Posts from Thursday Jan 28 2010

Greed returns

When Stephen eats a banana…

Some covert film video footage has emerged from this year’s World Economic Conference in Davos, Switzerland…

 Read more

Dead deals, or, AIG in pics

Schedule A to the Amended Shortfall Agreement, once redacted to the nines, now unveiled, means we don’t have to wait until 2018 to get an inside peak into just which CDO deals, and banks, the US government helped via its bail-out of mega-insurerer AIG.

As guest-blogger Tom Adams over at Naked Capitalism points out, one of the most interesting things here is the relationship between notional value and collateral posted. Since AIG was providing insurance on these deals, it had to post additional collateral as the notional value of the deals declined. Read more

A poor UK-market reaction to S&P!

We’re in the midst of a UK-focused sell-off partly based on the following wire story. (The market was also unsettled by weaker than expected US durable good numbers.) Read more

The CoCo mortgage, coming soon?

We’ve referred to the Debt Hangover speech by Andrew Haldane, the Bank of England’s financial stability wizard, once already on Thursday. But it’s worth revisiting to highlight his views on mortgage structuring.

It’s a curious idea drawing on the the recent rise of contingent capital bonds — also known as CoCos — as a much championed solution to the banks’ own capital needs. Read more

Is negative convexity the new Bernanke conundrum?

Negative convexity is something which has been mentioned on this blog before.

It sounds dramatic, not to mention nerdy, but bear with us because it is something which is actually quite interesting — and something which is, once again, rearing its head in connection with the Federal Reserve. Read more

Lunch Wrap

On FT Alphaville Thursday morning,

- Moody’s chimes in on the Volcker rule. Read more

Markets Live transcript 28 Jan 2010

Live markets commentary from FT.com 

Moody’s chimes in on the Volcker rule

We’ve had plenty of analyst reaction on the Volcker rule, but we’ve yet to see any set-pieces from the ratings agencies. So it’s with much interest that we read a compendium of Moody’s comment on financial market reform — including the Volcker rule, the Tarp tax, etc — released on Thursday.

Here’s the ratings agency’s initial take on the Volcker proposalsRead more

Rejoice! – a UK M&A deal

On Reuters:

ARRIVA PLC – CONFIRMS THAT IT HAS HELD VERY PRELIMINARY DISCUSSIONS WITH SOCIÉTÉ NATIONALE DES CHEMINS DE FER FRANÇAIS
ARRIVA PLC- REGARDING A POSSIBLE CONTRIBUTION OF ALL OR PART OF KEOLIS’ TRANSPORTATION BUSINESS TO ARRIVA
ARRIVA PLC – AFFIRMS THAT DISCUSSIONS ARE AT A PRELIMINARY EXPLORATORY STAGE Read more

Port-ugal in the storm

Is Portugal the next of the porcine-acronym peripheral eurozone countries to send jitters through the market?

Like Greece, the Iberian nation has racked up its fair share of foreign investment in recent years. This chart, from Deutsche Bank’s fixed income team and focused on foreign bank holdings of Greek government debt, is worth reprising: Read more

The Aftermarket

Oh dear.

That Manchester United notes offering is not faring so well in the aftermarket. Read more

Going plural

Those words were first uttered by Royal Mail chair Allan Leighton when he left Wal-Mart, the US owner of British supermarket-chain Asda, to take on a portfolio of directorships.

But if Leighton has gone plural how can we describe Australian businessman and former mining executive David Lenigas? Read more

How market making (ahem, prop trading) saved the day

Some interesting points raised by Andrew Haldane, the Bank of England’s financial stability executive director, in a speech given in Liverpool on Wednesday.

Namely: Read more

In defence of the Squid (sort of)

A rare – and unexpected – defence of the bank-that-everyone-loves-to-hate comes from James Kwak at BaselineScenario who (quite correctly) observes that not many people have commented on Goldman Sachs’s “stunning” compensation announcement on January 21.

Just to remind you, this from the FT’s reportRead more

Try, try, again at the Talf

The New York Federal Reserve has released the January subscription details for its Talf programme — the Fed’s effort to help jump-start the securitisation market.

All in all, the Fed accepted 46 bonds for the January legacy CMBS portion of its Talf programme, but declined five — a rejection rate of about 10 per cent. That’s rather higher than the rates we’ve seen in previous monthsRead more

Brics: get your funding kicks while you can

You may well be feeling “Bric-ked out” after the recent surge of media attention, including the FT’s all-singing, all-dancing “Building Brics” special. But that’s nothing compared to how you might feel later this year, if the latest figures are anything to go by.

