Author: Vincent Fernando, CFA

We’re at one of those historic moments in the credit market, when U.S. government bond yields are clearly no longer considered one of the safest investments in town.

Key corporate debt now trades for lower yields than U.S. bonds of similar maturity. Note these are both dollar-based types of obligations, thus the difference in yield isn’t simply due to dollar-weakness fears. It’s due to default concerns:

Bloomberg notes that Berkshire Hathaway recently sold debt at 3.5 basis points less than Treasuries of similar maturity, and that Procter & Gamble and Lowe’s have seen their debt trade at lower yields than Treasuries as well. For a country with a rock-solid credit rating, this is pretty staggering (even if we are looking at temporary anomalies).

Whatever credit ratings firms may say, markets have now made it pretty clear that the U.S. is far from a risk-free debtor. It’s as if markets are already moving yields ahead of a potential cut to the AAA-rating. Thing is, given the precedent any cut would create, it’s highly unlikely credit ratings firms would actually cut America’s rating. Instead they’ll wink and nudge markets that the old risk-free rating is essentially gone, even it still officially remains… and markets have figured it out.

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• Moody’s: Government Debt Is Vastly Understated, And On Its Current Path America Will Be Downgraded
• Obama’s 8-Month Nightmare Could Begin Tomorrow

Thousands of Russians have come out to protest against the extended rule of Mr. Putin, on what they called a ‘Day of Anger’, as there’s a growing perception that living standards have deteriorated under his watch.

Opposition groups are uniting to complain about growing economic difficulty across the nation post-crisis:

Reuters:

At least 1,500 people turned out in the Pacific port of Vladivostok, raising their hands to support a motion to dismiss Putin’s government. Around 1,000 rallied in Saint Petersburg and hundreds gathered in several other cities.

 

“People have no work and they are fed up,” said Ivan Fotodtov, 26, a Vladivostok web designer who braved snow to protest rising bills cutting into his stagnant wages.

…

“Each region has its own issues, but everyone sees their lives are getting worse,” Nemtsov told Reuters. “The protests are only going to grow.”

It’s still a relatively modest movement, but it could be gaining steam. Read more here >

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• Is Vladimir Putin About To Undermine The EU With A Big Greek Bailout?
• The New European Gas Pipeline That’s Threatening To Whack Putin At The Knees
• Putin Says He Didn’t Try To "Destroy" Russia’s Billionaires

Goldman Sachs has already put forth a rather bold counter-consensus forecast for U.S. interest rates — no fed interest rate hike until the end of 2011.

Yet an extension of this long-delay before any tightening on the interest rate front is that Goldman Sachs doesn’t even expect major tightening via the federal reserves liquidity facilities which were created during the crisis to un-crunch credit markets:

Goldman:

The New York Fed has already run some tests of its reverse repo tool on a very small scale. We expect further tests in coming months for both this and the term deposit facility. In testimony on the Fed’s “exit” strategy in February, Chairman Bernanke said that “[a]s the time for the removal of policy accommodation draws near, these operations could be scaled up to drain more significant volumes of reserve balances to provide tighter control over short-term interest rates.” Although the Chairman was not very specific about the lead time between reserve drains and rate hikes, we interpret his comments to mean a small number of months—no more than six, and probably fewer than three.

If this interpretation is correct and rate hikes are as far off as we think they are—i.e., not before the end of 2011—then large-scale reserve drains are unlikely for at least another year. This is in contrast to the views expressed by many market participants, who expect such operations during the second half of 2010.

So the message from Goldman seems to be: Don’t expect any significant form of tightening in 2010.

(Via Goldman Sachs, U.S. Economics Analyst, 19 March 2010)

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• PLAYBOOK: Watch Out For This Indicator If China Tightens Lending Tonight
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The Department of Energy has just released a study that found ‘critical shortcomings’ in U.S. oil inventory data.

Rig Zone:

The documents, obtained through a Freedom of Information Act request, expose several errors in the Energy Information Agency’s weekly oil report, including one in September that was large enough to cause a jump in oil prices, and a litany of problems with its data collection, including the use of ancient technology and out-of-date methodology, that make it nearly impossible for staff to detect errors. A weak security system also leaves the data open to being hacked or leaked, the documents show.

