Posts from Monday Feb 15 2010

In praise of market discipline

Wolfgang Münchau, a genuine insider when it comes to the great European experiment, counsels us not to worry too much about moral hazard as the surreal discussions over the non-bailout rescue of Greece continue. He says the conditions Greece is forced to sign up to on condition of any aid or guarantees will see to that.

For Otmar Issing, however, it is simply the case that Europe cannot afford to rescue Greece. Says this former member of the European Central Bank’s executive board: Read more

EU leaders: only 8 years behind the curve on currency swaps

As noted previously on FT Alphaville, Greece’s newly-controversial currency-swap is by no means a new story: Risk magazine covered the deal as far back as 2003.

That European Union authorities have only now requested information about the deal presumably tells us more about the inner workings of Brussels than it does about Greek finances. Read more

The new safe havens (no, not gold)

There’s a hint here of tinned foods, a ready stash of aspirin, emergency comms and a necessary supply of smokes in the following list from RBS.

Below is RBS’ list of 10 “supracorporates”; the bank believes these entities will be highly resistant to the appalling newsflow on the sovereign front: Read more

Comp v market cap – banks around the world

Here’s a fascinating table from Reuters (albeit slightly out of date): a ranking of the world’s biggest banks, along with the salary cheque trousered by their respective chief executives.

Note the comic disparity between Northern American execs and their peers in China. Read more

Quote du jour, women and children first edition

Via Bloomberg:

“We are basically trying to change the course of the Titanic,” [Greek Finance Minister George] Papaconstantinou said at a conference in Brussels today. “People think we are in a terrible mess. And we are”. Read more

Europe’s ABS currency-swap exposure

Back in January, a US court rather controversially decided that claims of a Lehman Brothers special purpose vehicle — to which the bank was a counterparty — should not be subordinated to other creditors.

As the FT commented at the time: Read more

Cat or Canary?

Right, time for a little bit of perspective on the sovereign CDS are good/evil (delete as appropriate) debate, courtesy of BarCap.

 Read more

Greece v everyone, Eurostat and currency swaps edition [UPDATED]

It appears that Eurostat — the EU statistical agency — could no longer ignore that controversial-if-not-at-all-new Greek currency swap.

Some headlines on Monday: Read more

In the Q&A hot seat…

…Alfredo Pastor, former Spanish secretary of state for the economy and a senior economist at the World Bank.

He is currently professor of economics at the IESE Business School at the University of Navarra and is right now over at FT.com’s Ask the Expert, taking questions on the likelihood of a sovereign default within the Eurozone and the implications of any EU-sponsored rescue. Read more

How to borrow €1bn without adding to your public debt figures

Something tells us the story of Greece’s €1bn currency swap — and particularly the involvement of a bank everyone loves to hate, Goldman Sachs — is going to run and run.

Therefore we are going to republish a large chunk of the original 2003 story from Risk, which has now been unlocked and can be read in full hereRead more

Fawlty Europe

As a well known European (anglo-centric) joke goes:

Heaven is a place where the police are English; the chefs are Italian; the car mechanics are German; the lovers are French and it’s all organized by the Swiss. Hell is a place where the police are German; the chefs are English; the car mechanics are French; the lovers are Swiss and it’s all organized by the Italians. Read more

Is the party ending for junk junkies?

It wasn’t long ago that we posted this: “Junk bond junkies party on“. Now, investors are selling out of junk bonds at the fastest rate since September 2005, the FT reports on Monday, citing the sell-off as the latest indication that concerns over sovereign debt are hitting other credit markets.

At the same time, a curious distinction is emerging across the Atlantic between European and US junk bonds – indicating to some observers that a more sanguine (i.e, less panicked) view of Greece’s debt crisis may be setting in. Read more

Lunch Wrap

On FT Alphaville on Monday morning,

- The Spanish inquisition. Read more

Greece’s personal wealth comedy

Just to put some extra pressure on Greece’s finances, Fitch reminded at the beginning of February that a newly proposed Greek draft law was seeking to establish a personal bankruptcy framework for private individuals that could actually increase default rates.

As Structured Finance news reported: Read more

Markets Live transcript 15 Feb 2010

Live markets commentary from FT.com 

Japan: it’s not what Tokyo says it’s how it gets there

A rare upside surprise from Tokyo, as it emerged on Monday that Japan’s economy expanded a faster than expected 1.1 per cent in the last quarter of 2009 compared with the previous three months, according to preliminary figures.

That’s an astonishingly respectable 4.6 per cent on an annualised basis, a figure helped by a marked recovery in exports and improving domestic demand, as the FT reportsRead more

The Greeks’ swap probe

Der Spiegel reported last week that Goldman Sachs had helped Greece cover up part of its whopping deficit via a currency swap deal, which used artificially high exchange rates.

