Posts from May 2012

Richard Koo’s prescription for Greece (and Germany)

Nomura’s Richard Koo is kinda with Christine Lagarde when it comes to the Greek tax problem.

But eurozone bonds (aka eurobonds) are not the solution, he says. Firstly, Greece needs to address its mutual distrust problem with Germany, and persuade the Germans that it will get serious about this tax collection thing: Read more

Fancy some Italian 5-year? (updated)

The 10-year has spiked through 6 per cent, btw. Read more

Spain’s long climb to the liquidity hospital [updated]

UPDATE: We have a denial or two. This is from the ECB’s twitter account:

Contrary to media reports published today, the European Central Bank (ECB) has not been consulted and has not expressed a position on plans by the Spanish authorities to recapitalise a major Spanish bank. The ECB stands ready to give advice on the development of such plans. Read more

Further reading

Elsewhere on Wednesday,

- The new stimulant of choice on Wall St is just… weird. Read more

The 6am Cut London

The ECB has rejected Spain’s plan for Bankia, telling Madrid that it would be in danger of breaching an EU ban on “monetary financing”, says the FT, citing two European officials.

A top Obama administration official was dispatched to Europe on Tuesday, reports the WSJ, to press eurozone officials for changes such as broadening the rescue funds and allowing them to directly recapitalise banks. The Treasury Department’s under secretary for international affairs, Lael Brainard, met Greece’s interim finance minister on Tuesday and will be in Frankfurt today. Read more

Overnight markets: Down

Asian shares fell on disappointment over Chinese stimulus plans, while concerns grew over Spanish banking problems, says the FT.

The MSCI Asia Pacific index lost 0.7 per cent with Japan’s Nikkei 225 Stock Average off 0.7 per cent, South Korea’s Kospi Composite index down 0.8 per cent and Australia’s S&P/ASX 200 index 1 per cent lower. Read more

Accruing better sovereign credit

Here’s a distinction you tend not to see on the front pages of the sovereign crisis…

Cash-based sovereign accounting: recognising a cost only when cash changes hands. Accrual-based: recognising a cost when it’s incurred in the first place. Read more

The Closer


The European Central Bank unambiguously rejected the Spanish government’s unorthodox plan to recapitalise Bankia. The plan would have consisted of Spain’s injecting sovereign debt into Bankia, after which Bankia would post the bonds as collateral to receive money from the ECB. The FT reports: “The ECB told Madrid that a proper capital injection was needed for Bankia and its plans were in danger of breaching an EU ban on “monetary financing,” or central bank funding of governments, according to two European officials.” (Financial TimesRead more

RIM, the limbo

While we are no longer giving quantitative financial guidance…

Look, advisors! Leverage something something!, says Research in Motion: Read more

Whale precursors

Reading through a new CreditSights note about the JPMorgan CIO trade fallout and hedge accounting treatment, we came across this historical tidbit (emphasis ours):

Back when CEO Dimon was the head of Bank One, there were episodes in the early 2000s when the company registered hefty gains, and then some [marked-to-market] losses on a CDS book designed to hedge underlying credit risk of the loan portfolio. Read more

The market still does not ‘like’ Facebook

Another bad day for Facebook shareholders. It looks like the latest plunge — which took the shares below the $30 level — has something to do with the start of option trading this morning. The shares have dropped to new lows, down around 7.9 per cent at pixel time.

 Read more

Bankia in the Sunshine State

A particularly eagle-eyed FT Alphaville reader noticed this when strolling in the heat of Miami Beach:

 Read more

The decline of US shadow banking, charted

The US shadow banking appears to have halved since the start of the 2008, at least according to one new estimate — which also reminded us that we still have to come up with a better way to define this very broad sector.

This is from a Deloitte report out on Tuesday (click charts to enlarge): Read more

Ten-year Bund yields below 1%? Wouldn’t faze Nomura

‘Have you ever wondered why none of our Bund forecasts are definitive?,’ Nomura’s European rates strategist Desmond Supple asked clients on Tuesday.