Moreover, problems with EIA data underscore the hazards of depending on companies or other firms to self-report data.

While this may been suspected in the past by many in the energy industry, oil inventory data can still be a substantial market mover. Thus it’s worrisome how, at times, it appears that data errors were large enough to make a substantial impact on the market:

On Sept. 16, the EIA released data showing almost four million barrels of oil had vanished from the Cushing storage hub in Oklahoma during a single week. The market paid particular attention because Cushing is the nation’s most important commercial storage facility. Its oil is used to fill orders from buyers on the New York Mercantile Exchange. Oil futures jumped 2.2% after the report

But out of the sizable drop at Cushing, 1.7 million barrels represented a correction made after the EIA discovered a previous error in one company’s reporting, according to the emails. James Beck, who heads the team that conducts the weekly survey, confirmed the correction in an interview.

Read more here >

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A Chinese commerce minister thinks that March data, when it comes out, could show that China has lost its export surplus and has a trade deficit.

Reuters:

“A country’s currency appreciation is very limited in helping to rebalance global trade,” he said. “I personally expect that China could possibly have a trade deficit in March.”

On the one hand such a forecast could be seen as a defense against global criticism of China’s trade practices.

But on the other hand if it was simply a made-up excuse rather than an authentic forecast, the minister would have probably chosen a time period further out.

We’ll know pretty soon whether ot not his forecast is correct, and if indeed Chine reports a trade deficit then the nation will be freed from a substantial amount of international pressure on the trade front. Except with the U.S., of course, where the China-U.S. trade surplus probably has little chance of disappearing any time soon.

Don’t miss: Why the Chinese real estate bubble is the most obvious bubble ever >

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A huge boom in natural gas production could now be coming in Australia, but in a different fashion from that in the U.S..

It’s offshore, down under:

—

(AP) – First gold, then coal and iron ore. Now, a new bonanza is about to be unleashed from beneath Down Under: Australia’s got gas.

Projects being ramped up to tap huge undersea fields off the country’s northwest could quadruple Australia’s exports of liquefied natural gas in the next few years and turn it into what the country’s resources minister has called an “energy superpower.”

It will be the next stage of a long boom that has enriched Australia and made it a key supplier of the raw materials underpinning Asia’s development—from the girders in city skyscrapers to the fuel burned to light them.

“We have what the world, and particularly the rapidly growing economies of Asia, want—iron ore, energy and minerals,” said Colin Barnett, the premier of Western Australia state, which is at the heart of the new boom.

The mostly desert state has become known for a frontier atmosphere not unlike that of Australia’s 19th century gold rush, the country’s first mining boom that drew enough migrants to almost triple Australia’s population within a decade.

As a major source of the materials driving Asia’s economic surge, Australia has increasingly been drawn into the orbit of emerging giants China and India, spawning tensions and discord. There are also nagging worries over economic overheating and long-lasting environmental damage caused by its thriving resource industry.

Gas was discovered off Australia’s remote northwest coast in the 1970s. But its exploitation has lagged behind iron ore and coal that have been easier to get and more in demand.

Now, gas is gaining popularity as a cleaner-burning alternative to coal in power generation, with a fraction of the greenhouse gas emissions.

The biggest boost in the sector came last September, when Chevron and joint venture partners ExxonMobil and Royal Dutch Shell announced they would go ahead with the massive Gorgon project.

The venture will drill fields about 80 miles (130 kilometers) offshore to tap into an estimated 40 trillion cubic feet of gas, build pipelines and a liquefaction plant and port for about AU$43 billion ($41 billion)—roughly the size of Guatemala’s gross national product.

If that sounds big, the numbers stack up. The decision to proceed came on the heels of news that ExxonMobil Corp. had signed a 20-year deal worth about AU$50 billion to supply PetroChina Co. with LNG from its share of Gorgon. Similar deals for Gorgon gas worth another AU$70 billion were struck with power companies in Japan, South Korea and India.

The Australian government says Gorgon could generate exports worth AU$300 billion during the next 20 years. And that’s just one project. There are at least a half dozen other large gas plans in the works, including Australian company Woodside’s $12 billion plan to tap the Browse fields holding an estimated 20 trillion cubic feet of gas.

