Posts from Thursday Feb 25 2010

Craig Pirrong v Gary Gensler: who’s right on OTC derivatives?

We do love a good battle of the intellects here on FT Alphaville, so it was impossible to pass up this opportunity.

On Thursday, the FT featured an op-ed by CFTC chairman Gary Gensler on the topic of derivatives. Read more

CDS report: Bigger Claims and Smaller Floats

Markit’s Otis Casey wrote this CDS report

We have seen this before.  First, the US initial jobless claims number came in disappointing again.  Instead of declining by 13,000 which was the consensus estimate, it rose by 22,000.  Predictably the stock markets sold off and Treasuries rose.  The corporate credit markets followed suit.  The Markit iTraxx Europe index was quoted in the 89-90 range versus a close  of 86.17.  Crossover was even wider in intraday trading by about 12 bps at 486.67. Read more

Censorious Citi [UPDATED]

Social media and social networks — that universe of blogs, Facebook and the Twitter — have proven time and time again to be a minefield for unwary companies and organisations.

Witness: United Airlines breaks guitars; the maker of Motrin vs the mommy bloggers; the epic Skittles twitter #fail. Read more

News moves stock prices shock

We’re being facetious, but why not when three academics have taken 285,917 company press releases to see the impact on stock prices?

AbstractRead more

The Great British Krona

The reason for the fall to a nine month low? Read more

Details on those other Greek debt deals

Goldman’s been getting plenty of heat over the currency swap it arranged for Greece.

But the swap itself is not the only issue here. Securitisation also plays a factor and it seems Titlos — the special purpose vehicle (SPV) created to securitise the swap — is not the only Greek debt-concealing securitisation deal undertaken by the Hellenic Republic. Read more

Get Goldman (and those evil speculators)

First Obama, then Lagarde, and then Spanish media.

And now, Bernanke. Read more

Failed-bank assets, in pics

So we knew FDIC — the organisation charged with insuring US bank deposits — has an asset problem.

About 200 banks have failed in the US since 2007, leaving FDIC with a number of often-unenviable loans and other financial assets to sell, securitise or use as collateral for bonds. What we hadn’t realised is that the organisation auctions literally everything from failed banks – right down to the furniture and fittings. Read more

Lunch Wrap

On FT Alphaville Thursday morning,

- ‘(In economic terms) the Euro does not work.’ Read more

Ooops…red faces at Telecom Italia

That’s one hell of an accountancy hitch.

From Reuters (our emphasis): Read more

Behold the great Chinese tightening

The great Chinese tightening is gathering pace…

Amid recent exhortations from Beijing to rein in lending, China’s state-controlled banks are now rushing to raise money from public markets to shore up their balance sheets after a year of record loan growth and the introduction of stricter capital requirements. Read more

Buiter’s back

We haven’t heard much from the former Maverecon blogger since he moved to Citigroup to take up the role of chief economist.

But that changed on Thursday morning. Read more

Markets Live transcript 25 Feb 2010

Live markets commentary from FT.com 

‘It is relatively clear that (in economic terms) the Euro does not work’

Is this another hit for the grand European project?

Paul Donovan, senior global economist at Swiss bank UBS, has just published a 16-page note entitled “How to break up a monetary union.” The central contention: the eurozone just doesn’t work. Read more

Another day, another fit of bonus neurosis

There seems to be barely a day without a bonus-related development or rant from an aggrieved banker or outraged commentator.

More so now that Wall Street’s bonus fixation and middle-American “bonus rage” has drifted across the Atlantic to the UK – where the recent spectacle of the big UK bank chiefs waiving their rights to 2009 bonuses seems to have mollified the would-be anti-bonus ranters – for now. Read more

RBS – the reaction

That’s the early price action in RBS following the publication of annual results on Thursday morning, which have impressed the market. Read more

Revision and APS ambiguity at RBS

Meet the new, less-risky, open-for-business RBS.

The British bank has just released its 2009 results, and the company is happily trumpeting its turn-around. It’s also boasting of a reduction in the risk on its balance sheet –something it came under criticism for after being bailed-out by British taxpayers in 2008. Read more

Further reading

Elsewhere on Thursday,

- Short selling rules: explainedRead more

Pink picks

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

Giles Wilkes: Make the Bank give credit where it is due
The governor of the Bank of England has joined a growing chorus of voices worrying about the UK’s recovery. A few weeks ago, it looked likely that the Bank could soon begin to unwind the extraordinary measures it has used to support the economy; now they may need to be extended. With interest rates at zero,Mervyn King acknowledged that this means more quantitative easing. Unfortunately more of the same will not be good enough, says Wilkes, chief economist of the liberal think-tank Centre ForumRead more

Snap news

Breaking pre-market news on Thursday,

- RBS reports 2009 operating loss of £6.2bn, says impairment rose to £13.9bn but “appear likely to have peaked” – statementRead more

Bernanke signals low rates

Stocks rose in volatile trading on Wednesday after Fed chairman Ben Bernanke said US interest rates will remain exceptionally low for an “extended period” despite the “nascent” economic recovery. In his first appearance in Congress since being reappointed for a second term as Fed chairman, Bernanke gave a gloomy economic outlook and noted that inflationary pressures were likely to remain “subdued”. Also affecting markets were China’s moves to tighten bank lending.