The answer…
 Read more

Barclays is one unhappy taxpayer

Just in case you missed it earlier — we thought it worth posting the full letter from Bob Diamond, Barclays chief executive, to Andrew Tyrie MP, Treasury Committee chairman, regarding HMT’s blocking of two tax schemes (one on buybacks of debt). This involved a rare use of retroactive legislation, if you recall.

Anyway, the letter (click image for full doc): Read more

Ireland LOVES a good referendum

We thought there was a solid tradition in Ireland: first referendum is a No, the second is a Yes. It seemed so simple. But the Irish government has gone and smashed that venerable tradition by saying, if the people vote No, it won’t be putting this issue to a referendum again… incontrovertibly.

Worrying. Read more

China’s mini stimulus, explained

So what is this great new Chinese stimulus that world markets are becoming solely increasingly reliant upon for a regular fix of optimism?

Two things that we know so far… sort of: Read more

Markets Live transcript 29 May 2012

Live markets commentary from 

The (early) Lunch Wrap

Good morning, New York…


The Eurepo curve spells trouble

Sandy Chen at Cenkos has drawn our attention to an interesting development in the repo market: the Eurepo curve has inverted.

 Read more

England and the eurozone: channel tunnels

The pound has been the strongest performing G10 currency so far this year, even though it has been weakening of late against the US dollar and Japanese yen.

 Read more

Further reading

Elsewhere on Tuesday,

- European Union, Soviet Union: compare and contrastRead more

The 6am Cut London

Spain’s prime minister insisted the country’s banks won’t need an international rescue. The FT reports investors recoiled at a €19bn rescue of Bankia, sending the country’s borrowing costs over Germany’s to the highest level since the start of the euro. Bloomberg looks at the ‘delay and pray’ approach of Spanish banks over their soured property loans.

Russian billionaire Mikhail Fridman has resigned as CEO of TNK-BPreports the FT, plunging relations between BP and its Russian partners into fresh turmoil. A person close to the Russian stakeholders said the partnership “appears to have run its course”, while an industry insider said the move could precede a state takeover of the Russian stake driven by Russia’s energy tsar Igor Sechin. Read more

Overnight markets: Up

Asian stocks inched up on hopes for China’s policy easing to boost the slowing economy, despite concerns that Europe’s debt crisis may worsen, says the FT.

The MSCI Asia Pacific index gained 0.1% with Australia’s S&P/ASX 200 up 0.3% and South Korea’s Kospi Composite index 0.6% higher. But Japan’s Nikkei 225 Stock Average shed 0.5% after the country’s jobless rate rose last month for the first time since January. Read more

M&A flows and the (slippy) FX market

M&A flows and their impact on currencies are an especially hard thing to get a grip on – cause and effect can get quite muddied.

A recent note from UBS analyst Chris Walker took another shot at discovering  how M&A flows influence the FX markets. He argues that while M&A flows do influence FX markets, they do so largely because of expectations and speculation — not because of flows directly related to M&A transactions (UBS’ emphasis): Read more

German slackers vs toiling Greeks…

In the (relative) absence of news, we should share this tweet from @presseurop

 Read more

Sonia says: ‘UK rates are (possibly) coming down’

With all the excitement in Spain and Greece of late, it’s been easy to miss a rather big move in British interest rate expectations.

Consider this chart of the November MPC SONIA index future. According to friends in sterling overnight markets, the pricing here suggests a roughly 45 per cent chance of a UK base rate cut, come November. Read more

How much an implicit banking subsidy?

The Bank of England has taken another crack at estimating the cost (or value, depending on your point of view) of the implicit subsidies given by the state to various banks.

The full paper, with a much more detailed look at methodology, is here. We will just bring you a little snapshot of Noss and Sowerbutts’ work. Read more

Markets Live transcript 28 May 2012

Live markets commentary from 

The (early) Lunch Wrap

Good morning, New York…