US and European equities finished higher today with the glaring exception of Spain, where domestic bank Banesto set aside €475m against bad property loans and the prior day’s rally for Spanish sovereign bonds fizzed out. (Financial Times) Read more
Money market mutual funds saw a noticeable reduction of assets under management for the sixth week in a row (third consecutive double-digit decline), with AUM down by $15.2bn for the week ending April 4. Assets of funds targeting institutional investors explained almost all of the decline, dropping $15.1bn. Retail investors’ funds closed the week almost unchanged. Read more
The Swiss boson is a hypothetical condition which is supposed to account for why the Swiss franc has ‘mass’ when all other neighbouring currencies don’t.
A multi billion-euro experiment, operated by BERN (but funded outright by tax payers), is currently under way on the borders of Switzerland and the Eurozone to try and stamp out the asymmetries, ideally by creating something known as the ‘anti-franc’. Read more
The Securities and Exchange Commission (“Commission”) deems it appropriate and in the public interest that public administrative and cease-and-desist proceedings be, and hereby are, instituted pursuant to Sections 15(b) and 21C of the Securities Exchange Act of 1934 (“Exchange Act”) against Goldman, Sachs & Co. (“Respondent” or “Goldman”). Read more
Before the crisis, it wasn’t too hard for a corporate client to trade over-the-counter derivatives. They just had to find a bank willing to sign them up, agree some documentation, and they were good to go. For most corporates, banks were eager to help, so the client could probably find someone willing to meet their needs both in terms of what they want to trade and how they wanted to trade it.
If they didn’t want to post collateral, then that was fine. Certain trading arrangements had a cost, sure, but derivatives sales people are known for being accommodating (especially given that they get paid based on the deals that they close). No collateral? No problem, sir! Read more
The Basel III capital rules for credit valuation adjustments (CVA) create new, large capital requirements for over-the-counter derivatives trading with counterparties who don’t post daily cash collateral. Yesterday we saw how these rules were inspired by CVA losses on credit protection written by monolines like MBIA and Ambac. Today we’ll examine the unintended consequences of the new rules.
First we have to get a bit technical about how the CVA capital charges work. Sophisticated banks will be required to put their CVAs and eligible hedges into a value-at-risk (VaR) model. That model will use historical credit spread movements to estimate possible losses for the current CVA and its hedges. The capital charge is based on the one-in-a-hundred loss. Read more
Something of a scramble in the Gulf of Mexico late on Wednesday as Shell dispatched aerial monitors and an oil-spill response vessel to investigate a “light sheen” about 130 miles southeast of New Orleans. Given that the sheen is 10 miles long and one mile wide, there should be no surprise at the response in London on Thursday morning…
Fed no. 2 backs low-rates policy: Janet Yellen, vice-chair of the US Federal Reserve, said further monetary easing may only be needed if growth is slower than expected but argued that a range of policy rules suggested keeping interest rates close to zero until as late as 2015. (Financial Times)(Wall Street Journal)
Aviva is considering selling its US division, according to people attending a meeting of investment managers held with the insurer’s chief executive Andrew Moss. Some analysts have speculated the division may be put up for sale, despite it being designated as a core region. (Financial Times) Read more
Most Asian stocks rose, with the regional benchmark index trading near its lowest level in more than two months, as materials producers and traders climbed on higher commodity prices and Citigroup upgraded global industrial shares to overweight, says Bloomberg. But South Korea’s Kospi Composite slid 0.9 per cent to a one-month low amid fears about North Korea’s rocket launch, says the FT.
Nikkei 225 up +11.78 (+0.12%) at 9,471
Topix up +0.21 (+0.03%) at 806.05
Hang Seng up +34.57 (+0.17%) at 20,175 Read more