RBS bonus backlash looms

Alistair Darling on Wednesday cleared the payment of £1.32bn in bonuses to RBS staff, just a day before the UK state-owned bank reports losses expected to be about £6.5bn. The chancellor is braced for a public backlash over the bonus awards, reinforced by the fact that RBS has fallen short of its commitment to raise lending to businesses. Although RBS provided £80bn of new loans last year, its net lending may have fallen as business customers have repaid debt at a higher rate.

Coca-Cola eyes $13-$15bn buy

Coca-Cola is close to buying the North American operations of its largest bottler, Coca-Cola Enterprises, for $13-$15bn, in a reversal of the soft-drink maker’s 20-year-plus strategy. Coke’s possible reunion with CCE, which went public in 1986, mirrors the steps PepsiCo took last year to snap buy its largest bottlers. And like PepsiCo’s $7.8bn deals with Pepsi Bottling Group and Pepsi Americas, the CCE acquisition would grant Coke more flexibility and control over its distribution. Under the proposed deal, CCE would in turn acquire Coke’s bottling businesses in Scandinavia and Germany.

GM’s Hummer China deal fails

General Motors on Wednesday night abandoned efforts to sell its Hummer operations to a Chinese buyer and said it would now wind down production of the heavy SUV. In a statement, GM said Sichuan Tengzhong Heavy Industrial Machines was unable to complete the acquisition. The Chinese carmaker’s $160m attempt to acquire the brand had already faced rejection by Beijing, throwing what would have been a landmark deal into disarray.

Greece in turmoil over cuts

Greece suffered renewed turmoil on Wednesday as protesters took to the streets to protest severe budget cuts while S&P threatened to downgrade the country’s long-term rating to near-junk status. Demonstrators from both public and private sector unions brought much of the country to a standstill as they rallied against the government’s austerity programme. Athens, meanwhile, was negotiating even tougher budgetary measures with a visiting financial delegation including the IMF, European Commission and ECB.

UK to review takeover rules

Rules governing takeovers of British companies could be toughened following the launch of a consultation by the Takeover Panel on the code governing M&A deals. The move follows Kraft’s contentious £11.6bn takeover of Cadbury, which prompted calls from UK business secretary Lord Mandelson and top business figures for a re-examination of the rules. In inviting comment on amending the code, the Takeover Panel said the complexity of the consultation process meant it could take more than a year.

China’s banks in cash-call rush

China’s state-controlled banks are rushing to raise money from public markets to boost their balance sheets after a year of record loan growth and the tightening of capital requirements by regulators. This week alone, Chinese lenders have announced plans to raise up to Rmb76bn (£7.2bn) through equity and bond sales, with at least Rmb150bn of bank fundraising in the pipeline, analysts say. The cash calls come as Beijing tries to limit new lending to the property market and the investment vehicles of local governments.

Toyoda in ‘tearful’ apology

Akio Toyoda, Toyota’s chief executive, on Wednesday apologised to US lawmakers in what the FT describes as “one of the most anticipated appearances” by a foreign executive on Capitol Hill. Speaking mainly in Japanese through an interpreter, Toyoda struck a contrite tone throughout the three-hour hearing over defects in some top Toyota models. Reuters adds that he ended the day “in tears”.

KKR plans US flotation

KKR said it had started work on a US listing and announced a return to the black as the buy-out group reported annual income of almost $2bn, on a rebound in the value of its portfolio. Buoyed by a recovery in financial markets, KKR said it had elected to seek a New York listing and that it would file a registration statement with the SEC “as promptly as practicable”. The decision follows KKR’s merger last year with its Amsterdam-listed KKR Private Equity Investors unit.

Freddie Mac ‘may need’ support

US mortgage giant Freddie Mac said on Wednesday it would probably have to take more taxpayer cash this year to offset continued losses in a fragile housing market. The warning by the government-run lender came as it revealed a Q4 loss of $7.8bn in 2009, compared with a year-earlier loss of $23.9bn. Its Q4 deficit in 2009 was inflated by a $1.3bn dividend payment to the US Treasury but is still up on the loss of $5.4bn in the previous quarter.