Straws in the wind ? Signs of the Times ?

Bond yields have begun to rise worldwide.

Why ?

Well, the US Fed put up interest rates in the US last week .
Eurozone rates are edging up.
Japan's central bank has announced the finish to zero interest allowing the flooding of markets with cheap liquidity.
Investors know the era of low interest rates and cheap money is rapidly coming to a close.

What are the effects .... ?

Iceland, has a freely floating currency, and like the UK and US it's 300,000 folks have borrowed heavily to buy houses. Inward investment has been high as has outward investment (Baugur etc.,) The Icelandic economy expanded a hefty 8% in 2004 and 5.5% in 2005, inflation doubled to 4.5% (ish ... they fiddle their Retail Price Index as much as the US Fed and the UK Treasury does) double their "target" of 2.5%.

Result ? The central bank slams on the brakes, interest rates now a heart stopping 11.5%...other rises rumoured.

Result ? The Icelandic krona has declined 10% ( and falling) and import prices are rising.

Check out New Zealand ... standard 9.5 % interest on loans and rising. The currency lost another 1 per cent against the United States dollar yesterday and weakened sharply against other currencies. Government bonds are yielding nearly 7%.

The NZ dollar has fallen more than 6 per cent in March and 12 per cent this year against the US dollar. Against the yen it has fallen to 71.15 yen from 87 yen in December a fall of 19%.

It closed below US62c for the first time since June 2004, ending on US60.48c in frenetic late trading.

NZ is running the largest Trade deficit ever.

"Car dealers hurting as dollar crashes" says one report which says that as the NZ dollar declined cheaper Russian cars are being imported 37, 000 in January this year (annually a totsal of 150,000) against3,500 January 2005.

However new car registrations were up 20% on last March with Toyota and Ford the major sellers.

Today the he NZX 50 gross index closed at an all time high of 3739, said to be fuelled by the declining dollar as investors fled for solid investments, rather than bricks and mortar.

Should we be worried ?

Small countries, small straws in the wind, but a prudent withdrawal from stocks known to be held by Baugur, and FL Group might not be unwise .... otherwise read Signs of the Economic Apocalypse, 4-3-06 or this review of Q1 2006 ...

"Friday was the last day of the first quarter of 2006, so let's recap the year so far. Gold went from $519.70 an ounce to $583.50, a rise of 12.3% in three months. Oil went from 61.04 dollars a barrel to $66.35, an increase of 8.7% after having risen 40.5% in 2005. The yield on the ten-year U.S. Treasury note increased 46 basis points from 4.39 to 4.85 so far this year. The Dow Jones Industrial Average is up for the quarter, going from 10,717.50 to 11,109.32, a rise of 3.7%. The NASDAQ rose 6.1%, from 2,205.32 to 2,339.79 in Q1 2006. Sounds like good news for the U.S. stock market, unless you compare stock prices to the price of oil or gold. The dollar fell 2.3% from 0.8440 to 0.8252 euros so far in 2006."

Read more here at "Signs of the Times".

Read Bloomberg about how FOREX of 16 currencies fared today against the US$ (Swedush krona rose 1.9% .....here