The Guest Blog

Good Bye to a Hard Year and More of the Same

Professor Moorad Choudhry|Head of Business Treasury, Global Banking HKSCKPVIamp; Markets, Royal Bank of Scotland.

One can’t imagine too many people will mourn the passing of 2011. Possibly Lamont Peterson, or Mo Farah but then Mr Farah has London 2012 to look forward to.

Traders work in the ten-year U.S. Treasury Note options pit at the Chicago Board of Trade in Chicago, Illinois.
Daniel Acker | Bloomberg | Getty Images

For investors the markets have been consistently grim all year and the issues we’ve discussed from start to finish – sluggish economic growth, high and rising unemployment, sovereign debt crises and the future of the euro – are still with us and will haunt us well into 2012. So investors can look forward to more of the same, although still worse.

It is more than likely that we will continue to drift in “crisis” mode without any clear resolution. If you had said at the beginning of 2010, when the Greek sovereign debt crisis broke, that this issue would still be unresolved, and that the Greek sovereign authority was still able to raise funds in 2011, you would probably have been disbelieved.

It would appear that until the international capital markets refuse to roll over any new short-term debt for any southern euro zone country, we will have a continuation of the political indecision that has troubled the euro so far.

Will there be a denouement in 2012? One would have thought so, but not necessarily, which does not augur well for investors. A good pre-Christmas sign for us was US Treasury bills back to 0.00 percent yield this month, with the prospect of negative T-bill rates to come in the new year. This is the purest sign of increasing risk aversion, and investors should continue to monitor the US T-bill rate closely.

As is customary for year-end columns on finance, here are my personal short-term predictions for next year (levels for the end of the second quarter of 2012):

GBPUSD : 1.65

US 3-month T-bill rate: 0.04 percent

US 10-year Treasury yield: 2.05 percent

UK 10-year Gilt yield: 1.90 percent

FTSE100 : 5650

Feel free to remind me about these nearer the time, when they will most likely be nowhere near the mark!

Thank you to readers for indulging this column in 2011, I’m now off until the New Year, so normal service will be resumed on Wednesday 11 January 2012. Best wishes for Christmas and a less volatile 2012 …


The author is Professor Moorad Choudhry Head of Business Treasury, Global Banking & Markets, Royal Bank of Scotland. The views in this article represent those of Moorad Choudhry as a private individual, and do not represent the views of Royal Bank of Scotland or of Moorad Choudhry as an employee of Royal Bank of Scotland