The author has been described by News Ltd as an "iconoclast", "Svengali", a pollie's "economist muse", and "pungently accurate". Fairfax says he is a "Renaissance man" and "one of Australia’s most respected analysts." Stephen Koukoulas concludes that he is "85% right", and "would make a great Opposition leader." Terry McCrann claims the author thinks "‘nuance’ is a trendy village in the south of France", but can be "scintillating" when he thinks "clearly". The ACTU reckons he’s "an enigma wrapped in a Bloomberg terminal, wrapped in some apparently well-honed abs."

Monday, January 23, 2012

Aussie credit default swap index down 14% since RBA's December meeting (charts)

The main rationale for the RBA cutting in December, which it claimed was a line ball call after its 'technical adjustment' to neutral in November, was the need to give financial markets insurance against a deterioration in European conditions (especially given the absence of a January meeting). Since the RBA met in December, one of the best measures of raw financial market risk, the very actively traded Australian ITraxx Index, which shows changes in the value of a basket of credit default swaps (with Australian bank CDS's dominating), has fallen about 14%. You can see this in the first chart below. I have also illustrated a longer-term time-series...In a study published in December, the RBA reported that it closely followed the credit default swap (CDS) market, and the ITraxx index in particular, for real-time pricing on financial market risks.