Posts from Wednesday Jan 27 2010

Hoenig the hawk

As expected, the Fed’s zero rate strategy holds for now, but for the first time in a year there was a dissenting voter: Thomas M. Hoenig…

Statement (our emphasis): Read more

Repairing the buck

Horses and stable doors spring to mind (inevitably), but the SEC has finally come up with a series of new rules for money market funds in the US in the hope that we do not see a re-run of the Reserve Primary Fund debacle. Or at least not for a while.

The $63bn money market fund “broke the buck” in September 2008, threatening a full-blown sector-wide panic amongst ordinary retail investors. Read more

Schedule A to Amended Shortfall Agreement

Lex counsels us that the accusations of a “backdoor bail-out” of AIG towards the end of 2008 are misplaced.

First, US banks had already been subject to a high-profile, front door bail-out. By November, the government was evidently holding the financial system together on multiple fronts. Second, with $85bn in loans already granted to AIG, the Fed could not credibly threaten to let the insurer fail. It could have strong-armed banks into taking a haircut (risking accusations of regulatory over-reach). And, given the French banking regulator’s resistance to its banks taking losses, this could have meant favouring European over US banks… Read more

Presenting the ‘iPad’

No, it’s not a sanitary towel.

It’s the latest, much anticipated, offering from Apple. Read more

Dalton who?

Press release Wednesday afternoon:

The Board of Wm Morrison Supermarkets PLC announces today the appointment of Dalton Philips as Chief Executive. Dalton, aged 41, will take up his new position in March 2010. Read more

Spreads that speak for themselves

Here’s a simple exercise, mapping financial sector credit risk against sovereign risk in Europe using data from CMA Vision:

What happens when the world defaults?

The question one inevitably has to ask when all the risk in the world has been placed upon sovereign shoulders — who bails out the world when it defaults?

Davos delegates, as can be expected, are already working on a contingency. From the WEF programme on Wednesday: Read more

Man hunt

That’s the price action in Man Group on Wednesday and over the past year. Read more

Could UK money supply collapse post-QE?

The end of QE is nigh! Cue much hand-wringing over the gilt market and the potential impact of future tightening on equity markets.

But David Owen, of Jefferies Fixed Income, on Wednesday, has a nice exploration of a deflationary-doom scenario: Read more

Europe and Volcker’s rule

The press backgrounder for the Volcker rule makes for interesting reading. Not least the parts where a “SENIOR ADMINISTRATION OFFICIAL” discusses the future contours of the financial system:

The 10 percent cap on insured deposits exists in current law. It was put in place in 1994. And what we’re saying is that deposit cap has served our country well. It needs to be updated and supplemented with a cap on other forms of funding — non-deposit funding, other forms of liabilities — so that in addition to the deposit cap there should be a cap on these other forms of liabilities with respect to the share that that institution holds in the economy. Read more

Grεεk-out!

Greek CDS has just hit an all-time high of 375bps, according to CMA Vision:

If I had a pound, peseta, drachma or a deutsche-mark…

. . . the real effective rate would be:

 Read more

China’s (un)real GDP

Here’s a chart showing China’s GDP growth rate in real and (un)real terms from Sean Corrigan at Diapason Commodities:

 Read more

Lunch Wrap

On FT Alphaville on Wednesday morning,

- Prop(er) pictorial irony at Barclays. Read more

Seleno-Greek bond yields

Rapid developments for Hellenic Republic bonds on Wednesday, as Greece denied an FT report that it had mandated Goldman Sachs to sell bonds to China. Yields on the benchmark 10-year jumped 18bps to 6.43 per cent.

 Read more

Markets Live transcript 27 Jan 2010

Live markets commentary from FT.com 

European banks need €83bn

Yep. Another day and (yet) another note on the impact of the Basel proposals.

And this one is pretty frightening. Read more

Prop(er) pictorial irony at Barclays

More proprietary trading pictorial irony here and here.

Related link:
Barclays plays down impact of Obama proposals – WSJ

China: Reaction or overreaction?

