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Anorak | Financial Spreads: Oil Slick, Bonds Stick And Pounding Sterling

Financial Spreads: Oil Slick, Bonds Stick And Pounding Sterling

by | 25th, July 2008

SPREAD Watch: Anorak’s look at the financial spread markets

BUY much last month?

The Office For National Statistics (average age, mean height at age six months and number of employees called Colin on application) has released figures on high street sales.

June was a record month. June saw a month-on-month drop of 3.9 per cent in sales volumes. This reversed the jump of 3.6 per cent in May.

If the Grand Old Duke of York did economics, he’d be in charge right now.

But how low has the economy sunk? Are we in recession? How much is a pound worth?

Well, yesterday sterling fell 0.5 per cent to $1.9873 against the dollar, 0.4 per cent to £0.7882 against the euro and was 0.7 per cent lower to Y214.05 against the yen.

On the Tradefair market, punters can get the GBP/USD spread at 199.40-199.43.The EU/GBP spread is on 0.7884-0.7886. And one pound will buy you 213.08 – 213.16 Yen.

Will you be buying pounds? Or are you getting into more secure stuff, like bonds?

The FT says “European government bonds rose sharply, driving the yield on the ten-year Bund down 9 basis points to 4.57 per cent and the two- year Schatz yield by 15bp to 4.44 per cent.”

On Tradefair, the September Bind is trading at 111.43 to 11.46. Know that the German Info business confidence index has dropped from 10.12 in June to 97.5 in July. That is biggest fall since the recession of 2001.

Or what about an investment in oil?

The price of oil is falling. Buy now, then. Fill your boots, cars, baths and children. Buy! Buy! Buy! Not too long ago the talk was of the $200 barrel. What happened?

Has the recent oil rise been a bubble, manufactured by speculators? The US crude spread is at 126.17 to 126.23. That’s well down on this year’s highs.

Meanwhile, US regulators at the Commodity Futures Trading Commission allege that Optiver Holding, two of its subsidiaries and three high-ranking employees manipulated the prices of crude oil, heating oil and gasoline futures contracts on the New York Mercantile Exchange at least five times in March 2007.

Has it all been a big fix?

In other e-mails, disclosed in the regulator’s civil complaint, traders said they would “hammer”, “whack” or “bully” the energy market. One e-mail said: “You should milk it for right now, as much as you can, because you never know how long this thing is going to last.”

Although the regulator’s case involves the illegal practice of manipulation, not speculation, lawmakers are nevertheless likely to use it as an example of the impact that financial players could have on the oil market.

Even if guilty – and the matter is only under investigation; nothing proven, only alleged – what can one Dutch-based company do alone? And if the company is guilty, who could be next?



Posted: 25th, July 2008 | In: Money Comment | TrackBack | Permalink