Restructured squared

Into March-end and the European debt crisis is rearing its ugly head again, not helped by S&P’s comments that Greece may have to restructure its debt again.

So that’s a restructure of restructure, or restructured squared. Also, we now have Spanish citizens on the streets, and concern that Spain is about to implode. At the time of writing, Spain was due to present its budget, with a stack load more austerity to meet these targets. With the youth on the streets (as over half of them are without jobs) do we predict a riot?

In Asia, concerns that China is travelling as fast as a Robin Reliant uphill are not helping the cause, and corruption scandals coming out in Hong Kong are not lifting sentiment. The trend in US jobless claims remains lower, which reassured some, but concerns about a slowing US, given recent weaker data, are starting to grow.

As for being long credit, it is starting to feel like driving the wrong way down a one way street: strange stares, lots of noise, and plenty of close shaves. Selling is the name of the game at the moment. Some £190 million was put into the Bank of England auctions yesterday with no purchases, so into month-end spreads will soften.

Finally, fillips from data are like spring sunshine – it does not last. UK mortgage approvals nose-dived to an eight-month low. As for the theorists that suggest quantitative easing creates more inflation, errrr, M4 money supply fell 1.9% on the month (that’s -3.4% year-on-year). Whether that would be even more negative without QE is anyone’s guess. UK consumer confidence collapsed to a three-month low; the US Kansas City Fed index is lower than expected; and German retail sales are softer. We suspect some April showers ahead.

Bryn Jones is fixed income director at Rathbone Unit Trust Management.