Yet even as the projects pile up, Australia is trying to tamp down strains with China that have taken some of the gloss of its mineral and energy endowments.

On Monday an Australian executive of mining giant Rio Tinto will face court in China charged with stealing commercial secrets in a trial Australian lawmakers are concerned is linked to Beijing’s unsuccessful campaign to get lower iron ore prices. The case has added to unease about close China relations after a string of deals for state-owned Chinese firms to buy into Australian resource projects.

Other problems are local but no less intractable.

Gorgon, Browse and some of the other big deposits lie off the Pilbara, a remote Outback region of Western Australia that is buffeted by a half-dozen cyclones a year and where temperatures can soar to 118 degrees (48 C).

Western Australia’s few urban areas are already bursting at the seams because of the mining boom. A five-hour flight across nearly unbroken desert from Sydney, the state capital of Perth can’t build hotels fast enough to keep up with demand, and cranes building office towers dot the skyline.

A severe worker shortage means companies compete for just about everyone from mine site managers to truck drivers—who can earn more than AU$120,000 a year in salary and a rest and recuperation flight to Perth every month.

One of the main supply towns is Karratha, a sweltering collection of houses and a few shops and pubs nestled between hills covered in spinifex and boulders of a deep-maroon color that belies the iron content within.

It’s more than 1,000 miles (1,800 kilometers) from the nearest city, surrounded by some of Australia’s harshest territory, and there’s almost no one here but miners. A bungalow with a pool can set you back AU$2,000 a week in rent.

“It’s gone bloomin’ overboard,” said Jim Holland, a driver and 40-year-veteran of mining in the region. “The house down the road from me sold the other week for $900,000, three bedrooms.”

Holland is one of the lucky ones. Rio Tinto in the 1980s offered to sell some company-owned houses to longtime workers for around AU$45,000, and he took it up. Before too long he plans to sell up and retire in comfort to Thailand.

The federal government has appointed a task force to find ways to fill an expected shortfall of 70,000 construction workers in the resource sector in the next decade, with fast tracking of visas for skilled migrant workers—likely from Asia and the Middle East—a key consideration.

Gorgon alone is expected to create 10,000 jobs—including several thousand workers during construction on currently uninhabited Barrow Island.

Conservationists say the government should never have approved Barrow Island as a site for the liquefaction plant. The nature reserve is home to species such as the flatback turtle and the burrowing bettong, a rat-like kangaroo that no longer survives on the mainland.

“I don’t see how you can have a safe operating environment for an industrial facility and also create the natural dark conditions that turtles need in order to not be disturbed from their natural nesting,” said Gilly Llewellyn, the World Wildlife Fund’s conservation manager.

Chevron says the plans for Gorgon avoid conservation sites and the project is environmentally friendly because it includes plans to inject polluting carbon dioxide gases into an underground trap. Chevron did not respond to requests for an interview.

Environmental concerns about the industry deepened last year after fire erupted on an oil and gas rig at a different field off the northwest coast and burned unchecked for more than two months, spilling thousands of barrels of oil into the sea.

On Barrow Island, the first signs of Gorgon are starting to show. Shipping containers—entirely shrink-wrapped to prevent mainland pests such as rats or cockroaches being introduced—are being unloaded and scrub cleared for an accommodation camp, said Anne Nolan, a state government official who visited this month.

Before long, it will be a bustling scene of more than 3,000 people working around the clock.

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• The Guy Who Crashed Amaranth Burned Again For Market Manipulation
• America’s Massive Shale Gas Revolution Hits Canada Threatening LNG Glut

The roller coaster that is the Greece crisis is now screaming downwards again.

S&P is worried that Greek banks could hit by losses as funding costs rise and the Greek economy experiences a decline in GDP for both 2010 and 2011 (a recession).

It’s not just the government that faces financial problems:

Bloomberg:

“We expect funding costs to remain higher than in the past,” Cruz said. “It may coincide in time with a part of the cycle where banks are going through low growth and low business volumes, and higher credit costs because the credit cycle is not yet finished, and such a combination of pressure from different sides could present challenges for profitability in our view.”