As it happens the Greek government has been probing the apparent misuse of currency swaps at least before February 1. Read more

60 cent

Fresh jitters in Dubai on Monday morning.

RTRS-DUBAI FIVE-YEAR CREDIT DEFAULT SWAPS RISE TO 651 BPS FROM 627 AT FRIDAY CLOSE-CMA Read more

The Spanish inquisition

(Sorry, I’ll get my coat).

But on a more serious note, levels of delusion/paranoia are reaching dangerous highs in Spain. Read more

Jim ‘the BRIC’ O’Neill’s big call

He’s no stranger to headline-grabbing pronouncements and just to prove it, Goldman Sachs chief economist Jim ‘the BRIC’ O’Neill is back with a verrry big call on Monday, telling Bloomberg that “something’s brewing” in China on the currency front.

In remarks that are guaranteed to send some investors into a frenzy (and splatter egg over O’Neill if no action from Beijing follows) he reckons China is about to let its currency strengthen as much as 5 per cent in a one-off revaluation to slow growth. Read more

US CMBS deliquencies jump to 5.42%, Moody’s says

Loan delinquencies on US commercial mortgage backed securities posted a record 52bps increase to 5.42 per cent in January, according to Moody’s. In December, the rate was 4.5 per cent.

The rating agency said the increase in the delinquency rate was the largest thus far in the ongoing downturn: Read more

Further reading

Elsewhere over the weekend and on Monday,

- Germany growls as Greece balks at immolation. Read more

Pink picks

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

Clive Crook: The US Government is running to stand still
Barack Obama’s ambitions to pass ground-breaking laws on healthcare and climate change have so far come to nothing, writes the FT’s Clive Crook. A second economic stimulus had seemed to be moving forward, but also now looks in trouble. Democrats occupy the White House and have big majorities in Congress, yet cannot get anything done. Why the paralysis? Read more

Snap news

Breaking pre-market news on Monday,

- Yara International makes recommended $4.1bn ($41.1 a share) offer for Terra Industries – statementRead more

Bharti nears $10.7bn Zain deal

Shares in Bharti Airtel fell more than 6% in Mumbai on Monday as it entered into exclusive negotiations to acquire the African assets of Kuwaiti telecoms group Zain, in an all-cash deal valued at $10.7bn, reports the FT. Zain’s board met on Sunday and according to the WSJ, accepted Bharti’s offer, under which Bharti would pay $10bn for the assets now and $700m later. The deal, which excludes Zain’s Sudan and Morocco operations, is subject to due diligence. Bharti has until end-March to examine Zain’s books.

RBS stuck with German portfolio

RBS is sitting on a loss of several hundred million pounds after being forced to take back the keys on £1.8bn in German properties bought at the market’s peak by a fund run by Morgan Stanley. In one of the largest paper losses on property for a UK bank, RBS has taken control of a portfolio of 28 German properties, after lending about €1.9bn to acquire the portfolio in 2007. RBS is expected to hold on to the properties until they regain some of the value lost.

DIC sells most of Merlin stake

Dubai International Capital has sold two-thirds of its 17% stake in Merlin Entertainments, to the family behind Lego, a co-investor in the theme park operator behind Legoland attractions. The Dubai sovereign wealth fund agreed the sale with the Lego founding family in summer 2009, shortly before Merlin started work on a £2bn IPO. But it was kept secret to avoid speculation of a fire sale by Dubai after the city’s debt crisis late last year.

Athens to resist austerity push

Greece is expected on Monday to resist pressure for an immediate tightening of its current austerity package as it fights to win back the confidence of investors and its EU neighbours. Germany and the ECB have pushed Athens to boost its existing fiscal stability plan with steps such as a 1-2% increase in value-added tax in return for financial help. But Athens wants to postpone any decision on further measures until mid-March when officials from the EU, ECB and IMF are due to review its deficit-cutting plans.

Supergroup sets £400m float

Supergroup, the UK fashion retailer, will defy the gloom dogging new listings by launching a flotation on Monday to raise up to £125m, valuing the company at about £400m. The move reflects Supergroup’s conviction that it offers a different proposition to that of the private equity-backed New Look , which abandoned its IPO last week. Supergroup, which owns the Cult Clothing chain, is debt-free and owned by its founders and senior management.

UK mutuals near capital deal

UK building societies are close to finalising details of a new investment instrument that would allow them to comply with tough new EU capital requirements without compromising their mutual status. Talks on the creation of “mutual ordinary deferred shares”, or Mods, are nearing conclusion, say industry executives. Mods, like bonds, would have a capped coupon but be loss-bearing for regulatory purposes.