Posts from Thursday Feb 18 2010

Did the discount rate hike leak?

Sure, the Federal Reserve made it very clear on Wednesday that while it would soon be raising its discount rate, this should NOT be taken as an indication that policy was being tightened.

But we’re pretty sure that’s exactly how it will be taken,  what with markets being markets… Read more

CDS report: Steels lead

Markit’s Otis Casey wrote this CDS report

Market reaction was fairly benign today considering that US economic news was mostly negative.  US jobless claims and wholesale prices were higher than economists predicted.  The previous jobless claims report was even revised upwards.  Sour prospects for employment gains coupled with signs of inflation would normally send the markets reeling but the market seemed to take comfort in a variety of factors. Read more

Taibbi attack

Eddy Elfenbein at Crossing Wall Street really doesn’t like the guy who gave us the Vampire Squid:

Lots of people love Matt Taibbi’s reporting. I find him entertaining, but not very worthwhile. I don’t see him as a journalist but as a courtier to the hip class. He distorts his stories to flatter their prejudices which is everything a journalist should not be. Read more

In CDOs we TruPS

Your daily dose of structured finance acronymic hindsight available right here, in a TruPS CDO edition.

From Fitch Ratings on February 12: Read more

Should European banking bosses keep their mouths shut?

PR firm Hill & Knowlton has begun to dabble in an arena usually reserved for its banking clients: modelling.

As the Gorkana PR service reported on Thursday: Read more

So will we ever get off QE?

Just a quick thought.

Wednesday’s Federal Open Market Committee minutes showed US central bankers pondering an exit strategy from their extraordinary liquidity operations. But they also pretty much left the door open to continue their quantitative easing programme if the economy needs it. Read more

Italy ❤ currency swaps too

Turns out, sovereigns are not the only public bodies with a love of currency swaps.

Bloomberg reported on Wednesday that Italian municipalities are increasingly under domestic pressure over their prevalent use of derivatives in the last few years. Read more

Lunch Wrap

On FT Alphaville Thursday morning,

- Spreading in the UK… Read more

Spreading in the UK…

The yield on Britain’s 10-year gilt just shot up to about 4.2 per cent, according to Reuters data.

Unfortunately you can’t see it in the below Bloomberg charts, since the data service appears to still be using a March 2019 benchmark (Reuters is using a 2020 one), but they should give you some idea. Read more

BNP Paribas says a weak euro could rescue Europe

When FT Alphaville met with BNP Paribas’ head of currencies Hans Redeker in an informal meeting a couple weeks back, one of the subjects discussed was the need for a weaker euro to stimulate German exports beyond the Eurozone to offset falling demand from within Europe.

On Thursday, BNP Paribas’ FX team makes the point again in reference to the Greek fiscal crisis. Read more

Soros’s bubble buy

It’s just as well that George Soros has a philosophy (as the Wall Street Journal reminds us) of spotting a bubble and buying it, as he puts it.

When it comes to gold, which he famously described at the recent World Economic Forum in Davos as “the ultimate asset bubble”, he has indeed put his money where his yellow metal is. Read more

Markets Live transcript 18 Feb 2010

Live markets commentary from FT.com 

‘We believe the market might be underestimating the risks the [Spanish] financial system faces’

Straight reporting this.

On Thursday Credit Suisse cut their 2010-2012 earnings estimates and price targets for all the Spanish banks they cover by an average 11 and 7 per cent, respectively. They currently have underperform ratings on purely domestic Spanish banks, a neutral on BBVA and an outperform on Santander. Read more

Eurozone liquidity murmurs

You’re looking at use of the European Central Bank’s marginal lending facility, which allows eurozone banks to pledge collateral in return for short-term liquidity. You can see there’s been a relative spike in usage over the past few days. On Tuesday, for instance, the ECB recorded €3.49bn in use. Read more

Watershed moment in Nigerian telecoms: someone is lying…

A single big deal in African telecoms might look like a bold gamble, (or a very expensive bout of M&A whimsy). But two in a week, worth a combined $13.2bn, made it look like the Chinese and Indians know something about the prospects for African telecoms that some other big telco players don’t. Actually it now seems that some people – including the Nigerians – don’t even know who’s bidding for what.

We’re talking about the planned $10.7bn deal by India’s Bharti Airtel for the African telecom assets of Kuwaiti group Zain, announced on Tuesday, and the $2.5bn bid for a majority stake in Nitel, Nigeria’s former state telecom monopoly, by New Generation, a consortium that was widely reported on Wednesday to have included China’s Unicom as well as Minerva, of Dubai, and GiCell, a small Nigerian telco . Read more

Introducing Project Veritas (née Baseball)

Otherwise known as Harbinger’s plan to sew a coast-to-coast US satellite communications network through the acquisition of SkyTerra Communications of the US and then Inmarsat, which is quoted in London and is a constituent of the FTSE 100.

Stale speculation? Consider these two extraordinary documents sitting on the SEC’s Edgar database — here and hereRead more

Further reading

Elsewhere on Thursday,

- Lucas van Praag, Goldman’s PR prince profiled.
 Read more

Pink picks

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

Satyajit Das: Stripping away the disguise of derivatives
Reaction to revelations that Greece used derivatives to disguise its true level of borrowing is reminiscent of Captain Renault (played by Claude Rains) in Casablanca: “I am shocked, shocked to find that gambling is going on in here.” Use of derivatives to disguise debt and arbitrage regulations and accounting rules is not new, writes Das, author of “Traders, Guns & Money”. Read more

Snap news

Breaking pre-market news on Thursday,

- VT Group rejects raised offer of 68op-715p a share from Babcock – statementRead more

Babcock set to raise VT bid

Babcock International is poised to raise its offer for VT Group to more than £1.2bn in a bold attempt to push its support services rival to the negotiation table. The fresh strike could come on Thursday, just days after Babcock revealed it had approached VT about a deal and had been immediately rejected. Babcock’s new proposal, which would again be indicative, is likely to be between 685p and 715p a share. At 700p, it would value VT at £1.26bn, higher than the £1.14bn cash and shares proposal revealed on Monday.

