Posts from Friday Feb 19 2010

The oligarch list

From Finans magazine, a list of rich Russians.  Commentary (in Russian) here and an unsatisfactory Google translation is available here.

Note the toppling of Roman Abramovich, replaced by Vladimir Lisin, who controls Novolipetsk – a steel complex south east of Moscow that sports its own zooRead more

CDS report: The discount rate adjustment is a technical move, not a policy shift

Otis Casey of Markit wrote this CDS report

Equity markets started a bit lower today and the US Dollar strengthened based on the Fed’s surprise move to raise the discount rate by a quarter of a percentage point to 0.75%. Considering the broad rally across asset classes last year was attributed in large part to loose monetary policy, one would think that such a surprise would be a significant setback for the markets. That did not happen. Read more

For Greece, another insult

From S&P:

Brevan Howard is not an evil anti-Spanish speculator, ok?

From the horse’s mouth on Friday (via Reuters):

RTRS – HEDGE FUND FIRM BREVAN HOWARD SAYS HAS NO EXPOSURE TO GREEK DEBT OR CDS – INVESTOR LETTER EXTRACT Read more

J-com, fat fingers and a case of mistaken identity

Oh dear… it’s not quite a “fat-finger” case this time but rather, what you could call a “thick” moment for a hapless trader.

J-Com, the Japanese recruitment company at the centre of a “fat finger” trade in 2005 , was this week again caught up in a market bungle after a trader mistakenly bought up a chunk of its shares in the belief it was a similarly named but unrelated company at the centre of a takeover deal. Read more

Riding on a sovereign guarantee in Spain

As FT Alphaville has pointed out, some strange distortions are emerging in the trading of Spanish Instituto Credito Oficiale (ICO) debt.

On Friday, for example, ICO paper — which carries the full and explicit guarantee of the Kingdom of Spain — was trading at the same rate as comparable Santander-issued covered bonds (+73 bps over the mid-swap, according to Barclays Capital). Read more

‘There is literally no-one who has completely covered themselves in glory throughout the crisis’

Timothy Ash, head of emerging markets research at RBS, issued both a mea culpa and a call to arms in a note on Friday.

First, the mea culpa: Read more

Moving down the corridor…

We won’t pretend to understand all of this 2008 Federal Reserve paper.

The basic premise seems to be that central banks can separate monetary policy from actual money. They can do this by using a “floor system” as opposed to the more traditional corridor system. Read more

Asian electronic trading: you ain’t seen nothing yet

It has really only been a matter of weeks since the Tokyo Stock Exchange – Asia’s biggest bourse – gained Arrowhead, or what you could call a 21st-century trading platform.

Already, however, traders have shaken off their usual jaded and cynical view of the comparitively arcane world of Japan-based stock trading. Read more

Lunch Wrap

On FT Alphaville Friday morning,

- The (2001) illustrated sovereign swapRead more

Meet Petros Christodoulou

He’s the new head of Greece’s debt management agency. From Forbes:

 Read more

Markets Live transcript 19 Feb 2010

Live markets commentary from FT.com 

Moody’s does δομημένη χρηματοδότηση

Bad news for Greece.

Moody’s, the only rating agency that still has Greece at the A level, has just placed almost every single triple-A rated Greek structured finance and covered bond deal on review for a downgrade. Read more

Spain’s ICO distortion

FT Alphaville was recently alerted to a strange disparity between Spanish government bonds and those issued by a key Spanish SSA issuer Instituto Credito Oficial, which is a general provider of credit support to small and medium-sized businesses in Spain.

For those unfamiliar with ICO, its website describes it as follows: Read more

The (2001) illustrated sovereign currency swap

Ta-dah — a theoretical sovereign currency swap purportedly presented to European officials in the early years of the new millennium. The diagram was drawn up in 2001 by Gustavo Piga, an Italian academic specialising in public debt and monetary policy issues. It’s part of a 150-page International Securities Market Association-commissioned report on derivatives and “public debt management.” Read more

Discount rate stigma

Is it a coincidence that around the same time the Federal Reserve announced it was raising the discount rate, board member Elizabeth A. Duke was speaking about the exact same thing?

In a speech at the Economics Club of Hampton Roads, Norfolk, Virginia, meant to commemorate her first year at the Fed, the former banker had some interesting things to say about the facility : Read more

Further reading

Elsewhere on Friday,

- Save Lucas van PraagRead more

Pink picks

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

Gillian Tett: The US battle to pull the props
Could the Obama administration’s plans to curb “proprietary trading” produce a nasty jolt for the US Treasuries market? If Bob Diamond, head of Barclays Capital, is to be believed, there is a risk it might, says the FT’s Tett.
 Read more

Snap news

Breaking pre-market news on Friday,

- Anglo American reports 2009 operating profit of $5.0bn – statementRead more

Fed raises discount rate

The US Federal Reserve announced on Thursday it would raise the discount rate for commercial banks as part of moves to withdraw emergency support from the financial system, reports the FT. The discount rate will increase on Friday from 0.5% to 0.75%, moving the spread over the main federal funds rate to a more normal level and returning the duration of loans to a maximum of overnight. The Fed stressed that the moves “do not signal any change in the outlook for the economy or for monetary policy”.

