Posts from Friday May 14 2010

The Treasury non-conundrum, or why yields are trading below 3.6%

SocGen economist Aneta Markowska affects bemusement at the benign bond yield environment in the US. As she put it in a recent note (any emphasis/links FT Alphaville’s):

Sovereign debt concerns have rocked many economies in recent months. Fundamentally, countries with large twin deficits are most vulnerable because they have to rely heavily on foreign investors to finance their government budget gaps. Based on these criteria, the US is right up there with the most vulnerable economies. So why are Treasury yields trading below 3.6 per cent? Read more

Dubai repays $980m Nakheel bond on time

Finally, some good news:

May 13 (Reuters) – Dubai repaid a $980 million Islamic bond issued by developer Nakheel while another state-owned firm said it was confident of refinancing an upcoming loan as it digs out from a massive debt burden. Read more

Europe is Lehman-fied, part quatre

There have been more than a few comparisons drawn between the crisis in the eurozone and Lehman Brothers here on FT Alphaville. Here’s another, via Tullett Prebon Economist Lena Komileva.

Here are extracts from Komileva’s argument, via a note sent out on Friday (any emphasis FT Alphaville’s): Read more

Rosenberg: ‘Gold is now in a bubble? Not a chance’

This is Dave’s  moment, and the the Gluskin Sheff man let fly on Friday – proclaiming the enduring attraction of gold, tearing into spurious retail sales figures in the US and declaring the primary trendline now to be global deflation.

But let’s concentrate on gold, something of a hot topic on FT Alphaville (with charts!) Read more

CDS report: Volte face

Drastic times call for drastic measures. In Europe this week we have been treated to the sight of politicians and central bankers jettisoning deeply-held beliefs in response to events out of their control. “Those are my principles, and if you don’t like them…well I have others”. It is perhaps unfair to compare two of the major UK political parties and the ECB to Groucho Marx; their options were limited by circumstances. But the volte faces being performed had important implications for the credit markets and beyond.

Markit CDS chart Read more

Reuters names e-mini ‘flash crash’ seller

A big exclusive for Reuters, which on Friday afternoon revealed the identity of the mystery trader CFTC chairman Gary Gensler said placed a disproportionately large sell order in CME e-mini S&P futures around the time of Thursday’s ‘flash crash’.

And it was not a high frequency trader or a hedge fund, but a money manager called Waddell & Reed Financial. Read more

Equities and CDS, also eurotrashed

European stocks crash-landed toward their close on Friday, countering the gains reached at the week’s start in the wake of the eurozone rescue.

Spain’s Ibex 35 led the way with a 7.2 per cent drop — its biggest daily fall since November 2008, reflecting earlier fears after official data showed core deflation: Read more

Eurotrash all over again

Ouch. The Mighty Drachmark plunged to 1.236 against the dollar in late European trading on Friday — flying past levels last seen in October 2008:

 Read more

In Europa We Trust

Now here’s a bravely contrarian Goldman Sachs research headline:

The European Rescue: Stability and sanity restored! Read more

The surprising cost of volatility

From Ted Seides, senior managing director of founder of  Protégé Partners, who is presenting at the CFA Institute 2010 Annual Conference, which begins on Sunday in Boston…

Extract: Read more

The great Aussie-yen unwind

Get ready for the great unwind in yen-Aussie dollar trades.

That, at any rate, is the view from JP Morgan’s Japan currency strategist Tohru Sasaki. Read more

Now, about those DEM rumours – redux

On Thursday we poured scorn on the bizarre rumour that German officials have already prepared for a “plan B” contingency involving the return of the Deutsche Mark as soon as this weekend.

Although it might not have been as far fetched as we thought… Read more

Markets Live transcript 14 May 2010

Live markets commentary from FT.com 

Corporate bonds’ worst month since December

Insurers have led the corporate bonds market into the first monthly decline since December on speculation that they face sovereign debt losses, according to Bloomberg. Bank of America Merrill Lynch data showed that AIG was among the big losers, who might also face indirect risk from the Gulf of Mexico oil spill.

