A Sinking Fund is a means of repaying fund borrowed through a bond issue. The issuer makes periodic payments to a trustee who retires part of the issue by purchasing the bond in the open market rather than the issuer repaying the entire principal of the bond issued on the maturity date. Another company buys back a portion of the issue annually at a fixed rate with current market value of the bond. Should Interest rates decline following a bond issue, sinking fund provisions allow firm to lessen the Interest rate as it essentially replaces a portion of existing debt with lower yielding bond. From the investors point of view, a sinking fund will add safety to the Corporate bond issue. The issuing company is less likely to default on the repayment of remaining principal upon maturity since the final repayment is substantially less. This added safety affects the Interest rate at which the company is able to offer bonds in the market place.
The dovish comments on Thursday from Mario Draghi, president of the European Central Bank, saw heavy euro selling and increased risk sentiment. But in the late US and Asian sessions, Saxo’s John Hardy says there was very weak risk sentiment.
John Hardy: We have a very interesting setup today coming into Friday’s Non Farm Payrolls and yesterday we had an ECB Meeting and Draghi came out with very dovish performance, effectively guiding the market expectations for more QE from ECB with those lower inflation forecasts in particular and opening up the horizon to extend beyond that September 2016 original deadline, basically saying that QE is going to continue until the CPI Inflation gets to where the ECB wants it go towards 2%.
This saw Euro lower and risk sentiment improving. We have a major Central Bank out with very dovish performance and the initial knee jerk reaction is already unwound such as European equities trading below the levels where they were. This means risk sentiment is very critical and in addition to what US Payrolls say. With weak US Employment report USD/JPY is the big focus. On the other hand strong payroll numbers and good Average Hourly earnings and then risk sentiment turning back to positive side today could be good for the US Dollar and we could see the downside in the EUR/USD. The dovish performance from ECB is very negative for the Euro. We will be watching how Euro behaves relative to risk sentiment and US Data.
Ian Coleman from First 4 Trading is looking to buy USD/CAD. He says the
pair is mirroring the USD index and that looks ready to go higher.
Ian Coleman: The intraday trading for USD Index has been mixed and volatile. This has caused USD Index to form expanding wedge formation. While we stay inside this formation we expect intraday trading to be mixed it has a bias towards breaking to upside. The medium term chart shows channel formation with same bias. The USD/CAD pair is mirroring this volatility. We expect an eventual bias to break higher.
So our call today is to buy the dip in USD/CAD pair at 1.3240 which is our bespoke support. The target level is going to be 1.3305 and 1.3415 levels and stop at 1.3210.
Over the past week, we’ve seen one of the biggest rallies in the price
of crude in a quarter of a century. But Saxo’s Ole Hansen says
negative sentiment is still there as the driver continues to be weak
fundamentals including oversupply and rising inventories.
Ole Hansen: Considering that we saw one of the biggest rallies in the past few days, the overall negative sentiment in oil is still there. But obviously from a trading perspective, short sellers are much more cautious now and that has left the market in level. It looks like we are settling in the mid 40 ranges but the driver still obviously is the weak fundamentals. We have too much supply and and OPEC reduced production little bit in August. We expect Iranian Oil on market by next year.
This rally was driven by news that OPEC is prepared to talk with other partners to keep production under control. The market came to a conclusion that it is not going to happen and at the moment OPEC is fighting for market share and Saudi is goingn for market share like 80s. The extreme volatility in oil market continues and it is very difficult to trade at the moment. When volatility doubles you should trade lower amount. Keep an eye on 43.50 USD level and we could potentially be settling into a range. If we break below this level we could go back to 40 USD level.
The Sharpe Ratio is the ratio developed by Nobel Laureate William Sharpe to
measure risk adjusted performance. The Sharpe Ratio is calculated by subtracting the risk free rate from the rate of return for a portfolio and dividing the result by the standard deviation of the portfolio retunrs. The Sharpe Ratio tells us whether a portfolio’s returns are due to smart investment decisions or a result of excess risk. This measurement is very useful because although one portfolio or fund can heap higher returns that its peers. It is only a good investment if those higher returns do not come with too much additional risk. The greater a portfolio’s Sharpe Ratio the better is risk adjusted performance has been. A negative Sharpe ratio indicates that a riskless asset would perform better than the security being analyzed. A variation of the Sharpe ratio is the ratio which removes the effects of upward price movements on standard deviation to measure only return against downward price volatility.
