Posts from Thursday Feb 11 2010

Bond on bonds – disaster ahead

By the FT’s Chris Flood

Government bond markets are facing a decade of “disastrous returns”, according to Tim Bond, head of asset allocation at Barclays Capital. Read more

CDS report: Greek rescue? More like damp squib.

Markit’s Gavan Nolan wrote this CDS report

The much-anticipated EU rescue plan for Greece proved to be a bit of a damp squib, as was always likely to be the case. In true EU fashion the announcement was vague and had the whiff of compromise. The eurozone leaders agreed to stand behind the Greek government if it ran into funding difficulties but stopped short of a concrete commitment. This disappointed many long-risk investors hoping that a strong statement outlining financial support would trigger a rally. Instead the market is in limbo, though the implicit support offered by Greece’s fellow members could become stronger in the coming days. The details of the plan should be fleshed out before the formal agreement of Greece’s deficit reduction plan on Monday. Read more

Quote du jour, Greek machismo edition

Via AP:

Greek Prime Minister George Papandreou says in Brussels that Greece will not need help amid debt crisis Read more

Pangs of gilt(s), redux

In the wake of Wednesday’s inflation report from the Bank of England we pondered whether investors’ patience with the UK budget deficit might be closer to breaking-point than at any time in the past year.

The context being that UK gilt yields had risen significantly relative to yields in other government bond markets since investors began to anticipate the pause in QE Read more

Frank meet Clive, Clive meet Frank

With Frank, ‘get me a f****ing vodka’, Timis heading down under to float his latest vehicle — African Petroleum — we thought it only polite to introduce some of his rivals in the Australian extraction industry.

— Read more

‘The most serious wave of commercial real estate difficulties is just now beginning’

Here’s one of the scariest sentences you will (in all likelihood) read today:

 Read more

Greek bailout ennui

At long last, an official release on the Greek bailout and … it’s something of anti-climax.

Statement by the Heads of State or Government of the European Union: Read more

Too cold to protest

Buying out the mortgage market

Mortgage finance twinned with accounting rarely makes compelling reading, but bear with us.

Wednesday’s announcement that the two US Government Sponsored Enterprises (GSEs) will start buying out certain loans, has interesting repercussions for the mortgage market as a whole, as well as the Federal Reserve’s exit programmeRead more

Lunch Wrap

On FT Alphaville Thursday morning,

– My big fat Greek short-selling deterrent. Read more

China: ‘It’s simply because people are rich now’

How does this headline, from Thursday’s FT . . .
China lending and property prices surge

. . . square with this one, also from the FT, less than three weeks earlier:
China tells banks to halt lending Read more

Markets Live transcript 11 Feb 2010

Live markets commentary from 

When to sell the euro(zone)

Here’s something to ponder as we await details of a Greek bailout.

It’s a currency recommendation from analysts at BNP Paribas: Read more

The mother of all bank re-securitisations?

FT Alphaville first mentioned reports that the FDIC, the US body in charge of guaranteeing American bank deposits, was looking at `the mother of all bank securitisations’ back in October.

The Federal Deposit Insurance Corporation has accumulated some $36bn worth of assets from the plethora of failed US banks. One of the ways the organisation could sell off those assets is via some form of securitisation. Read more

My big fat short-selling deterrent

The Athens Stock Exchange is trying to make life more difficult for those evil speculators who roam global markets looking for innocent countries and companies to ruin.

It has increased the stock lending interest rate from 2.5 per cent to 5.5 per cent and adjusted margin requirements — all because of “increased price volatility”. Read more

Does rapid growth lead to high returns?

Economist and market watcher Andrew Smithers has focused in his latest client report on the disparities between equity returns in fast-growing emerging markets and more mature economies to argue for caution and international diversification of equity portfolios.

Citing what he sees as a widespread assumption that equity returns in rapidly growing economies should be higher than those in mature economies, he notes that investors are often encouraged to “overweight their portfolios to favour shareholding in emerging markets”, arguing: Read more

More BT pension woe

The price action in BT on Thursday morning following the publication of its third quarter results.

 Read more

Goldman’s Greek oops

Goldman analyst Erik Nielsen has goofed. Over Greece.