“If credit losses were to exceed our expectations and rise more meaningfully than what we currently anticipate, or if there is a combination with a scenario where we see more pressure on profitability than what we have anticipated, we may lower our ratings,” Cruz said. Any significantly eroded earnings generation may also trigger downgrades, she added.

Read more here >

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• Standard & Poors Says UK Banks Are No Longer The World’s Most Stable Institutions
• Germany’s New KILLER Export That Just Doubled In Market Share Thanks To Nations Like Greece

Alan Greenspan has just released a 48-page essay titled ‘The Crisis’ via the Brookings Institute, which the Economist bills as the latest defense of his performance as federal reserve chairman.

In a similar vein to Ben Bernanke, Mr. Greenspan argues that while he controlled short-term interest rates, long-term interest rates were largely out of his control, and were actually kept low by a ‘global savings glut’ from developing nations like China.

The Economist:

Both men make three broad points. First, they deny that monetary policy in the early 2000s was excessively loose by traditional central-bank rules of thumb. That is a criticism frequently made by John Taylor of Stanford University, author of the Taylor rule on how interest rates should change in response to movements in inflation and GDP. Mr Bernanke points out that based on contemporary forecasts for its preferred inflation measure, the Fed actually followed the Taylor rule reasonably closely.

Second, both men say there is no evidence that low short-term rates drove house prices upward. Mr Greenspan argues that the statistical relationship between house prices and long-term rates is much stronger than with the Fed’s policy rates, and that during the early 2000s the traditionally high correlation between policy rates and long-term rates fell apart. Mr Bernanke points to structural models which show that only a modest part of the house-price boom can be pinned on monetary policy.

…

Third, Messrs Bernanke and Greenspan point to the global nature of the house-price boom as proof that monetary policy was not to blame. Both cite new research from economists at the Fed showing that the looseness of monetary policy in different countries was not correlated with changes in house prices.

We’ve attached Mr. Greenspan’s full essay below, from Brookings.

spring2010_greenspan

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Despite all the rhetoric between China and the U.S. right now, let’s not forget that China will surely hike its yuan-dollar rate. It’s a just matter of when, not if.

If they aren’t planning to do it, then why is the Ministry of Finance (MoF) and Ministry of Commerce (MoC) studying the effects of a yuan hike right now? A report is to be released by the MoC on April 27th. So we’d say don’t expect anything to happen until they’ve actually figured out what would happen.

In addition, the government has already hiked the yuan in the past and appears pretty aware that its fixed peg isn’t sustainable in the long-term. Even recently, Wen Jiabao explained that future flexibility was still in the cards, despite presenting a sharp rebuke of America’s escalating yuan criticism.

Which exposes the heart of the problem….

While a hike is coming and in everybody’s long-term interest, don’t expect it to happen while the U.S. is demanding it. By making a political show out of the issue, the U.S. is only delaying the realization of any adjustment.

That’s because any hike would destroy droves of Chinese exporters who live on razor-thin margins and it would put a lot of Chinese out of work. Trying explaining that to the Chinese public if they think the hike was done as a gift to the U.S..

So while a hike must be done, and some degree of near-term damage to Chinese exporters and employment is unavoidable, China needs to carefully and patiently ascertain whether or not its emerging economic and political system can withstand the shock.

It’s a big deal to hike the yuan arbitrarily. China is a huge economy with billions of moving parts, all running at freight-train speed. You don’t just unscrew one of the engine’s bolts and then hope for the best.

Once they’ve made the hike, there’s no going back.

China and the entire world will be forced to live with the consequences, and if China accidentally torpedoes its economic and social stability by ‘doing the right thing’, it won’t be in anybody’s economic interest, not even the U.S..

So we should all stop freaking out and making the problem worse.

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See Also:

• Goldman: The One-Way Yuan Bet Is Over
• China’s Premier Toughens Stance On Currency, Blasts US Dollar Policy As "Protectionism"
• China Stress Tests Evidence That A Yuan Rise Is Coming

Guru Focus highlights how much John Paulson and George Soros seem to be thinking alike these days. They explain how almost half (27, to be exact) of Paulson’s publicly-disclosed stocks overlap with the stocks held by George Soros.

