Posts from June 2012

Recaps, so retro

Spot the eurozone country that doesn’t actually have to issue bonds in these closing 5-year bond yields on Friday:

Spain 5.4 per cent Read more

How to regulate Libor, a cheat sheet

Cheat sheet — geddit, dude.

While Bob no doubt breathes a sigh of relief at having survived the morning after, the other twenty banks lawyer up and pray, and the BBA says it’ll be constructive with regulators… Read more

Regulator captured, a case study

The WSJ reported on Thursday that JPMorgan’s regulators will conduct a thorough review of the bank’s models, according to “people close to the situation”.

Thanks to a letter from the the Office of the Comptroller of the Currency to Senator Sherrod Brown, we know that one particular model — the VaR model that JPMorgan’s Chief Investment Office switched to in January 2012, and which failed to alert management to outsized risks the division was taking — did not require regulatory approval before being used. Read more

Barclays’ PR rating: “D”

You’re in a crisis, you want advice, right? Preferably from someone who has experienced a similar crisis.

Step forward Mark Arena. He ran investment banking corporate comms for UBS in London before moving to New York to be the bank’s head of comms there, just in time for the Great Crunch and the near-implosion of his employer. So he has frontline form. Read more

Princeling wealth, encore

Click the face of Xi Jinping (the top spot in the Chinese leadership is his to lose) for another Bloomberg dive into the wealth of the extended families surrounding China’s princelings:

We’d highlight this one because the authorities earlier blocked in China on Friday. Read more

A euro reaction

Any pessimism surrounding the eurozone’s latest deal was not being shared by the single currency at pixel time. The euro was up near 2 per cent against the dollar:

 Read more

Grice on traffic-lights and a crisis of regulation

As I watched the intricate social ballet that occurred as cars and bikes slowed to enter the circle (pedestrians were meant to cross at crosswalks placed a bit before the intersection) Monderman performed a favorite trick. He walked, backward and with his eyes closed, into the Laweiplein. The traffic made its way around him. No one honked, he wasn’t struck .Instead of a binary, mechanistic process – stop, go – the movement of traffic and pedestrians in the circle felt human and organic.”

The above quote is from the ever-readable Dylan Grice’s latest missive in which he argues that regulation acts much like traffic-lights, in that it lulls market participants into a false sense of security. Read more

Counting the costs of (potential) Libor litigation

It’s safe to say that Barclays’ £290m fine is just the start of a saga that’s going to drag on for years. More banks are going to be hit with fines, and investors will try to sue wherever they can. Corporate lawyers around the world are rubbing their hands in anticipation of all the fees coming their way (we expect).

Cormac Leech at Liberum Capital has done an analysis of the UK banks’ potential Libor-fixing liabilities should there be comprehensive class-action (as separate from the regulators’ fines). Barclays and RBS would be the most impacted banks by some way. Liabilities could reach 26 per cent of their market values. Read more

On the transfer of risk and the mystery of low yields

It is impossible for all investors to be invested in safe assets all at the same time.

That’s because risk can never truly be eliminated. It can only be transferred or managed. The more people pour into “safe assets” at the expense of “risky assets”, the more they transfer risk into the original “safe asset”. Read more

Markets Live transcript 29 Jun 2012

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The (early) Lunch Wrap

Good morning, New York…


The eurozone crisis and the curse of the small print

For every announcement on how to deal with the eurozone crisis, there are as many questions that come to mind as there are statements from politicians. From Eurointelligence’s morning briefing (emphasis ours):

The following are a list of questions that immediately sprung to our mind: Read more

Some EU deal pessimism…

The market is moving up on the back of a quite substantive eurozone deal but, as our inboxes suggest, this is seen as more sticking-plaster than panacea. Essentially, it’s a case of low expectations being surpassed.

