Timing of the Fed or who gets out first from the(once) safe bond market.

Part I

 Several Federal Reserve officials, according to the WSJ have been speaking this week,trying to convince traders and investors and speculators, that they didn´t hear what they heard, and didn´t saw what they saw.
After the FOMC meeting, Fed Chairmain said undoubtedly, that if the economy improves as it expects,the Fed will start to taper, Central Banks purchases of Bonds.
Markets globally heard that,and the investor community started to unwind positions in Bonds.
The timing of the Fed tap program of bonds wasn’t the most important factor, as a number of Fed officials  seem to think. What matters is the timing of each traders’ own exit from a one-sided bet. It’s the old market saw about not being the one left holding the bag, and it kicked in High Frecuency Trade-style. The Fed either didn’t understand or appreciate this, and it’s been in damage-control mode ever since. The exit from the accomodative monetary policy,will not be as easy as the money printing.
 The unconventional measures for monetary expansion brings misallocation of resources,uneven
increase of asset classes prices,appreciation of currencies in emerging markets and developing economies,where credit and property prices have been rapidly growing. A slower growth in China
and the gradual exit from easy money in the U.S.

Bonds Quotes

  Government Bonds                                                       Price Change   Yield

U.S. 3 Month			0/32	0.056
U.S. 2 Year			-0/32	0.375
U.S. 5 Year			-6/32	1.422
U.S. 10 Year			-13/32	2.521
U.S. 30 Year			-5/32	3.543
Germany 2 Year			-0/32	0.194
Germany 10 Year			-2/32	1.735
Italy 2 Year			1/32	2.311
Italy 10 Year			7/32	4.544
Japan 2 Year			0/32	0.136
Japan 10 Year			-3/32	0.852
Spain 2 Year			-2/32	2.254
Spain 10 Year			-2/32	4.724
U.K. 2 Year			0/32	0.408
U.K. 10 Year			-3/32	2.442

Precious metal Prices

Precious Metal Prices Futures 3 months

Gold                 1,216.49

Silver                     19.33

The end of easy maybe will take longer than Central Banks Initial Plans

Central banks are in a deep easy-money hole of their own digging that they will have to start filling in at some point. But that day still looks quite some way off.

Indeed, the Bank of Japan and the Bank of England are staking out a much bolder stance, brushing aside warnings from some that they might be stoking currency wars by depreciating their currencies or sowing the seeds of asset bubbles and inflation.

For Japan, inflation would be a solution, not a problem, after years of gently falling prices. The country's nominal gross domestic product is no higher than it was 20 years ago, saddling the government with a debt-to-GDP ratio of 235 percent and climbing.

Britain seems simply to have concluded that higher inflation is a price worth paying to revive economic growth.

Three of the Bank of England's nine-member Monetary Policy Committee, including Governor Mervyn King, voted this month to buy more bonds under its quantitative easing (QE) program even though inflation has been above target for five years and is unlikely to fall back to its 2 percent goal for another three years.

There are clear signs of a softening of the commitment to inflation control in these two countries.

HSBC lowers Global growth forecast

HSBC downgraded its global growth forecast on Friday, citing risks to emerging markets from the slowdown in China and the prospect of a scaling back of the Federal Reserve"s bond purchasing program.

"The Fed might be thinking of monetary tapering but, for us, the only tapering is of our growth forecasts," warned Stephen King, HSBC's chief economist, and Madhur Jha, HSBC's global economist, in their third quarter global outlook.

HSBC cut its forecast for world growth to 2.0 percent in 2013, down from an earlier prediction of 2.2 percent. It also downgraded its 2014 outlook to 2.6 percent. 

In a blow to those hopeful that emerging markets can propel global economic growth and boost anemic demand in the developed world, King and Jha said the downgrade was entirely due to concerns about the outlook in developing countries.

"While dominated by the reduction in our forecasts for China, the new numbers also reflect further sizable reductions in our projections for Brazil and India, among others. They are consistent with the idea that, even allowing for the emerging nations' obvious long-term growth advantages, there is no easy escape from deteriorating near-term economic fundamentals."

Dramatic Rise in Real State Prices in Big Cities a dangerous alert.

Dramatic home price gains in some of America's largest cities point to a potentially new housing bubble in those areas, according to Robert Shiller, who helped create a closely watched gauge of U.S. housing prices.

Shiller said big price gains in Las Vegas, Los Angeles, San Francisco, Miami and Phoenix, fueled in part by a large influx of outside investor money, are a possible sign of trouble ahead.

"There is a risk of bubbles in these cities," Shiller, a co-founder of the S&P/Case-Shiller Home Price Index, told Reuters on Wednesday. "House prices increases have been dramatic. It looks like the beginning of the last bubble."

There is a risk that prices could rise for another year in these areas and then fall back, hurting newer buyers as they try and compete in markets where low inventory and all-cash Wall Street investors were pushing prices upwards.

The latest Standard & Poor's Case-Shiller index report showed that prices of single-family homes in 20 U.S. metropolitan areas jumped 12.1 percent in April, marking the biggest annual gain in seven years. The gains were led by price increases of 24 percent in San Francisco, 22.3 percent in Las Vegas, 21.5 percent in Phoenix, 19 percent in Los Angeles and 13 percent in Miami.

Shiller said "it is still too early to predict how healthy the housing recovery is, and he was unsure if prices overall would continue to rise after another year.

But a property crash was unlikely in the near term,  because lending rules have tightened and government oversight of the mortgage industry has been strengthened.

 There were clear signs of buying behavior in some major cities that pointed to a housing market, that was already overheating, despite the 2008 crash''.

Chicago business barometer falls to 51.6

Growth in Chicago-area manufacturing decelerated in June, as the Chicago business barometer fell to a 51.6 reading from 58.7 in May. That's the largest monthly drop in over four years, though economists had noted that May's reading was unusually strong. Economists polled by MarketWatch had expected a 55.0 reading. 