Guru Focus:

For some of stocks, both men simply own the stock for the quarter and there was no trading activity during the last quarter. There are stocks sold by one or both men and there are stock bought by one and sold by another. Listed below are the nine stocks that are owned by both men as of December 31, 2009 and bought by both men during the fourth quarter of 2009:

Read more about the stocks they hold here >

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• Columnist: "Soros Style" Investing Is What’s Killing The Dollar
• Don’t Believe The Lie of Over-Leveraged American Companies, They’re Actually Massively De-Levered And Ready To Spend
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If you remember, back in 2007 Russia sent a mini submarine to plant a flag on the sea floor at the North Pole.

Now, despite sharp opposition from nations such as Norway, Canada, and the U.S., Russia is moving to consolidate this early land-grab.

RigZone:

“There has been much ado around the Arctic region. You know how the (Russian) flag was erected (on the seabed) and how negatively our neighbors reacted to this,” Putin told members of the Russian Geographic Society. “Nobody has ever stopped them from erecting their own flags. Let them do it. But we work under the rules established by the United Nations and in line with international maritime laws.”

Why the international interest all of a sudden? The area in question is suspected to be rich in natural resources.

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• The New European Gas Pipeline That’s Threatening To Whack Putin At The Knees
• Roubini: What Russia Needs Is A Good Crisis, So It Can Fix Itself
• Mid-Day Market Recap: Equities Fall Harder After Dodd’s Speech

Economic bellwether Fedex reported earnings ahead of analyst expectations for their third fiscal quarter ending February 28th, raised their full year forward earnings guidance, and then spoke of a broadening recovery on their analyst conference call.

This comes after they had already become confident enough to increase rates on North American Less-than-truckload (LTL) shipments starting from the beginning of February:

—

NEW YORK (AP) — FedEx says the global economic recovery is broadening, as Asia continues to see strong growth and the U.S. economy gains steam.

Fred Smith, CEO of the world’s second-largest package delivery company, said U.S. growth is being led by a strengthening manufacturing sector. FedEx is predicting gross domestic product growth of about 3 percent for 2010, in line with the expectations of economists.

Still, Smith warned in a conference call Thursday that the housing market “could remain a problem.”

The largely positive comments came after FedEx said that fiscal third-quarter profit more than doubled from a year earlier. It was the first year-over-year profit increase for the Memphis, Tenn., shipping company in five quarters.

FedEx also raised the forecast for full-year earnings — bringing it in line with Wall Street’s projections — on expectations of “a continued modest recovery in the global economy.”

The company, considered an economic bellwether because of the variety of products it ships, said Thursday it earned $239 million, or 76 cents per share, compared with $97 million, or 31 cents per share a year earlier.

Revenue rose 7 percent to $8.70 billion. The results exceeded Wall Street expectations for earnings of 72 cents per share and revenue of $8.37 billion.

The company said results were boosted by higher shipping volume, particularly at its international express and Ground units.

Average daily volume in International Priority packages grew 18 percent, led by exports from Asia.

Average daily package volume at FedEx Ground grew 5 percent, mostly due to businesses shipping more packages to other businesses. Better volume is a good sign for FedEx — and in turn, the economy — because it means consumers and businesses are shipping more goods.

FedEx made more money per package mostly due to higher package weight — another positive economic sign. Cost cuts also boosted results.

But the results also show that large transportation companies like FedEx continue to battle higher fuel costs. In addition, a loss at the company’s freight unit and partial reinstatement of some employee benefits the company had taken away during the recession damped results.

For the fourth-quarter, FedEx expects earnings per share of $1.17 to $1.37, compared with analysts’ prediction of $1.26 per share. FedEx said reinstatement of more employee compensation programs will hurt earnings in that period as well as in the next fiscal year, which begins in June.

UPS, the world’s largest shipping company, said last month that fourth-quarter earnings nearly tripled. Still, UPS said its freight business — which transports larger products like appliances and cars — continued to lose money.

FedEx shares lost $2.52, or 2.8 percent, to $87.28 in morning trading. But shares climbed more than $3 in the week before the earnings report.