Darling overrode RBS fears

Alistair Darling, UK chancellor, overrode a warning from the Treasury’s top civil servant that a government scheme to insure the survival of Royal Bank of Scotland by underwriting £282bn of toxic loans could cover legally tainted assets. The asset protection scheme would have to cover assets “whose legality may not be certain,” Sir Nicholas Macpherson, permanent secretary at the Treasury, warned the chancellor in November in a letter. The APS was a crucial element of the lender’s rescue . RBS became 84% state-owned after agreeing to the terms of the taxpayer-backed insurance deal in late November.

AIG drops portfolio sale plan

AIG has shelved plans to sell its entire derivatives portfolio, in the belief that keeping up to $500bn worth of complex positions could help the insurer survive as an independent entity and repay US taxpayers. The decision could prove controversial in Washington, where officials have balked at the cost of bailing out the insurer and scrutinised its use of derivatives.  AIG is expected to announce in forthcoming Q4 results that its derivatives book, with a notional value of $2,000bn in September 2008, stood at $940bn at end-2009.

HgCapital prepares for share issue

HgCapital Trust, the UK based buy-out group, is poised to become the latest listed private equity firm to raise more capital from investors as it prepares a share issue ahead of an expected surge in new investments. In contrast to many of the buy-out groups that raised capital last year, HgCapital is hoping to tap its investors from a position of strength and said it was considering a placing of ordinary shares with subscription shares attached. It did not put a figure on the target amount but people familiar with its plans said it could be as much as £50m.

BNP’s bad loan provisions fall

BNP Paribas on Wednesday said it expected bad loan provisions to begin falling this year, as it reported net profit almost double that of 2008, helped by last year’s acquisition of Fortis Bank and cost controls. Baudouin Prot, chief executive, predicted a “decline in the cost of risk”, suggesting last year’s 45% increase to €8.4bn was a peak for bad loan and other provisions. France’s biggest bank had relatively small exposure to Greek debt problems, he noted, as BNP reported a 93% increase in net profit to €5.8bn for 2009, compared with 2008, on sales up 47% to €40.2bn.

L&G to offer ‘longevity insurance’

Legal & General is to take on the likes of Goldman Sachs, Credit Suisse and Deutsche Bank by offering “longevity insurance” to pension funds. The move could lead to similar launches by Prudential and others in the sector. Tim Breedon, L&G chief executive, said the business, which off-sets risks that retirees live longer than expected, was not a replacement for the more traditional bulk annuity or pensions buy-out markets. UK pension schemes are expected to offload more than £15bn of liabilities this year from defined-benefit plans; two-thirds of this is forecast to take the form of longevity swaps, according to Hymans Robertson, the pension consultant.

CIC in private equity push

China Investment Corp, Beijing’s sovereign wealth fund, has agreed to invest $1.5bn in the private equity secondary market through custom accounts with three of the biggest specialists in buying second-hand buy-out and venture capital fund interests. Lexington Partners, Goldman Sachs and Pantheon Ventures have each agreed to manage $500m for CIC through special accounts, which are to be kept separate from their main funds,. The move is the biggest injection of capital into the secondary market.

Bidders circle Daewoo Engineering

Foreign and domestic bidders are circling Daewoo Engineering & Construction, a subsidiary of the ailing Kumho Asiana conglomerate, fuelling competition for the South Korean builder even before it officially goes up for sale. South Korea’s STX Group on Thursday said it had contacted state-run Korea Development Bank, a key creditor to Kumho Asiana, about making an offer for Daewoo. The announcement came a day after local media reported that a US consortium chosen as a preferred bidder in a failed auction in November for the company was poised to submit a fresh bid.

BoCom seeks to raise $4bn in capital

Bank of Communications, one of China’s biggest lenders, is considering a multibillion-dollar capital raising to bolster its stretched balance sheet. Shanghai-based BoCom is looking to raise about $4bn and has asked investment banks to submit proposals. The fund-raising is expected to involve a rights offering in Shanghai and Hong Kong – the bank is listed in both.

MPC’s QE decision unanimous

The Bank of England’s monetary policy committee voted in unison to pause its emergency programme of cash injections into the UK economy this month, as it signalled a “wait and see” stance to judge the effects of the policy. Minutes from the February meeting show that the nine-member MPC was unanimous in its decision not to extend quantitative easing – the policy of creating new money to fund asset purchases – but for some members, the verdict was “very finely balanced”.

Ex-Goldman programmer pleads not guilty

A former Goldman Sachs computer programmer pleaded not guilty on Wednesday to charges he stole code from the bank’s lucrative high-frequency trading platform before leaving for another company last year, reports Reuters. Sergey Aleynikov, 40, said only “not guilty” at his appearance in Manhattan federal court on charges initially brought last July of theft of trade secrets, transportation of stolen property and unauthorized computer access. If convicted, Aleynikov faces up to 25 years in prison.