Brazil, Russia, India and China have issued a record amount of equity since the start of the year, as the so-called Bric countries have rushed to take advantage of increased appetite for emerging market assets Read more

Further reading

Elsewhere on Thursday,

- Dissent at the Fed. Read more

Pink picks

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

John Gapper: Volcker has the measure of the banks
Since Paul Volcker stood by Barack Obama a week ago as the US president unveiled banking reforms devised by “this tall guy”, the “Volcker rule” has provoked angst on Wall Street and in Washington.This is the first time any government has proposed a sensible structural remedy for the problems created by bailing out banks in 2008, writes FT columnist Gapper. Read more

Snap news

Breaking pre-market news on Thursday,

- ING contests EC calculation of state aid it has received – statementRead more

Overnight markets: Up

Asian stocks rose on Thursday, reports Bloomberg, helped by encouraging profit outlooks from Sony and Canon. The dollar gained and copper fell.

Asian markets (Thurs)
Nikkei 225 up +181.45 (+1.77%) at 10,434
Topix up +9.16 (+1.01%) at 916.83
Hang Seng up +363.33 (+1.81%) at 20,396 Read more

Chinese whispers hit Greek bonds

Greece’s debt crisis returned to financial markets on Wednesday as agitated investors demanded record premiums to buy its bonds. The yield spread between 10-year Greek bonds and benchmark German Bunds widened – at one point by almost 0.7 percentage points – after Athens denied an FT report that it was wooing Beijing to buy up to €25bn of government bonds in a deal promoted by Goldman Sachs. See also FT Alphaville.

BlackRock Q4 profits soar

BlackRock, the world’s largest asset manager with $3,350bn under management, on Wednesday reported a sharp jump in Q4 income but signalled a more difficult year ahead. Boosted by the rebound in financial markets and new fund inflows, net income rose to a higher-than-expected $256m in the quarter from $52m a year earlier. Full-year net income for BlackRock, which acquired Barclays Global Investors late last year, rose from $784m to $875m.

Morgan Stanley warns on curbs

US proposals to curb proprietary trading by banks could cut earnings at global investment banks by 3-5%, with JPMorgan, Bank of America and Deutsche Bank particularly at risk, according to Morgan Stanley analysis. But the research noted that European banks would be more affected by another set of regulatory proposals, from Basel-based regulators, than would their US counterparts. See also FT Alphaville on BarCap’s financial reform checklist.

Swedbank scraps bonuses

Swedbank, one of Sweden’s largest banks, has cancelled most employee bonuses for 2009 in one of the boldest steps to date by a large European bank to rein in bonuses. Stockholm’s support of the banking system since the financial crisis has stoked public anger over banks’ bonus schemes. Michael Wolf, CEO, said Swedbank remained committed to “market-based remuneration” but had decided to cancel 2009 bonuses in recognition of the year’s “exceptional” circumstances.

Diamond criticises Obama plan

Bob Diamond, president of Barclays and head of its investment banking arm Barclays Capital, has hit at US proposals to cut banks’ size or split them, arguing they would not make the financial world a safer place. Separately, the FT reports that the US plans to curb the banking sector could become law within six months. Barney Frank, chairman of the House financial services committee, told the FT the proposals could be incorporated into legislation now before Congress.

KKR snaps up Pets at Home

US buy-out group KKR has agreed to acquire Pets at Home in a deal valuing the UK’s top supplier of pet products at £955m. The deal follows an auction between leading private equity groups for Pets at Home, which persuaded its owner – Bridgepoint – to ditch plans for an IPO. KKR’s own capital markets unit teamed up with Nomura, Calyon and Commerzbank to underwrite a £450m debt package for the deal.

Tullow raises £1bn

Tullow Oil has raised £925m in a share placing to help fund its $1.35bn purchase of Heritage Oil’s Ugandan assets. Tullow, with a market cap of nearly £10bn, said it also needed the money for development of its Jubilee oil field in Ghana and a global drilling programme. The company on Wednesday placed 80.4m shares at £11.50 each, in a sale that was oversubscribed. The price represented a 5.4% discount to Tuesday’s closing price and a 1% discount to the theoretical ex-rights price of £11.63. See also FT Alphaville’s Markets Live discussion on Tullow.

CIBC in $2bn covered bond sale

Canadian Imperial Bank of Commerce sold $2bn of covered bonds on Wednesday in a deal that bankers hope will lay the groundwork for a US covered bond market. European banks watching the US after success in Europe with deals totalling $50bn so far this year. The three-year covered bonds, which are rated triple-A, were priced at 30bps over swaps. A guarantee of the collateral pool by the state-owned Canadian Mortgage and Housing Corp, enticed investors.

ICBC to curb some loans

Industrial and Commercial Bank of China, the world’s largest lender by market value, said on Wednesday it would curb some lending in response to Beijing’s attempts to slow domestic loan growth. But the bank stressed it would continue to fund projects already underway as well as small businesses, consumer credit and “key industries and areas” – a reference to sectors that enjoy explicit government policy support. See also FT Alphaville on “China overreaction“.