On Wednesday the analyst, in addition to musing over a possible Greek bailout, said some interesting things about just-published fiscal numbers from the Greek Finance Ministry: Read more

Further reading

Elsewhere on Thursday,

– “The euro should really be called the Icarus.” Read more

Pink picks

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

Niall Ferguson: America’s looming Greek crisis
It began in Athens and is spreading to Lisbon and Madrid. But it would be a grave mistake to assume the sovereign debt crisis now unfolding will remain confined to the weaker eurozone economies, warns Ferguson, an FT contributing editor and author of The Ascent of Money. For this is more than just a Mediterranean problem with a farmyard acronym. It is a fiscal crisis of the western world and its ramifications are far more profound than most investors appreciate. Read more

Snap news

Breaking pre-market news on Thursday,

– BT says expects to deliver adjusted EBITDA of around £5.7bn for the full year – statement, pension statementRead more

EU nears Greece rescue plan

Germany and France will lead vows of eurozone solidarity for Greece but are unlikely to agree on a detailed rescue plan for the debt-laden country at Thursday’s EU summit in Brussels. President Nicolas Sarkozy and Chancellor Angela Merkel are expected to show political support for Athens in efforts to calm debt market turmoil. But French officials noted “reticence” in Berlin and said a pledge of solidarity would be followed at a later date with concrete measures.

Brown: global bank tax near

Gordon Brown said on Wednesday that the world’s leading economies were close to agreeing a global bank tax, highlighting UK hopes of agreeing a deal at the G20 summit in Canada in June. In an FT interview, Brown indicated he believes that public opinion has shifted in favour of a globally co-ordinated tax after President Barack Obama’s move last month to raise $90bn from a US bank levy. The UK prime minister has been pushing a global charge on banks.

De Beers set for $1bn injection

De Beers will announce on Thursday a $1bn cash injection to help recapitalise the diamond miner and keep its tripartite ownership structure intact. Anglo American, the global mining company that owns 45% of De Beers, will contribute $450m in an injection similar to a rights issue, although De Beers is privately held. South Africa’s Oppenheimer family will follow with $400m and the government of Botswana, site of De Beers’ richest diamond mines, will contribute $150m. The move will help refinance $1.5bn in debt due next month.

Travelport delays £1.2bn IPO

US travel group Travelport on Wednesday night postponed its £1.2bn London flotation, blaming market volatility after struggling to win investors’ support. The decision to delay the IPO – the biggest in the UK for two years – is a blow to plans by majority-owner Blackstone, the US buy-out group, for a series of IPOs this year. Travelport shares were first priced in a range of 210p to 290p, valuing the group at up to £2.16bn, but people close to the deal saw the price falling to below 190p before the postponement.

UBS cuts bonuses

UBS will not award senior staff SFr300m ($281m) in cash bonuses after failing to hit internal profit targets. Like many big banks, UBS has overhauled its bonus structure to more closely align pay with long-term performance, including the introduction of a novel “malus” [opposite of bonus] system. It emerged on Wednesday that UBS would not disburse about SFr300m – nearly 10% of its total bonus pool – because the bank failed to make a net profit for 2009.

King signals on QE

Financial markets bet on Wednesday that the Bank of England would maintain ultra-low interest rates for a protracted period, after the monetary policy committee ditched optimistic growth forecasts in its quarterly inflation report. Mervyn King, Bank governor, also signalled that quantitative easing – the policy put on hold this month – could be revived. Separately, King dismissed pleas from UK banks to extend a £200bn emergency lending plan due for repayment from mid-2011. See also FT Alphaville, here and here.

China charges Rio staff

China has indicted four employees of Rio Tinto, the Anglo-Australian miner, in a move that could fuel tensions between foreign business and an increasingly assertive Beijing, as well as complicate annual iron ore pricing negotiations. State media reported that the men, including Australian national Stern Hu, have been indicted for bribery and violating commercial secrets. Under Chinese law, Beijing had until Feb 25 to indict or release the men, who have been detained since July. It was unclear when they would be tried.

CME in Dow index deal

CME Group, the world’s biggest futures exchange, has struck a deal with Dow Jones for a joint venture in which the Chicago trading giant will take control of the Dow index business from News Corp. CME will take 90% of the joint venture and the Dow 10%. The deal values the index business at $675m, at the low end of expectations when News Corp began exploring a sale last year.

IDC bidders set for first round

At least seven private equity firms and two trade bidders are poised to submit first round bids in the next week for Interactive Data Corporation, the financial data group majority-owned by Pearson, owner of the FT. Likely first round bidders include KKR, Carlyle, Hellman & Friedman, Bain Capital, Apollo, Permira and Providence. Interested trade bidders include Thomson Reuters and McGraw-Hill. Offers could come in at 15-25% above IDC’s Jan 14 share price of $25.40, say bankers, valuing the company at $2.7bn to $2.9bn.