Posts from Monday Jun 25 2012

Moody’s downgrades Spanish banks

Spanish banks have been downgraded by Moody’s because of their counterparty exposure to the sovereign that backstops them which itself just had its credit rating downgraded by Moody’s because of its pledge to support the banks on which it depends for LTRO funding.

Or something. Read more

The Closer

ROUND-UP

US stocks fell off the (European) summit. Advance disappointment with the eurozone’s leaders this week helped push the S&P 500 down 1.6 per cent to 1,313.72. The Dow Jones Industrial Average fell 138 points to 12,502.66 (Bloomberg). Read more

“Yammer time,” or how to generically write about Microsoft buying Yammer

Step 1: Find amusing pic of Steve Ballmer. Oh, here’s one.

Step 2: Ho ho, they did an infographic. Note to self: aim gun at head, pull trigger. Read more

The right and wrong debates about money market funds

Amnesia, ignorance and disingenuousness are competing fiercely as a possible explanation for this comment:

“In my view, you’re portraying an industry that’s extremely vulnerable, that has all these risks of runs and I really find that extraordinary in light of the actual history,” Senator Patrick Toomey, a Pennsylvania Republican, told Schapiro. “We’ve had another round of real stress: an ongoing recession, European credit crisis, downgrade of the U.S. government, considerable redemption pressure and not a single problem in this industry.” Read more

Cyprus needs bailing, says Cyprus

This had been a long while coming… Flashes from Reuters at pixel time:

16:57 – CYPRUS APPLIES FOR EU BAILOUT  - GOVERNMENT STATEMENT Read more

Interesting Israeli easing

Israel’s central bank had just cut interest rates at pixel time on Monday, easing by 25bps to a 2.25 per cent policy rate.

Why’s this one so important, we hear you ask. Read more

And the rupee just keeps sliding

Miss Prism. That would be delightful. Cecily, you will read your Political Economy in my absence. The chapter on the Fall of the Rupee you may omit. It is somewhat too sensational. Even these metallic problems have their melodramatic side…

Apparently the rupee’s plight has gotten bad enough for the Reserve Bank of India and the government to have a chat and attempt again to shore up the embattled currency. Read more

À propos those BIS gold swaps

In 2010, when the BIS first revealed that it held gold swap agreements worth SDR8.16bn (representing 346 tonnes of gold) the revelation knocked the gold market.

That’s because rather than making money (or yield) from lending out its gold — as the BIS usually did — it had become cost effective for the BIS to lend out currency against gold collateral instead. Read more

Central bank existential crisis confirmed

The BIS Annual report released this Sunday is jam-packed with data, charts, observations and analysis. Joseph has already stuck up some of the most compelling

But one of the other key points to emerge is in its chapter on the “limits of monetary policy”. There is, it appears, a marked admission that central banks may be losing control. Read more

When scientists become hedge fund managers

There are many gems in the annual report of the Bank of International Settlements that came out on Sunday. One of the most intriguing is a trail which leads to an actual estimate of the cost to society of scientists becoming hedge fund managers.

The trail starts at a section about debt sustainability across a number of countries. It notes that elevated levels of debt got us into this crisis and the situation still hasn’t improved for many countries. In fact, for some countries, the debt burden of the private sector has gotten even worse. Check out the last row of these charts on debt service ratios (looking at the red lines): Read more

Markets Live transcript 25 Jun 2012

Live markets commentary from FT.com 

The (early) Lunch Wrap

Good morning New York…

FT ALPHAVILLE Read more

Fitch junks Cyprus

(Alternate title: Fitch junks incoming EU president.)

Fitch has cut Cyprus’ credit rating to ‘BB+’ from ‘BBB-’. That’s a junking and, shockingly, it’s down to the banks. From Fitch (with our emphasis): Read more

Personalising banking again

How can banks make wise credit intermediation decisions when they don’t know the people or businesses to whom they are lending?

Better understanding of clients, not less, is what helps to improve banking. Read more

Testing for forebearance

Spanish bank write-downs on residential mortgage loans, eh.

It’s something that had been vexing analysts before last week’s stress-test results from Oliver Wyman and Roland Berger, though these tests haven’t dived into individual bank loan books. That comes laterRead more

Further reading

Elsewhere on Monday,

- Bright spots in the UK’s very peculiar recession. Read more

The 6am Cut London

The Bank of England’s leading dovish policymaker has called for at least £50bn of fresh quantitative easing. David Miles told the FT that a “substantial” number was needed to intervene in the economy. Miles added that new BoE lending operations to banks would help monetary policy. “It’s a complement to one of the levers we’ve got, rather than a substitute because [the MPC] has run out of effective levers,” he said. The BoE’s Financial Policy Committee is meanwhile likely to advise this week that banks should be able to relax their buffers of liquid assets, Reuters reports.

JPMorgan’s Chief Investment Office will not be made to pare back investments in asset-backed securities and corporate debt, following a review into the ‘London Whale’ trades, reports the WSJ. Executives will however constrain the CIO from investing in “infrequently traded derivatives” and private equity. Bets on ABS and corporates helped the CIO deliver big gains for JPMorgan in recent years, whereas most US bank treasuries have focused on mortgage and government bonds. Read more