China’s credit-tightening moves continue to reverberate around the Asian region and further afield, despite some analysts’ views that the “China reaction” story is — well, an overreaction.

But “overreaction” is a hard word to say in Japanese. Read more

Quantitative Ending

Today is a rather big day for the UK gilt market.

It is the beginning of the end of the Bank of England’s quantitative easing; that is, the central bank’s buy-back of UK government bonds. QE, you’ll remember, was aimed (in part) at keeping gilt yields low, thereby stimulating the economy by further reducing funding costs. Read more

Time for the tin hat?

Remember this?

 Read more

BBVA’s collateral damage

Spain’s BBVA was trading over 4.4 per cent lower on Wednesday after reporting its fourth quarter results. As Bloomberg reported:

Jan. 27 (Bloomberg) — Banco Bilbao Vizcaya Argentaria SA, Spain’s second-biggest lender, said fourth-quarter profit slumped 94 percent as it wrote down goodwill on its U.S. business and set aside more for bad loans. Net income fell to 31 million euros ($43.6 million) from 519 million euros a year earlier, the Bilbao, Spain-based bank said in a filing to regulators today. Read more

Financial reform checklist

Here’s a useful thing from Barclays Capital banking analysts Jonathan Glionna and Miguel Crivelli.

It’s a checklist of the steps to various financial reforms; Financial reform being, for the moment, the Financial Reform Bill, Basel III banking regulations, that US banking tax, and US president Barack Obama’s planned limitations on the size and scope of financial institutions — part of the so-called Volcker ruleRead more

A good day for the Sage

After his surprise move into US railways late last year with the $26.6bn purchase of rail operator BNSF, Warren Buffett is expanding his presence in the reinsurance industry — a sign, say some analysts, that he is calling the bottom in reinsurance stock prices.

As the FT reports on Wednesday, Buffett’s Berkshire Hathaway has become one of the largest shareholders in industry giant Munich Re, building a stake worth €660m ($934m) in the German reinsurer, according to a market announcement triggered when his stake rose above 3 per cent. Read more

Further reading

Elsewhere on Wednesday,

- Poverty and the American suburbRead more

Pink picks

Comment, analysis and other offerings from Wednesday’s FT,

Martin Wolf: Volcker’s axe is not big or sharp enough
“I admire Mr Volcker and strongly support his desire to develop a financial sector that supports the wider economy…”, writes the FT’s Wolf. Equally, I agree that part of the solution is indeed structural. But these proposals are, in important respects, unworkable, undesirable and irrelevant to the task at hand. The president may indeed be desperate. But much more work is needed. Read more

Snap news

Breaking pre-market news on Wednesday,

- SAP Q4 profit falls as customers cut spending – statementRead more

Overnight markets: Down

Asian markets (Wed)
Nikkei 225 down 46.80 (-0.45%) at 10,278.48
Topix down 5.51 (-0.60%) at 910.89
Hang Seng up +109.05 (+0.54%) at 20,218

US markets (Tues)
S&P 500 down 4.61 (-0.42%) at 1,092.17
DJIA down 2.57 (-0.03%) at 10,194.29
Nasdaq down -7.07 (-0.32%) at 2,204 Read more

Spyker buys Saab for $400m

General Motors on Tuesday agreed to sell Saab Automobile to Spyker Cars of the Netherlands in a $400m deal that will save the Swedish brand from closure. The sale ends a year-long effort by GM to find a buyer for Saab as it offloads lossmaking non-core brands. GM will receive $74m in cash and $326m in preferred shares in the new Saab-Spyker company as payment for the assets.

Rusal plunges on HK debut

UC Rusal, the aluminium group controlled by Russian oligarch Oleg Deripaska, on Wednesday fell sharply on its Hong Kong trading debut following its long struggle to come to market. The shares fell more than 9% to HK$9.80 in early trading, against the IPO price of HK$10.80, while the Hang Seng index rose nearly 1%. Rusal, which had hoped to raise up to US$2.6bn, priced its IPO in the middle of an indicative range last week to collect US$2.2bn.