The main change is that Spain’s bailout loans won’t have (explicit) seniority status and that bailout funds will (eventually) be injected directly into teetering Spanish financial institutions, meaning Madrid can sweep the burden of the bailouts off its sovereign books. It also looks like rescue funds will also be used to stabilise bond markets. Read more

Further reading

Elsewhere on Friday,

– Undooming BritainRead more

A late-night deal…

From the FT’s Peter Spiegel and Joshua Chaffin in Brussels:

Eurozone leaders agreed to radically restructure Spain’s €100bn bank recapitalisation plan, allowing EU bailout funds to eventually be injected directly into teetering Spanish financial institutions, meaning Madrid can sweep the burden of the bailouts off its sovereign books. Read more

The London 6am Cut

The US Supreme Court upheld the constitutionality of the Affordable Care Act, ruling that the individual mandate requiring most Americans to obtain insurance was a tax that Congress was empowered to impose, reports the FT. Some of the reactions to the ruling were… really quite funny, when they weren’t simply wrong.

Anticipated second quarter losses on the trades made by JPMorgan’s chief investment office are in a range of $4-6bn, reports Reuters, while the Financial Times pegs the number at $5bn. Read more

A Ulysees pact, on eurozone seniority


Specifically Read more

Spain, seniority, and survivor bias

Update (0445am UK time) — Well, well, well… eurozone leaders did indeed promise not to subordinate Spanish bondholders at the summit, as we assumed they would below. Seniority was “renounced” in the case of Spain.

That phrase suggests a reversion to the original status of official eurozone bilateral and EFSF loans – of being at least pari passu with bondholders. (Though at times the loans have even been subordinated on some points, such as restructuring interest rates. The status is a political football subject to constant change, you could say.) Read more

Productivity post-paradox

We noted in an earlier post that an optimistic near-term scenario for US employment would likely mean productivity growth remaining at its depressed rate for a little while.

The alternative — productivity growth returning back up to pre-crisis trend — would have to coincide with sluggish employment growth unless economic growth were to pick up significantly. Read more

So who made the decision, Bob?

Staring a political storm in the face, Barclays chief executive Bob Diamond writes to Andrew Tyrie MP, chairman of the Treasury Select Committee.

(Excuse the lengthy quoting) Read more

The Closer


US stocks staged a late comeback on EU summit hope. The S&P 500 pared losses to close down 0.21 per cent at 1,329.04 (Reuters). The S&P 500 health sector fell 1 per cent after the Supreme Court’s ruling, brought down by insurers. Read more

Greek mattresses seeing capital flight

With a new government in place and market focus shifted to Spain and Italy’s debt issues, Greece has been enjoying a bit of welcome breathing space.

The country’s banks have been seeing steady inflows since the election two weeks ago, according to Reuters (emphasis ours): Read more

In defence of Libor quote-rigging, encore

Right, this one may stick in the throat somewhat but it’s an interesting idea, a variant of which we have heard before.

From JCD Rathbone, of JC Rathbone Associates, (with our emphasis): Read more

Affordable Care Act upheld by the Supreme Court

The Supreme Court has upheld the constitutionality of Obama’s best-known legislative achievement, including that of the individual mandate requiring nearly all American to obtain health insurance. Click here for the opinion.

The key reasoning is that the mandate can be considered a tax that Congress is empowered to impose. Read more

Transacting at Libor, bro

Another quote from the Barclays Libor files — from the CFTC itself:

In addition to the $200 million penalty, the CFTC Order requires Barclays to implement measures to ensure that its submissions are transaction-focused

 Read more

Libor, the liquidity consequences

It’s all very well bashing Bob and calling for bankers’ heads.

But we shouldn’t overlook another exceedingly important point about the Libor affair, as picked up by Claire Jones over on the FT’s Money Supply blogRead more

‘Sell Bob’

Barclays, down 16 per cent at pixel…

 Read more

Breaking News

Upon closing of the proposed transaction, News Corporation’s shareholders would receive one share of common stock in the new company for each same class News Corporation share currently held. Following the separation, each company would maintain two classes of common stock: Class A Common and Class B Common Voting Shares.

Upon closing of the proposed transaction, Rupert Murdoch would serve as Chairman of both companies and CEO of the media and entertainment company. Chase Carey would serve as President and COO of the media and entertainment company. Over the next several months, the Company will assemble management teams and Boards of Directors for both businesses. Read more

Goldman Sachs on fewer ‘safe assets’

First of all, a big congratulations to Goldman Sachs for jumping on board the safe assets debate approximately 12 months late.

And, in so doing, challenging (but not really challenging) what we still think is the biggest trend of the post-crisis era. Read more

Markets Live transcript 28 Jun 2012

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