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• Shippers Rattled By Shortage Of Ships Due To Trade Surge
• Rumor Confirmed: Idle Ships Pouring Back Into Service In Response To The Global Rebound
• China And Germany Unite To Impose Global Deflation

China isn’t just competing vigorously with the U.S. at the bottom of the value chain, the nation is simultaneously competing at the top as well.

New York Times:

For years, many of China’s best and brightest left for the United States, where high-tech industry was more cutting-edge. But Mark R. Pinto is moving in the opposite direction.

Mr. Pinto is the first chief technology officer of a major American tech company to move to China. The company, Applied Materials, is one of Silicon Valley’s most prominent firms. It supplied equipment used to perfect the first computer chips. Today, it is the world’s biggest supplier of the equipment used to make semiconductors, solar panels and flat-panel displays.

What’s happening is that this U.S. tech company is placing its top research and development people right in China, even though theoretically they could be in the U.S., because it wants to keep its innovation right next to where its factories and best market for demand growth are.

Continue reading at the New York Times >

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• China’s Jiangsu Province Hikes Minimum Wage In Hopes Of Luring Back Freaked-Out Coastal Workers
• Here’s What Today’s ISM Number Suggests About Job Creation In February
• What It’s Like To Look For A Job These Days

A gold standard is already effectively happening, according to Marc Faber.

Already, gold ownership is expanding, with much thanks to the finance industry’s exchange traded fund (ETF) innovation:

CNBC:

“I think we already have now a gold standard … created by the market place,”Faber told “Squawk Box Europe.”

“We have the (exchange traded funds) that have proliferated and we have more and more physical buying of gold,” he said.

Read more here >

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• Faber: The Greek Bailout Won’t Succeed, And You Should Buy Gold Every Month For The Rest Of Your Life
• Faber: It’s Dead Simple, The Supply Of Dollars Will Grow Way Faster Than The Supply Of Gold
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Wharton is warning markets to keep a very close on Spain right now. That’s because while a Greece or Portugal financial melt down might be manageable, a Spanish one could have massive negative repercussions for both Europe and the global economy.

This is due to the massive size of both Spain’s economy and debt:

Knowledge @ Wharton:

If Spain fails to execute a credible plan to cut its budget deficit, the worries over sovereign solvency will spread quickly beyond the small, peripheral countries currently making the most headlines, experts warn. A Spanish default could herald the breakup of the euro and a rise in retaliatory protectionism around the world.

…

According to an analysis by consultants at McKinsey, the sum of Spanish government, corporate and household debt relative to the size of the overall economy surpasses all developed countries except the U.K. and Japan. Correcting the imbalance has grave implications for the public purse.

For that reason, observers worry about Spain’s ability to service its debts. Bailouts of Greece and Portugal, if necessary, would be “not inconsequential but manageable,” according to Witold Henisz, a professor of management at Wharton. The EU-led rescues would probably knock tenths of percentage points off of European growth, he adds. It’s a different story with Spain.

The need for a Spanish bailout could drop us into a second phase of the global financial crisis, one where the euro could end and the world could entrench into deadly trade-destroying protectionism:

Italy, for example — facing default as they became unable to fund budget deficits. The viability of the euro currency would come into question, as the union’s stronger members could eventually refuse to prop up weaker members and decide that their destiny would be better served by monetary independence. Spanish officials’ lashing out at indistinct foreign culprits is a precursor of what to expect, Henisz says. The risks of a “spiral into protectionist isolationism” would rise. “Political parties that espouse nationalism and xenophobia could get some serious purchase under these conditions.”

Check out the video below, or the full article here.

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See Also:

• Spain Begs Markets To Stop Comparing It To Greece
• Spanish Secret Service Now Hunting Down Financial Speculators
• Forget Greece, With Nearly 19% Unemployment, Spain Should Have You Freaking Out

Could this be the start of a new down leg?

Market Watch:

But the pace of the selling accelerated as news broke that Greek may seek financial help from the International Monetary Fund over the April 2-4 Easter weekend due to little hope for aid from the European Union.