Source: Marketwatch

From Xinhua: U.S. monetary policy to remain "data-dependent": Fed official

The path of U.S. monetary policy will remain "fully data-dependent" in line with the developments of economic growth, unemployment and inflation, and the current large-scale bond purchase program "will continue for some time," a senior Federal Reserve official said Thursday.

U.S. economic recovery will "continue to benefit from the knowledge that the Federal Reserve is committed to supporting growth as long as necessary," U.S. Fed Governor Jerome Powell said at the Washington-based thinktank Bipartisan Policy Center.

Last week, U.S. Fed policymakers painted a brighter picture of U.S. economy.

U.S. Fed Chairman Ben Bernanke jolted global financial market when he said later this year the central bank would start scaling back its massive bond-buying program, the so-called QE3, if the economy improves as expected and may end it by mid-2014 altogether.

"Recent volatility in markets is in part related to concerns about the possibility of a reduction in asset purchases," Powell said.

Asset purchases are being deployed to add near-term momentum to the economy. After the completion of those purchases, the purchased assets will remain on the Fed's balance sheet for some time and continue to put downward pressure on interest rates, he said

China's Central Bank will have a prudent monetary policy

China's central bank will continue to implement prudent monetary policies, but will conduct preemptive adjustments and fine tuning in an appropriate way when necessary, said its chief Zhou Xiaochuan on Friday.

He said the bank will work with other departments to guide financial institutions to maintain reasonable lending level, and will use multiple tools to adjust liquidity and keep the market overall stable, he said at the ongoing Lujiazui Forum in Shanghai.

Quotes of precious metals

Precious Metals  3 months futures

Gold                    1191.71

Silver                      18.77

Reducing Bond Porfolios

Investors pulled about $20 billion from mutual funds and exchange-traded funds (excluding money market funds) for the week ended Wednesday, according to Thomson Reuters unit Lipper, marking the biggest weekly net outflows since August 2011, when markets were roiled by the U.S. debt downgrade and Europe’s debt crisis.

The outflows followed Fed Chairman Ben Bernanke’s comments last week, in which he outlined a preliminary timetable for the wind down of the central bank’s bond-buying programs. “Investors continue to be spooked by the thought of ‘tapering,’” says Matthew Lemieux, an analyst at Lipper.

Investors pulled a net $4.5 billion from weekly reporting municipal-bond mutual funds and ETFs, the largest such outflow on record. Investment-grade corporate-bond mutual funds and ETFs saw their second-highest net outflow on record, with about $2.32 billion exiting these funds.

Fund flows related to the stock market offered a mixed message. Investors pulled $6.6 billion from U.S. stock ETFs, with the bulk of the outflows ($3.6 billion) coming from the ETF market’s largest fund, the SPDR S&P 500 (SPY). ETFs often attract a hefty dose of “hot” money that flows in and out from traders and hedge funds. The weekly outflow was the biggest since April 24.

Conversely, investors sent $282 million into U.S. stock mutual funds, illustrating how mom-and-pop — the retail investors who predominantly invest in mutual funds — stuck with stocks amid the recent turbulence

Japan´s May Unemployment Rate 4.1%

Japan's seasonally adjusted unemployment rate stood at 4.1 pct in May, unchanged from the previous month, the Ministry of Internal Affairs and Communications said Friday.

The number of jobless people dropped by 10,000 from April to 2.7 million after seasonal adjustment.

China's Economic Restructuring

Chinese Premier Wen Jiabao told citizens on Feb. 27, 2010 that to secure a steady and fast economic development, the most important thing is to well treat the relationship among economic restructuring, the transformation of development pattern and inflation control. Following are some facts about the country's economic restructuring: China has pledged more efforts to accelerate economic restructuring this year to make its growth more sustainable, after its economy posted a strong recovery of 8.7 percent growth in 2009, exceeding its target of 8 percent. Growth of the world's third largest economy slowed to 6.1 percent from a year earlier in the first quarter of last year, led by a slump in exports caused by the global financial crisis starting in 2008. The Political Bureau of the Communist Party of China Central Committee issued a statement Monday which vowed that the government would accelerate economic restructuring and push forward substantive progress in changing the mode of economic development this year, while continuing the proactive fiscal policy and moderately loose monetary policy. The nation's top leaders have reiterated the need for economic restructuring, which analysts said, would be the focus of this year's macro policy. Chinese President Hu Jintao said on Feb. 3 that "on the surface, the global financial crisis impacted on the speed of China's economic growth, but in essence it was the economic growth pattern that was worst hit." "The transformation of economic development mode brooks no delay based on a comprehensive judgement on international and domestic economic situation," Hu said. The key for the transformation was to achieve it "at an accelerated speed" and with practical effects, he noted. Chinese Premier Wen Jiabao said on Feb. 4 that development of science, education and culture was key to the transformation of China's economic growth mode and its sustainable development. He urged traditional industries should be upgraded with the latest technologies to enhance their efficiency and competitiveness. On Feb. 5, Chinese Vice Premier of China said that the country entered a key period of time when adjusting economic structure was the only approach to advance the country's sustainable development. To achieve the end, China should further promote domestic consumption, he said, emphasizing the important roles that employment and the social security net play in fuelling domestic demand. On Feb. 21, Li Yizhong, Minister of Industry and Information Technology, noted China's economic growth should shift its dependence to consumption, investment and exports from mainly on investment and export. Scientific advancement, labor quality and management innovation should replace resource investment to sustain economic growth, he said. To prop up growth, Chinese government has put in place several stimulus packages. Some aimed to push forward economic restructuring while striving to ensure growth. Source: Xinhua