The US Indices ended higher on Wednesday as China fears ease. The Dow Jones rose by 1.82%, NASDAQ BY 2.46%, S&P 500 added 1.83% to its value. The US Dollar traded higher against most major currencies yesterday despite the release of diappointing economic reports and concerns over China’s economic outlook beginning to ease. Today US Trade Balance is expected at -43.2 billion vs. -43.8 billion and US Unemployment Claims at 273K vs. 271K previously. Gold finished lower to close at $1,1133 an ounce. Crude oil rose to close at $46.10 a barrel.
The Euro fell vs the US Dollar after 3 days of gains. According to daily chart the EUR/USD is trading in an ascending triangle pattern. Breaking the lower side of the pattern may lead the pair towards 1.08. However breaching the upper side could take it to around 1.17. The Pound traded lower versus the dollar on a lower than expected UK Construction PMI. Technically according to daily chart the GBP/USD is near the lower band of the Bollinger band indicator. Holding there could take the pair to around 1.4950 while approaching the upper band may take it towards 1.60.
Risk adjusted return is a concept that refines an investments return by measuring how much risk is involved in producing that return which is generally expressed as a number rating. Risk adjusted returns are applied to individual securities, investment funds and portfolios. There are 5 principal risk — Alpha, Beta, R Square, Standard deviation and Sharpe ratio. Each risk measure is unique in how it measures risk when comparing 2 or more potential investments and an investor should always compare the same risk measures to each different investment in order to get a relative performance perspective
In this video the trader guy looks at currency pair GBP/USD pair for the September 2nd session.
GBP/USD — As you can see on the daily chart, the downward pressure continued on Tuesday. The first thing I would like to bring to your attention is we had 2 hammers that now been broken down. Because of this it looks like we are set to go to the next level support level at 1.52. So I am a seller below 1.53 aiming for 1.52 which is a short term trade. On the other hand we have the possibility of rally as per usual we will expect the resistance at the break of this uptrend line near 1.55. Above there things change and we look for 1.58. In the meantime I certainly think we are going to see continued selling pressure in the pound. Looking at the 4 hour chart, how sad things really look for pound at the moment and again rallies should be thought of as value in the US Dollar.
The Wall Street fell yesterday after weak data from China added to fears that a slowdown in the world’s 2nd largest economy could constrain global growth. The Dow Jones fell by 2.84%, S&P 500 by 2.96% and NASDAQ lost 2.94% from its value. The US Dollar finished lower against major currencies on Tuesday after data showed that Manufacturing activity in the US expanded at its slowest rate in more than 2 years in August. The ISM Manufacturing PMI came out less than expected at 51.1 vs. 52.6 forecast. Today the ADP Non Farm Employment Change is expected at 204K vs. 185K previously. Gold rose to close at $1,139 an ounce. Crude oil fell sharply to close at $44.19 a barrel.
The Euro finished higher versus dollar on Tuesday after Unemployment Rate came out better than expected at 10.9% vs. 11.1% forecast. On the 4 hour chart the pair is trading above the support level at 1.1199 wiht positive momentum indicator above 0. Holding these conditions may lead the pair towards 1.15 while breaking below the line may start a reversal to around 1.10. The Pound traded lower versus the dollar after data showed that growth in the UK Manufacturing Sector slowed last month dampening the outlook for 3rd quarter growth. On the 1 hour chart the pair is holding below the bearish trend line with negative RSI indicator below 50. Maintaining these conditions may continue the drop towards 1.52 however recrossing the line may take the pair to higher areas towards 1.55.
Alan Collins expects gains in EURGBP to continue after a gradual reaction back from the 200 day line after Black Monday.
Alan Collins: The rise has begun this week and we are expecting it to continue in the coming days. Last week was dominated by powerful rise on Black Monday and after that the reaction from 200 day line which was gradual and fragile. This week’s demand has seen an imperfect Rising Three Pattern. We have support from 13 day moving average and yesterday we broke 200 day average and increasingly positive keltner channel and we are looking for gains to develop further in the coming days. Today we are looking to buy at 0.7360 and 0.7345. We are looking for targets at 0.7399 and 0.7419 and stop for this trade is at 0.7318.