Posts from Wednesday Feb 10 2010

FHA says everything is A-OK – but defaults are running at 9%

In February, HousingWire reported on upbeat comments from an official at the Federal Housing Administration, a government agency which insures mortgages:

The 2009 books is solid,” said Margaret Burns, director of single  family development for the FHA. “The 2007 book is substantially riskier,” representing the most challenging portfolio to manage, though in the last two years underwriting standards tightened  considerable, but not at the expense of origination volumes. Read more

CDS report: Where’s the bailout?

Markit’s Gavan Nolan wrote this CDS report

Markit chart of Portgual and Greece CDS vs iTraxx Sovx Western Europe

Markit chart of Portgual and Greece CDS vs iTraxx Sovx Western Europe

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A Bernanke brief

Here’s a little table:

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A rush to trade in Russia?

Take a look at the following charts of Russia’s Micex index, the RTS index and the same RTS index as denominated in dollars:

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Handy sovereign risk table

Looks like Credit Suisse has jonied the conspiracy trying to undermine Spain.

Here’s a ranking of countries by perceived risk, taking into account things like current account balances, public and private debt, and CDS spreads.  It comes from a note on the impact of sovereign risk on European banks, published on Wednesday by Jagdeep Kalsi, which you will find in the usual placeRead more

Bernanke beats the weather

Most of the policy agenda in Washington has been postponed because of the weather. In fact the House of Representatives has been adjourned until February 22.

So we don’t get to actually hear Fed chairman Ben Bernanke read this — testimony on the Fed’s QE/stimulus exit strategy, which was due to be delivered to the Financial Services committee on Wednesday. Read more

Pangs of gilt(s)

Is Bank of England governor Mervyn King worried about rising gilt yields?

From the just-released February inflation reportRead more

Moody’s whip hand over Greece, redux

Alternate title: Markets’ whip hand over central banks.

As mentioned previously on FT Alphaville, Moody’s has just released another of its sovereign risk reports, with some interesting perspectives on the issue of eurozone contagion and confusion. Read more

US banks have $176bn in exposure to troubled Europe, BarCap says

US banks’ exposure to Greece, Ireland, Portugal and Spain represents approximately 5 per cent of their total foreign exposure, analysts at Barclays Capital said in a note on Tuesday.

In absolute terms, that clocks in about about $176bn. Emphasis FT Alphaville’s: Read more

Credit rating cliff risk

On Tuesday, ratings agency Standard & Poor’s cut its outlook on Bank of America and Citigroup to “negative.” Counterparty ratings for both banks are currently set at `A’ by S&P.

The jump from the A bracket to B and below is an important one in the US. Read more

Lunch Wrap

On FT Alphaville Wednesday morning,

China’s punishment, US Treasuries’ pain. Read more


That’s the share price of Sweden’s SEB — one of the Nordic region’s largest banks. About 11 per cent of SEB’s loans also happen to be to the Baltic region. Read more

The Bank of England’s sliding expectations

If you want to know on what the Bank of England based last week’s decision not to extend quantitative easing beyond £200bn, here it is: the February Inflation Report.

And it looks like the Bank’s infamous UK GDP fan-chart is as wide as ever but, importantly, it’s sliding down the scale. Whereas the central bank was once forecasting economic growth in the region of 0 to 7 per cent, it’s now forecasting something like negative 1 per cent to 6 per cent: Read more

Markets Live transcript 10 Feb 2010

Live markets commentary from 

What’s Temasek up to now?

Temasek, Singapore’s state investment firm, often moves in mysterious ways – not all of them lucrative, although the low-key sovereign wealth fund (which prefers being called an “investment agency”) has made enough shrewd moves over the years to maintain an enviably large war-chest of about $121bn- not least its move in November to sell its first ever tranche of 30-year bonds.

In its last annual report, in September, Temasek said it had an annual return of 16 per cent since its inception in 1974, down from the 18 per cent it reported August 2008 but still not a bad performance considering the investment environment. Read more

Crystal ball gazing with Goldman

As rumour and denial swirl around the markets regarding outside financial help for Greece, Goldman Sach’s European economist Erik Nielsen has been looking into the bank’s crystal ball.

And this is what he sees: Read more

China’s punishment, Treasuries’ pain (Updated)

China-dumping fears — of Treasuries or other assets — have long been on the minds’ of investors.

On Wednesday those fears hit the blogosphere, big time. Read more

Autonomy hits the acquisition trail (again)

Right up there on the list of things the City did not want Autonomy to do was make another acquisition. But that, it seems, is exactly what the FTSE 100 software company, which divides opinion in the Square Mile like few others, is planning.

