The Economist: A World of Cheap Money

[Winehole23]

And not only are government-bond yields low: given the high debt-to-GDP ratios of many nations, they aren’t even all that safe. In the joke of Jim Grant, who writes a financial newsletter, instead of offering risk-free return they offer return-free risk.http://www.economist.com/news/briefing/21575773-central-banks-have-cushioned-developed-worlds-economy-difficult-period-they-have-yet

[Winehole23]

So far this year $5.7 billion of subprime car loans have been issued, a 30% increase on last year. And there has also been a revival in the issuance of collateralised loan obligations (CLOs).

[Winehole23]

This demand for fixed-income investment has lowered borrowing costs for businesses. Standard & Poor’s, a rating agency, says that yields on low-rated, or junk, bonds in Europe halved from 12% to 6% in 2012. Companies with a junk-bond single-B rating are able to borrow at a rate that is four percentage points below the post-2000 average, according to Citigroup, a bank, whereas a typical investment-grade company, ranked A, can borrow at 2.4% compared with an historical norm of 5.1%.


http://media.economist.com/sites/default/files/imagecache/290-width/images/print-edition/20130406_FBC360.png

As a result many multinationals can borrow money more cheaply than European governments. Procter & Gamble pays 2.3% on its ten-year bonds; Italy pays 4.6%. Large companies are filling their boots accordingly: global corporate-bond issuance topped $2 trillion in 2012, the highest level since 2009 (see chart 2).


Low rates have not just made life easier for some consumers and big companies by reducing their borrowing costs. They have also allowed firms to substitute debt for equity. This usually boosts earnings per share, which makes it an attractive choice for executives motivated by share options. American companies spent around $400 billion last year buying back their own shares, the equivalent of 2.6% of GDP. British ones spent 3.1% of GDP the same way. The trend has continued in 2013. By March 7th, $111.6 billion of American share buy-back programmes had been announced, a 96% increase on the same period in the previous year, according to Thomson Reuters.anything stand out here?

[RandomGuy]

anything stand out here?

There is a lot of cash out there chasing returns.

This would seem to indicate that the Fed will trim its QE activities, IMO.


On a semi-related bit of news:
http://finance.yahoo.com/news/precious-gold-slumps-2-low-105249569.html
PRECIOUS-Gold slumps to 2-year low below $1,400 per ounce


I must admit gold has be more than a bit perplexed. I will have to spend some time researching it at some point.