Euro Displaces Dollar in Bond Markets

[Jcrowley]

Euro displaces dollar in bond markets

By David Oakley and Gillian Tett in London

Published: January 14 2007 22:08 | Last updated: January 14 2007 22:08

The euro has displaced the US dollar as the world’s pre-eminent currency in international bond markets, having outstripped the dollar-denominated market for the second year in a row.

The data consolidate news last month that the value of euro notes in circulation had overtaken the dollar for the first time. Outstanding debt issued in the euro was worth the equivalent of $4,836bn at the end of 2006 compared with $3,892bn for the dollar, according to International Capital Market Association data.

Outstanding euro-denominated debt accounts for 45 per cent of the global market, compared with 37 per cent for the dollar. New issuance last year accounted for 49 per cent of the global total.

That represents a startling turnabout from the pattern seen in recent decades, when the US bond market dwarfed its European rival: as recently as 2002, outstanding euro-denominated issuance represented just 27 per cent of the global pie, compared with 51 per cent for the dollar.

http://www.ft.com/cms/s/572b41a6-a414-11db-bec4-0000779e2340.html

[SpiralHawk]

1. Thanks a pantload, Commander AWOL & republicon cronies

You screwed up again, and America takes it on the chin again because of your corruption and incompetence.

"Hell, I'm making a fortune on War Profiteering, and so are my republicon cronies.
So the rest of you can just shut up and sit down.
Who cares what you think?"

Sincerely (smirk, smirk) yours, Commander AWOL Bush

[acmavm]

2. You don't think these bastards haven't invested the bulk of their

money in the Euro, do you?

It's only us little peasants who are gonna go under.

[mmonk]

3. All that killing and mayhem for nothing.

[mmonk]

4. I remember whan I invested in euro shares

with interest from euro bonds, everybody including people from here gave unsolicited advice how foolish I was. Being a fool has worked out fine for me so far.

[sandnsea]

5. I remember DUers discussing it

Back in 2004, I think. I wonder how many people did well with euro investing. Maybe you could start a thread and ask, and see what the naysayers have done. Would be informative.

[mmonk]

6. I just may do that.

Of course their take was the traditional make money investing when my approach was safeguarding the value of my money and portfolio. However, the move has made money for me as well.

[bridgit]

7. oooooh, now that's going to really drive bush nutz & i ain't kid'n...

wait till china calls in it's markers, there'll be hell to pay

[A HERETIC I AM]

8. What are the "markers" China is going to call in?

Just curious.

[bridgit]

9. many had bought into america when america was a going concern...

[A HERETIC I AM]

10. And America is no longer a going concern?

You didnt answer my question, though.

What are the markers you speak of?

What exactly is China going to "call in"?

[bridgit]

12. china, as do many countries, bank rolls this venture we loosely refer to...

as america, money from overseas came here when america offered many solutions to what seemed intractable problems...now, american corporate answers to such problems are to send everything overseas anyhow, while capturing the resources of the world; bring corporate america's "bottom line" up, by forcing everyone else's down...

that is not a creative resolution imo of these issues we face commonly and on the global scale i.e. american auto manufacturers are tanking (read the headlines) and their answer remains, for instance, to sue california for our MPG & emission standards due to go into effect soon and meant to keep in-line with world standards i.e. Kyoto considerations,

they maintain such standards run antithetical to their bottom line and they may be right, but they are wrong in a very real sense, as are many in corporate america, as to what will solve such problems long term...and so...solutions will be sought elsewhere, and that is the free market too = pooh-poohing green technology & renewable energy is another example,

your answer is a simple one: would you continue to fund a BBQ stand that sold no product, and refused to upgrade it's business model so as to facilitate that end?

china can dump their dollars (markers, those little things traders fling about on the floor of the stock exchange and others sweep up at the end of the day, if that's easier for you to picture) for euros, and that will drive our markets shit bonkers

[A HERETIC I AM]

15. Ahhh....all that to find out you don't have a grasp on what a Bond is.

Ok...I understand all of the post preceding the answer i asked for. And you're right, there are many problems with corporate America that need resolving. Among them convincing Detroit to make cars folks actually want to buy that at the same time don't slowly kill the planet. BTW, you infer that foreign money has stopped flowing into this country. Nothing could be further from the truth.