From the RNS on Wednesday morning: Read more

Asia’s local currency bonds are looking pretty good

If you’re sitting in the eurozone, Asia’s local currency bond markets might look distant – and small. But this haven of relative tranquility is enjoying robust growth amid the turmoil roiling eurozone markets.

In fact, as the Asian Development Bank reported late last year, emerging east Asia’s local currency bond markets have tripled as a proportion of the global market since the Asian financial crisis in 1997. Read more

Further reading

Elsewhere on Wednesday,

– Anatomy of a Euromess.
 Read more

Pink picks

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

Martin Wolf: Europe’s stragglers need German consumers
The financial crisis of 2009 is morphing into the fiscal anxieties of 2010, writes the FT’s Wolf. This is particularly true inside the eurozone. Spreads between rates of interest on Greek bonds and German bunds touched 3.86 percentage points in late January (see chart). The risk has emerged of a self-fulfilling confidence crisis that would have dire consequences for other vulnerable members. Read more

Snap news

Breaking pre-market news on Wednesday,

– BHP Billiton underlying EBITDA falls 22 per cent to $10.8bn – statementRead more

Europe considers Greek ‘firewall’

Financial markets surged on Tuesday on hopes of a European rescue plan for Greece, as German officials admitted they were considering a “firewall” to prevent the Greek debt crisis spiralling out of control, reports the FT. Reuters on Wednesday cited a senior German coalition source saying European governments had “agreed in principle” to help Greece, probably on a bilateral basis. The euro’s slide and pressure on bond prices had forced Berlin to consider “significant” steps in handling the crisis, said one official.

Euro revives on Greece hopes

The euro pulled away from near record lows against the dollar on Tuesday as speculation of an imminent bail-out for Greece squeezed short positions built up against the single currency. Speculation that EU leaders would agree support measures for Greece at their Thursday summit was fuelled by news that Jean-Claude Trichet, ECB president, would leave a meeting in Sydney a day early to attend the EU gathering. The euro hit an eight-month low of $1.3583 last Friday, as data showed that speculators had built the largest ever short position against the single currency.

EIB rules out Greek aid

The European Investment Bank, the EU’s long-term lending institution, on Tuesday denied speculation that it might become involved in a bail-out of Greece, saying such support would go beyond its legal mandate. Germany and France meanwhile have ruled out direct EU aid for Athens and the European Commission has vetoed suggestions of IMF involvement. If Greece were to require emergency help, it would probably take the form of bilateral loans and guarantees from other eurozone governments and perhaps involving private bank consortia, say experts.

UniCredit chief warns on Europe

The chief executive of one of Europe’s biggest banks has warned that the continent’s economic recovery could be damaged, particularly in eastern Europe, if the threat of a “heart attack” in Greece was not addressed. Alessandro Profumo, chief executive of Italy’s UniCredit, which has a vast network across eastern Europe, said a growing aversion to risk triggered by the Greek debt crisis would hit the cost of doing business in central and eastern Europe.

Sants quits FSA

Hector Sants has resigned as chief executive of the UK’s FSA watchdog, sowing confusion about the direction of financial regulation. The former Credit Suisse banker, who became chief executive in 2007, reshaped the FSA into a more combative, intrusive regulator and has been a vocal advocate for international banking reform. He has also criticised Conservative proposals to dismantle the agency. Sants said in a statement he had always planned to serve a single three-year term, and has told friends he has no particular plans.

BofA, Citi warned on ratings

The planned overhaul of US financial rules prompted S&P to warn on Tuesday it might downgrade the single A credit ratings of Citigroup and Bank of America on concerns that the shake-up would lessen the chances of further government bail-outs if they ran into trouble again. S&P revised its outlook on Citi and BofA from stable to negative, even though it acknowledged that Citi and BofA had bolstered their balance sheets and improved their performance in recent months.

UBS private bank sees exodus

UBS on Tuesday revealed a sharp acceleration of outflows from its once powerhouse private bank in the fourth quarter, even though the group returned to profitability in the period. Net outflows from the private bank doubled to SFr33bn ($31bn) in the fourth quarter from Q3, bringing the total for 2009 to SFr90bn. The withdrawals came after Sfr107bn of outflows in 2008. UBS’s overall Q4 result compared with a SFr564m Q3 loss, and reduced the loss for 2009 to SFr2.74bn from SFr21.29bn the previous year. See also Lex.

Rock to end deposit guarantee

A gold-plated savings guarantee that protects 100% of deposits for customers of Northern Rock is expected to be lifted within weeks as the government moves a step further in its rehabilitation of the nationalised bank. Northern Rock has provided a haven for retail deposits since it was put under state control two years ago, as the government has underwritten all of its customers’ deposits.
By comparison, savers with accounts elsewhere have only the first £50,000 insured by the government.