Adobe attacks Apple on software

Adobe Systems is hitting back at Apple in the technology companies’ war over web video formats, with an advertising campaign and a letter from its founders, the FT reports. Apple CEO Steve Jobs has often criticised Adobe’s Flash technology, which is not part of the company’s iPhone or iPad products.

Airbus maker’s earnings suffer

Franco-German aircraft maker EADS blamed volatile financial markets and the weak eurozone for a sharp 64 per cent drop in first-quarter profits on Friday, the FT says. EADS now faces more pressure to deliver on its troubled A380 superjumbo project. Earnings fell 92 per cent in the first quarter.

Capital flooding into China

Official data show that capital inflows into the Chinese economy acclerated in April, the WSJ reports, reflecting the country’s robust recovery and an anticipated rise in the renminbi. A spokeswoman said that low US interest rates may have encouraged the inflow. perhaps through investors borrowing in the US and investing in China.

CSI: Chicago

The Chicago Mercantile Exchange has published its account of what happened on May 6, the day of the Flash Crash, FT Alphaville writes. And yes, it does read a bit like the script to a Crime Scene Investigation episode — busting trades and all that.  Read more

Swiss banks see the light

The resolution to a tax dispute between the United States and the Swiss bank UBS is going to transform Switzerland’s famously secretive financial system, the NYT reports. One year after the US targeted UBS over American citizens’ tax evasion, a new law is ready to enshrine a new era in disclosure for Swiss asset management.

Forget the wolf pack, the ECB hates the herd leaders

What is it with the ECB and animal analogies?

European Central Bank executive board member Lorenzo Bini Smaghi is angry at the “herd leaders” — mostly published analysts — and the “wolf pack” markets that follow them. Read more

SEC probes muni derivatives

First CDOs, now municipal CDS. The Securities and Exchange Commission has begun investigating whether Wall Street banks bet against municipal bonds they also sold, according to the WSJ. US states, including California, are also sniffing around the trade.

US fears hedge fund rift with Europe

European Union countries led by France and Germany plan to push through tough hedge fund regulations next week after turning down UK pleas to defer a vote, the FT reports. Non-EU funds could be made to curtail leverage and hold assets with European banks in order to market to EU investors, prompting fears of an Atlantic lockout.

Austerity Britain and equities

Should stock market investors fear the onset of austerity Britain?

Not necessarily, according Goldman Sachs which has examined three periods of significant financial retrenchment over the past 40 years, finding that UK equities have outperformed the world market and enjoyed a re-rating each time. Read more

The deflationary pain in Spain

Ouch. You don’t want deflation when your economy is struggling with huge private debts. So spare a thought for Spain on Friday, where official data revealed negative core inflation.

Flashes via Reuters, emphasis FT Alphaville’s: Read more

US monetary base growth is really quite off the chart

The latest edition of the St Louis Fed’s Monetary Trends is literally off the chart, FT Alphaville finds — which should prompt some reflection on the relationship of monetary policy to asset prices. Read more

A short history of European liquidity

Here’s a timely report from Fitch — a short history of the European Central Bank’s liquidity operations.

For those who are having difficulty keeping track of what’s been on offer, here’s a quick summary: Read more

Volcker speaks, but knows when to shut up

Paul Volcker is living proof that octogenarian bankers can still stay relevant, FT Alphaville notes, as he reflected in London on UK banking reform and the future of the eurozone. But with decades of practice, he also knew when to shut up. Read more

Further reading

Elsewhere on Friday,

- Goldman Sachs — the musicalRead more

Pink picks

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

Gillian Tett: The risks posed by get-rich geeks
An entire week has now passed since the extraordinary, tumultuous crash and rebound of the US equity markets, writes the FT’s Tett. But, although regulators and policymakers have been crawling all over these events with a toothcomb for seven days, the only thing even more remarkable than the drama of those events is that their trigger remains a mystery. Read more

Snap news

Breaking pre-market news on Friday,

- SEB confirms talks to sell German retail business – statementRead more