Today's edition of the Saxo Morning Call features the SaxoStrats team discussing the continuing weakness of the US dollar as commodity prices recover ground and in the wake of key US equity indices hitting all-time highs Thursday.
Article / 09 July 2014 at 12:00 GMT

World Cup Bond Update: Battle of the bond market polar opposites

Fixed Income trader / Saxo Bank
By Michael Boye

Tonight they are both among the elite contenders for the World Cup trophy but in bond markets they are polar opposites with one fighting to avoid insolvency and the other enjoying all-time lows in sovereign yields.

Argentina's dispute with holdout creditors remains unresolved. The parties are now in talks to negotiate a repayment solution that would enable Argentina to pay the coupons due on its government bonds. If it is unable to do so before the July 30 deadline the country will be declared in selective default by rating agency S&P. Bond markets remain somewhat confident that a peaceful solution will be found but Argentina still offers 9-10% yield for investors willing to take the bet on its government bonds.

The Netherlands, on the other hand, recently recorded a fresh all-time low in its 10-year government yield. With data going all the way back to 1517 — or roughly half a millennium —this landmark is a remarkable reminder of the extraordinary times we are experiencing in the sovereign bond markets. Bond investors in the search for higher yielding Dutch exposure will be looking at major telecom company KPN, downstream aluminium producer Constellium or soft drink producer and distributor Ajecorp.

Source: Bloomberg and Saxo Bank

-— Edited by Clare MacCarthy

Michael Boye is a fixed income trader at Saxo Bank

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Argentina vs Netherlands


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