true... But so is comparing gold to a car, IMHO. As to the rationale question asked earlier... I am not a gold bug, but I own some gold. Following (although I did it first) the central banks, I hold it solely for purposes of diversification of my portfolio, which predominantly...

Simpler than DMM... I am wondering if the OP experimented with SVD-based methods before progressing to what seem to be more complex ideas.

RBI is good and Y. V. Reddy, even though he's no longer in charge, is the man (doesn't surprise me, given the selection process for senior public servants in India). RBI, just like the PBOC (which was initially rumored to be the buyer of the IMF gold), is simply seeking to diversify its...

To me it's very simple and comes down to the good ol' "bank run" phenomenon. If a large financial organization fails, no matter what guarantees the state provides, there may arise a crisis of confidence. In such an event investors might, quite literally, withdraw all capital needed to fund...

Interesting paper, terry, thanks... I have started reading it, but I notice some mention of SVD, as well as PCA and ICA. It also appears that there is some similarities between the problems these methods attempt to address. Just out of curiosity, have you looked at/used simpler SVD-like...

It isn't a stellar argument, for sure. You have to admit, though, Ivan, that gold doesn't depreciate the way a car does...

Firstly, my argument is not whether the yuan has appreciated or not. I am simply saying that yuan has always, as a matter of POLICY, been weak vs the currencies of China's main trading partners. Would you disagree with this claim? Secondly, you're absolutely right. In no way am I...

Not sure I'd agree with this... Weakening the currency doesn't necessarily result from just printing money. The BoJ has been desperately printing money like there's no tomorrow, on and off, for 10yrs now, but has yen gotten any weaker? Moreover, who says that a weaker ccy always leads to...

Hmmmm, what about China? From what I can see, their policy of weak yuan has sure been good for them...

RBI bought 200 metric tons for arnd $6.7bn, which suggests they bought at $1042 per oz.

Google 'Covered Interest Rate Parity"...

Thanks, texrex... It's good to get a better understanding of these things from knowledgeable people.

Do you want to take a view on the strengthening of the currency or do you want to actually invest in China? If it's the former, there might be some FX shops that would offer RMB NDFs. You could take a view on just how much RMB appreciation the politics of the situation might permit.