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• Resolute In Athens: ‘We Won’t Pay For The Crisis’
• Heroic Greek Parliament Just Passed Austerity Measure While Riots Erupt In Athens
• What Do People Really Think About The Greek Crisis?

Who said that private America wouldn’t re-leverage itself again?

Morgan Stanley thinks we’re on the cusp of substantial private loan growth, since household balance sheets have stabilized and corporations have massively de-levered.

Morgan Stanley:

New era for households does not mean no borrowing: Private credit demands are poised to rebound, as consumers have substantially repaired their balance sheets, Corporate America will likely soon start to accumulate inventories and boost capex, and credit availability continues to improve. This modest rebound and massive Treasury borrowing needs will put significant upward pressure on real yields over 2010-11.

Corporate financing inflection point arrives: Corporate external financing needs are likely to turn positive soon as companies begin to accumulate inventory and increase capex, and as the growth in corporate cash flow slows. The combination is apt to boost corporate credit demands, perhaps sooner than expected.

This growth in private demand, which would be refreshing after we’ve had simply government demand for so long, could start to pull up in real Treasury yields since there could be more supply of debt.

Supply-demand balance points to higher yields: Treasury yields have remained low partly because of minimal competition from private borrowers. That’s about to change. Coupled with growing concerns about the sustainability of US fiscal policy, we think that this shift will promote significant increases in real yields this year.

Join the conversation about this story »

See Also:

• Banks Just Ignored $3 Of Commercial Real Estate Losses For Every $1 They Reported
• Foreigners Now Selling All Kinds Of U.S. Assets… Just To Buy Long-Term Treasuries
• SENTIMENT BACKFLIP: S&P Now Saying The Euro Could Threaten The Dollar As Reserve Currency

Good news for Russian giant Gazprom.

Although Europe has could have shale gas reserves amounting to potentially five times current proven natural gas reserves, they won’t be tapping them any time soon, say industry analysts.

Bloomberg:

While geologists say Europe may have similar fields spread from northwest England to Ukraine, drilling them profitably will prove a whole lot harder.

Getting the shale gas out requires drilling hundreds of wells and blasting the rock with water and chemicals, raising environmental objections in densely populated Europe. Those obstacles suggest Russia’s OAO Gazprom, supplier of 25 percent of Europe’s gas, will have plenty of customers for its fuel pumped through new pipelines across the Baltic and Black Seas.

“There is a great future for Russian gas in Europe,” John Barry, a strategic issues manager at Royal Dutch Shell Plc, said in an interview. “There is a lot of unconventional gas in Europe, but it’s a very, very early part of the story.” Shell has already faced public opposition to plans to explore in Sweden for shale gas.

Read more here >

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• Pro-Russian Candidate Wins First Round Of Ukrainian Election
• Lame BRIC Russia Snatches One Of The World’s Largest Gas Fields Back From BP
• Is Vladimir Putin About To Undermine The EU With A Big Greek Bailout?

Who do you think Bejing will pander to first, the U.S. or its own people?

A yuan hike would kill droves of Chinese exporters, say exporters.

Reuters:

The China Council for the Promotion of International Trade was checking with more than 1,000 exporters in 12 industries on whether they could cope with a stronger exchange rate, Zhang Wei, vice-chairman of the association, said.

Exporters in labor-intensive sectors such as garments and furniture worked on margins as small as 3 percent, he said.

“If the yuan rises, these companies will face the immediate risk of going bust as their profit margin is already very narrow,” Zhang told a news conference. “So for these companies, the consequences would be disastrous.”

They’ll scream bloody murder if it looks like China is hiking the yuan for the U.S..

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See Also:

• The Chinese Central Banker That Loves To Scare America Tells Obama Not To Expect A Yuan Hike To Save Him
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• Did We Just Get The First Sign That The Surging Dollar Is Killing Job Growth?

According to the Economist Intelligence Unit (EIU), based on their Country Risk service’s sovereign ratings, the United States does not have the best credit rating in the world.

Norway does, home to the niche safe-haven krone. Finally, some real credit ratings that aren’t afraid to insult nations:

The U.K. is already at BBB even, on par with Spain, from the Economist. See their full rankings here.

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See Also:

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