I take exception to the statement; "american auto manufacturers are tanking"

No...they aren't tanking. They are in trouble, to be sure but neither Ford or GM is going to go under any time soon.

The statement; "your answer is a simple one: would you continue to fund a BBQ stand that sold no product, and refused to upgrade it's business model so as to facilitate that end?" is as close to the definition of "non sequiter" as i could possibly think of. But if i could venture a guess, you are suggesting the United States and it's hundreds of millions of HIGHLY PRODUCTIVE citizens and millions of productive, responsible and innovative companies are somehow a BBQ stand with no product.

Look, I am no apologist for corporate malfeasance. I am however a believer in the free enterprise system and the ideals of a market economy. Economies fluctuate and follow a relatively predictable, historical up and down cycle. Where we are in the current cycle is up to debate but one thing is certain; We are by no means a "BBQ stand that sold no product".

"china can dump their dollars (markers, those little things traders fling about on the floor of the stock exchange and others sweep up at the end of the day, if that's easier for you to picture) for euros, and that will drive our markets shit bonkers"

Ummm.....besides being bullshit, it really doesn't matter if they do sell their TREASURY BONDS (if you want to call those "markers"...ok, fine) or not. The US Treasury already has the money from the sale of the bonds in the first place. Now we have to pay the interest over time and then repay the principal at maturity. No country with a large share of US Treasury securities is going to endanger their ability to continue to collect those interest payments by intentionally hurting the American economy. If China tries to sell the bonds they have bought, they have to have a buyer (or buyers) and that buyer is going to have to pay in US Dollars. Your REAL concern should be (and probably is, you just might not realize it) that foreign investment in Treasury securities will dry up. The likelihood of that is slim for the following reason - The financial markets of the United States, in spite of popular opinion on this message board - are deep, liquid, well regulated, politically stable and transparent. More so than ANY OTHER COUNTRY ON EARTH. Our markets are attractive because of this. There is entirely too much at stake to allow this to change.

China can no sooner "Call in it's markers" than GW Bush can form a coherent, grammatically correct sentence on his own. The bond market doesn't work that way.

[bridgit]

16. non-sense, my husband has stocks in a portfolio called: Japan...

it is an amalgam of stocks & funds within Japan itself, when you see a brochure that invites you to invest in Japan...someone will offer you such a mechanism, though the mix may be different or entirely up to the investor to decide as to which and whatever...

to contend that an investor is not able to divest is just plain silly, to suggest that china is not able to understand the various instruments in which she participates is laughable

to pretend you do not understand early retirement penalties or stipulations that may be in effect that you are not aware, just to make your feeble point, is nefarious: this is GD; and not the: Jane, You Stupid Slut forum (perhaps you should approach admin and make that suggestion), and china will do whatever is perceived in her interest; surely you understand self-interest

though i see you are somewhat confused about a good many things, the least of which being 'markers', and what they are...have a lovely day, though by all means possible stop hyperventilating for the benefit of us all

[A HERETIC I AM]

18. The fact that you equate an ETF your husband bought with Treasury Bonds

purchased by a foreign government is laughable as well.

I never suggested China could not divest itself. But in every transaction such as you describe there is a seller and a buyer. China would have to find a buyer in order to divest itself and that buyer is going to want the same surety China wanted when they purchased the bonds in the first place.

CHINA CAN NOT IN ANY WAY SHAPE OR FORM DEMAND THEIR MONEY BACK FROM THE US TREASURY.

Suggesting they can demonstrates a lack of understanding on what a bond is, how they are issued, what maturity is, what a coupon rate is, how interest is paid and what the terms are.

That you would equate the international bond markets to something the bank charges you when you want to liquidate a CD tells me i am making a point to someone either unwilling or unable to understand.

For the record, i in no way insinuated you were somehow a stupid slut. But thanks for clearing up that this was General Discussion and not a forum named like you described. I'll keep an eye out for it.