Greece mulls high-risk bond move

Expectations are rising in the markets that Greece will attempt to issue new bonds next week, in a high-risk move to boost its credibility among investors, reports the FT. But bankers warn that another bond syndication disaster could shut the country out of the markets. Speculation is also rising that Greece will return to the market to raise at least €3bn-€5bn through another syndicated loan. Bloomberg adds that Greece on Thursday replaced its debt management chief as its bonds continued to slide.

Obama wants to raise capital levels

The Obama administration is preparing to push for higher capital requirements for banks as the main thrust of its regulation reform strategy as it seeks to break the legislative gridlock in Congress. A prolonged debate in the Senate banking committee has raised doubts over whether Congress can deliver a bill the US president would be prepared to sign. While officials express optimism, they acknowledge that the administration may, as a last resort, have to rely on an executive order, bypassing Capitol Hill.

Economists weigh in on UK debt

More than 60 leading economists have backed Alistair Darling’s decision to delay spending cuts until 2011, fuelling debate on the crucial election issue of tackling the UK’s huge public debt. Two letters in Friday’s FT warn against “reckless” early cuts, in a riposte to the 20 economists who wrote to The Sunday Times last weekend supporting the Conservative party’s call for urgent fiscal tightening. Data on Thursday showed the UK’s budget deficit surged in January as income tax receipts slid, alarming markets and pushing up gilt yields. See letters here and here.

Barrick to list Africa assets in UK

A new miner is set to enter the FTSE 100 with the London flotation of a collection of African gold mines by Barrick Gold of Canada, the world’s largest producer of the precious metal. Barrick plans to sell off a 25% stake in in the new vehicle, African Barrick Gold, to institutional investors in the IPO. ABG’s assets comprise four mines in north-west Tanzania, representing 9.6% of total gold production of Barrick, which has a market cap of about $37bn.

Babcock escalates pursuit of VT

The battle for control of VT Group escalated on Thursday after Babcock International said it would take its £1.2bn-plus offer for its support services rival directly to shareholders. Babock confirmed it had made a second indicative offer for VT, which was again rejected. Mike Turner, Babcock chairman, said he was “surprised” by VT’s aggressive stance, claiming “huge strategic sense” in Babcock’s move. Babcock first revealed it had made an indicative offer on Monday, pitched at 633.9p a share.

BAE unveils £500m buy-back

BAE Systems unveiled a £500m share buy-back programme on Thursday as it revealed a slide in pre-tax profits for 2009, due mainly to the loss of a US army contract. Europe’s largest defence contractor also warned of tougher times amid UK and US spending cuts, but said it was well-positioned to weather a downturn. BAE reported an 88% drop in annual pre-tax profits to £282m although underlying earnings and revenues rose. Investors welcomed the buy-back and a dividend increase, as the shares rose more than 4%.

GLG sees $319m net loss

Assets under management at GLG Partners, one of the world’s largest hedge fund managers, edged up in the final quarter of 2009 to near pre-crisis levels although the group still suffered a loss as its shift towards traditional, lower-fee funds brought less revenue. GLG suffered a net loss of $318.9m for the year, mainly due to non-cash charges related to its 2007 listing. The increase in assets under management marked a recovery from a year earlier, when the departure of star fund manager Greg Coffey triggered big outflows.

SocGen sees 2010 bounce-back

Société Générale reported a slim Q4 and full-year profit on Thursday as it looked to “bounce back” from a year of struggle with its exposure to risky assets. Net income for the quarter to Dec 31 increased to €221m ($300m), up from €87m a year earlier. The meagre profit was just above analysts’ expectations after SocGen rattled markets in January with a profit warning. Full-year net profit was €678m, a fraction of the €5.8bn profit reported by French rival BNP Paribas.

LSE finalises Turquoise deal

The London Stock Exchange on Thursday finalised its acquisition of Turquoise, the alternative trading platform originally launched as a rival to the London bourse. It also appointed David Lester, LSE chief information officer, as the platform’s first CEO. The moves enable the LSE to proceed with plans for a pan-European trading platform. Turquoise will be controlled by the LSE with 60% of the ownership, with the rest held by the platform’s original nine shareholders.

Japan’s Willcom files for bankruptcy

Willcom, the Japanese mobile phone company 60% owned by the Carlyle Group, has filed for bankruptcy protection with debts of Y206bn ($2.3bn). Japan’s fourth-largest telecoms operator is the country’s second high-profile bankruptcy this year after Japan Airlines filed for protection last month as part of a government-supported rescue plan. Like JAL, Willcom plans to restructure under laws similar to America’s Chapter 11 and has requested support from the Enterprise Turnaround Initiative Corporation, a state-backed body which is also providing aid to JAL.