Happy 2010 to all. I forgot about this post.

@kizee. If you ever need a holiday dawg, Addis Ethiopia is your place (it rocks).
Nway I'm not familiar with the fx auction (post 17). Could you tell me how that works? Why do you think repo rates will be higher in 2010?

@imanyara. Continue posting. We can learn from each other. The fallacy of modern times is that money in the bank is the only item (thing) in the world that is 100% owned by two people, a 100% of the time. Do you agree with that? Brain-teaser!

@QD. Excellent points. Where do you think these unserviced loans will come from? Private or corporate or both? Any particular sector?

fx auction- they place a post on reuters sayin they wanna buy x number of usd thus sellin kes..post is at 11.00 auction closes at 12.00 so u hav an hour to pay market and push up market rate...so addis rocks? for real?

@kizee. I wish I had access to this reuters system, it would be interesting to see. Well I don't know if they are doing it right or not, but I wonder if there are any of those 'technical analysts' in Kenyan bank forex departments? Is there a tendering system used for banks borrowings through the discount window?

@tonicasert. Definately an unlimited govt credit card limit (cbk should force them to do KYC to see if they're worthy of that credit). So they're overspending for the sake of growth and this then becomes a case where the individual Kenyans loose out on three fronts. The govt sits on productive savings (held at cbk) from individual Kenyans, Kenyans pay more in future taxes to pay loans from banks and if the govt does spend the money unproductively Kenyans all loose out to inflation.

Crazy clubs in Addis and the mamas are too hot (all of them). If you looking for leather (jackets), it's the place to be. And the economy has a lot of potential if the govt reforms (foreign exchange controls exist).

It's another interesting week for public auctions. First a recap of last week's Bond auction where the yield on the re-opened short/medium term papers. Average redemption yield (ARY) on 2 year went down 206bp to 9.59% while 5 year went down 151bp to 8.13%. The latest weekly bulletin shows a Ksh10 b injection on Feb 1 enabling this to happen and highly distorting the yield curve on the short end (anyone comparing YTM spreads for 5 year paper in the past week can confirm that from published weekly NSE yield curves).

I'm not so sure how to do it but someone should post a pic on wazua with NSE yield curve for the past 2 weeks to confirm any changes.

Over the past few auctions 91, 182 & 364 day T-bills have declined by 27bp, 20bp & 62bp...the 364 paper had no redemptions (as predicted earlier) and curious that both 182 and 364 last week had 100% successful bidders (haven't seen that in sometime)...Inflation is low and demand for govt paper is high, so just what's the agenda from Prof Ndungu? Making govt paper unattractive for banks? Making bond traders happier? No 10% price cap on bonds (like equities)...one could exploit unsuspecting customers.

Curious that bond turnover at NSE was its highest in January competing comfortably with the equity market rally. The highest turnover was in the last week of January...does it correlate with the above auctions? Bond turnover of January 2010 alone (55bn) accounted for almost 25% of 2009 turnover (if 09 was an excellent year for bonds guys...talk about surpassing targets this year).

Here's a contrarian investor with his own way of making market, shorting bonds. Read
more:

http://moneynews.com/Str...ies/2010/02/04/id/348993

Kizee. You have a good point. Highly traded papers have been 5, 10, but have noticed that even the 20 is trading well. Who buys the 20 year paper? Fund managers? Does the NSE record bond turnover attributed to offshore investors?

So kizee. Which is more profitable, being an equities or bonds trader in 2010? I friend of mine just gave me the market shares for both equities and bonds traders at the NSE for 2009 and 2010. I'm trying to quantifying the question above. Which trader would you opt to be?

Yeah ur right, ive been told the bonds brokers with big clients won't even bother with anything below 100m. I'm thinking of a career in bond broking...they made about 887m between then vs 745m shared amongst the equity brokers. I broker friend gave me a conservative estimate for Jan 2010...bond brokers making 221m vs 51m for equities. Remember that idea of leverage, I wouldn't be surprised if bond brokers go scouting for huge loans.

@kizee. Trust valz was good to you...I spent bucket loads of cash but it was all worth it. You have to tell me more about this OTC bond market thing. Is there a law being drafted? And what about regulation?

yes theres some work goin on around changin some laws

The Fed policy decision to raise interest rates is raising red flags for guys like Michael Pollaro cos he thinks this aint such a good idea, why? the interest on US government debt (a scenario we can see already playing out in Kenya). Pollaro reckons that if the interest rates simply return to the long term average rate (a good long term mean proxy as it spans one full bear and one full bull market) then the US is looking at substantially higher interest costs.

Pollaro touches on the fact that many people have had dooms day scenarios about the interest on government debt, but fail to take into account the growth in government receipts...well how easy is it to growth the private economy in the US (or Kenya) by raising taxes? Just how well can the US continue to service its debts?

Read more:

http://trueslant.com/mic...bt-a-brewing-time-bomb/

Axl Merk discusses how the Fed monetizes its debts. Read more below:

http://www.321gold.com/e...als/merk/merk120208.html