Posts from Tuesday Aug 21 2012

The Closer


The S&P 500 touched an intraday cyclical high but fell in the afternoon, and equity markets globally challenged multi-month peaks; though volumes remain low. The FT’s markets round-up: “The FTSE All-World index rose 0.3 per cent, its best level since the start of May; the FTSE Eurofirst 300 closed 0.5 per cent, its highest level since July 2011; and the FTSE Asia Pacific index rose 0.4 per cent, its highest in more than three months. However, the S&P 500 in New York erased gains and closed 0.4 per cent lower after surpassing a four-year closing high of 1,419 points earlier in the day. The broadest measure of US stocks has advanced for six consecutive weeks.” (Financial TimesRead more

Frannie’s future, redux

It might just be us, but Fannie and Freddie’s makeover by the US Treasury last Friday seems not to have got much broader (political) play. It’s almost trite to observe that the GSEs have had almost no hearing in the 2012 election noise machine so far.

Odd when this could be a turning point in the mortgage agencies’ ties to the government. Read more

BoE research shows big banks were too big to fail

Brace yourself. We have a formula:

P(eventi) = α + βXi + εi Read more

The (belated) CMBS detox

It’s well known that commercial property investors are facing repayment delays across the board as scores of CMBS deals from the middle of the last decade mature.

Borrowers simply can’t refinance themselves with fresh bank debt, so all those sold CMBS paper have no option but to sit and wait while loans are paid down or borrowers are restructured and relevant properties sold. Read more

China’s unprecedented liquidity injection

As we noted earlier, the People’s Bank of China is continuing to inject huge sums of liquidity into the monetary system via so-called “reverse repos” (the equivalent of conventional central bank repos elsewhere). According to Chinascope, the latest round of easing supplied a record Rmb220bn to the market in exchange for collateral.

The seven-day operation was priced at 3.40 per cent (Rmb150bn) while the 14-day operation was priced at 3.60 per cent (Rmb70bn). Read more

Austerity goes to the polls, Dutch edition

The upcoming Dutch elections on September 12 have real potential to upset the markets, yet seem to be attracting rather a small amount of attention. That they come on the same day as the decision on ESM by the German constitutional court just adds to the potential for trouble.

Citi’s Tina Fordham and Jürgen Michels argue in a recent note that whatever the outcome of the two events, they will shape the political backdrop of the eurozone crisis for months to come (emphasis ours): Read more

Markets Live transcript 21 Aug 2012

Live markets commentary from 

The (early) Lunch Wrap

Good morning, New York…


Asmussen backs Draghi (updated)

And so to the Frankfurter Rundschau…

Here’s the interview with German ECB director Jörg Asmussen which was helping to compress Spanish and Italian sovereign yields further on Tuesday. His words are being hailed by some (such as the Telegraph’s Ambrose Evans-Pritchard, as a “crucial turning point” in the eurozone crisis. Read more

PBoC ramps up liquidity operations

The People’s Bank of China helped Asian stocks rally on Tuesday with a reported record liquidity injection via reverse repos. From Bloomberg:

The People’s Bank of China conducted 220 billion yuan ($34.6 billion) of reverse-repurchase operations, the most in a single day, according to a trader at a primary dealer required to bid at the auctions. The government may introduce new policies to boost consumers’ borrowing and spending this year, the Economic Information Daily reported today, citing an unidentified person.

 Read more

A rather Aud confirmation

From the Reserve Bank of Australia’s minutes released on Tuesday morning:

The further decline in the euro exchange rate put additional pressure on the Swiss National Bank in maintaining the franc’s peg against the euro to avert deflationary pressures. Members noted that the Swiss National Bank had purchased around €100 billion over May and June, with further sizeable purchases likely to have occurred in July. While some of these purchases were retained in euros, a sizeable share was converted into other currencies, including a modest amount in the Australian dollar. In contrast, members noted that the level of Chinese foreign reserves fell in the June quarter, as capital outflows occurred.

 Read more

Further reading

Elsewhere on Tuesday,

– When billionaires get boredRead more

The 6am Cut London

EU investigating cigarette sales to Syria. The sales were by a Swiss-based unit of Japan Tobacco to a firm at least partly owned by the Makhlouf family, according to  documents seen by the Wall Street Journal. The Makhloufs are first cousins of Syrian President Bashar al-Assad. The EU’s anti-fraud office, OLAF, is investigating whether the transaction broke European and US sanctions (Wall Street Journal).

Apple is now the most valuable company, ever, exceeding a previous record set by Microsoft. Apple’s shares closed up 2.6% to $665.15. However the record failed to lift US stocks, which closed flat (Reuters). Read more

“Five years later”

James Sweeney, Jonathan Wilmot and the rest of the Credit Suisse gang that brought you the excellent King Collateral paper in April are back with a short follow-up note.

It’s a sharp contrast between the state of the global economy five years ago — when the first warning signs of an unusually serious crisis began to emerge — and where we are now. The framework of risk purging versus risk accumulation used by the authors is especially interesting, though they don’t get into as much detail as found in some of their previous notes. Read more