Also, for the record( from http://dictionary.reference.com/browse/markers )
mark·er (mär'kər) Pronunciation Key
n.
One that marks or serves as a mark, as:
1) A bookmark.
2) A tombstone.
3) A milestone.
etc.etc.
down to
#7 Slang A written, signed promissory note.

I know what a marker is. Apparently you are under the impression that investors buy them all the time.

On edit to say it may, of course be a Mutual Fund your husband has purchased and not an Exchange Traded Fund. I just hope it wasnt EWJ from iShares. 12.86% return for the last 5 years but only .07% from it's inception. Or JEQ advised by Daiwa. 11.53% trailing 5yr but only 2.44% since incept. If you want a really good one, tell him to look at DPCRX (Dreyfus Premier Greater China) 24.45% trailing 5yr and a whopping 19.41% since inception.

But then....I have no idea what the hell i'm talking about. I might even be nefarious.

[Selatius]

14. China won't do anything to the US if we don't do anything rash.

What would qualify as rash would be bombing Iran. Unfortunately, China has invested billions of dollars in Iran to develop their oil fields to help fuel China's rapidly expanding economy. China will be struck especially hard if the oil rigs in the Persian Gulf are bombed by the US and if several of the oilfields are disrupted. They have the option of dumping a portion of the US debt that they finance. China is a buyer of US gov't treasury bonds. The interest rates are low on them, but they're a safe bet; the US gov't has always paid what was promised.

China would probably dump just enough US bonds to send our gov't a message. It probably won't be much but just enough to send a wave through the currency exchange markets and send the value of the US Dollar reeling.

[A HERETIC I AM]

17. Well, unfortunately that is the entire point of our ventures in the Middle East.

It is all about control of the oil reserves and who gets to profit from bringing them to market. China is in the same boat we were in 1947, albeit on a much larger scale. A booming economy, a burgeoning middle class with an unquenchable desire for natural resources. They also have roughly the same percentage of known domestic oil reserves vs. potential demand that we do. They HAVE to import it and where they get it from and at what price is most certainly on their minds.

You state; "China will be struck especially hard if the oil rigs in the Persian Gulf are bombed by the US and if several of the oilfields are disrupted. They have the option of dumping a portion of the US debt that they finance."

Not necessarily. There are many, many other sources of oil on this planet and it is doubtful that the US would bomb production facilities in areas where US oil companies also have a vested interest. How many oil production facilities were harmed by US forces in either Gulf war? Not many. Also, they might have the OPTION of dumping US Treasury Bonds but, as i stated above, they have to have a buyer. And that buyer will want stability in the US financial markets just as China does. I admit i could be way off and totally wrong but i think your argument is a non-starter.

I personally think that the war in Iraq potentially avoided a war with China, but that is another thread and that war may still yet come. All wars, WITHOUT EXCEPTION throughout human history have been over resources or market share/control.

[Selatius]

19. We blew up two oil rigs belonging to Iran in 1988 in retaliation for the mining of one of our ships.

It was an Iranian seamine, and Reagan ordered retaliation with the destruction of two oil rigs out in the Persian Gulf. Of course, in that same year, a US warship shot down an Iranian civilian airliner, so there is at least precedent with oil rigs.

If a conflict arises, even if the oilfields and all the oil rigs are not hit--it seems likely at least some of the oil rigs in the Gulf probably will be hit--there would still be a disruption in the flow of oil as no ship would be able to move through the Hormuz Strait with the US Navy exchanging fire with Iranian coastal defenses.

[A HERETIC I AM]

20. Fair enough. I recall the Airliner but was unaware of the oil rigs.

I agree with your point about shipping traffic through the Straits of Hormuz but there would be SIGNIFICANT international pressure to calm such hostilities in short order. I think you might agree with that.

Thanks for the history reminder.

[bobthedrummer]

11. Yep. Thanks to all that brought this about. Where is Wolfowitz on this???

:sarcasm:

Daddy War Bucks has been wounded in the head, more to follow...

[bridgit]

13. there'ya go, where the hell is Wolfowitz period...

yes i know, the world bank...great call that one too x(