Posts from Monday Feb 4 2013

The Closer


Worst day for the S&P 500 since November. The index closed down 1.15 per cent at 1,495.71, as eurozone political risk rose from the grave in Spain and Italy (Bloomberg). Read more

Lighting a FIRREA under Standard & Poor’s

Update, 8:40pm UK time — Shares in McGraw-Hill were down 15 per cent at pixel.

Fresh in the inbox… Read more

Shadow boxing with a very real system

FT Alphaville spent part of the weekend at a conference on shadow banking organised by the City Political Economy Research Centre. Though, as it turns out, much of the message was: be not afraid of shadow banking, some classifications are born, some are achieved and others have a name that sticks but is very much disliked thrust upon them. Read more

Dutch-bottomed bank bondholders

Well, we think “Dutch-bottomed” is probably a better metaphor for what’s happened to SNS Reaal’s subordinated bondholders than Bond Vigilantes’ “Going Dutch”. That just means splitting the bill. Dutch-bottomed is empty, or perhaps fallen through the trap door.

The Netherlands government did an unusual thing when it nationalised SNS, a small and struggling mortgage bank on Friday. It expropriated subordinated bonds of the lender. Here’s the decree. It theoretically suggests the holders still have a claim on the value of the bonds, at some point: Read more

Pricing the Berlusconi bias

On a generally crappy day for equities and bonds across all the big western markets, Italian stocks stood out:

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Robots, employment and sector safety

Above is a chart from CreditSights of employment changes by sector since the start of the last recession. Education and health jobs account for roughly 15 per cent of the working labour force, and their number has grown by nearly 11 per cent. Only mining has posted a higher growth rate (17 per cent), but obviously off a much smaller base. Read more

Why do CFDs baffle the cops?

The question is rhetorical.

Back in December we were able to share a long, angry letter penned by Vincent Tchenguiz concerning the legal dispute between the Tchenguiz brothers and the Serious Fraud Office. Read more

Great, and not so great, inflation expectations in Japan

We have to admit we found a point made by Nomura’s Richard Koo last month a little confusing. He argued quite persuasively that deflation is simply not a serious problem for the Japanese today.

JP Morgan’s chief Japan economist Masaaki Kanno weighed in on the rather odd dichotomy in the FT on Monday, arguing that:

The key to understanding the success of Abenomics is the asymmetric response between the currency and the bond markets, which can be attributable to divergent inflation expectations. In the currency market, inflationary expectations rose among investors, mostly non-Japanese, while on the other hand the JGB market remains dominated by Japanese investors, whose inflation expectations appear more or less unchanged.

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Markets Live: Monday, 4th February, 2013

Live markets commentary from 

The (early) Lunch Wrap

Foxconn plans Chinese union vote || Powerless Super Bowl disrupts advertisers || JAL increases full year forecasts || Argentina proposes new debt swap || Julius Baer boosted by Merrill Lynch || Chinese banks venture into ecommerce || Markets: Global stocks trading at 4½-year highs Read more

The Barcenas files

El Pais has a nifty interactive whereby you can search the 14 sheets of manuscripts allegedly penned over 18 years by Luis Gutierrez Barcenas, the party manager and treasurer at the heart of the supposed Rajoy “slush fund” scandal in Spain…

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That ring fence will be electrified after all

So, it’s happening. The Banking Reform bill to be published today will give the Treasury and the bank regulator the power to break up a bank that doesn’t respect the ringfence between retail banking and the riskier stuff. Read more

A floor with a few holes

The great debate over interest on excess reserves (IOER), base money and short term debt used ‘the floor’ analogy to describe what happens to short term interest rates. But that might not have been quite the right analogy, at least in the US case.

Izzy has already covered Manmohan Singh’s excellent paper and presentation. In it he raises a few points in regard to the supposed floor that IOER sets for rates, and it is worth exploring it a bit more. Read more

Deripaska on the collateralisation of aluminium

There’s an enlightening interview with Oleg Deripaska, chief executive of Rusal, in the Telegraph this Monday (h/t Neil Hume).

Turns out the metal tycoon believes aluminium may do better than expected this year, largely because much of the excess capacity that has plagued the industry has finally been cut back. Read more

Further reading

Elsewhere on Monday,

– Why centralised capital models don’t necessarily mean no diversification.

– What is the least bad investment?

– Some not-very-encouraging D-list dataRead more

The 6am Cut London

Barclays CFO and general counsel to depart: Finance chief Chris Lucas and general counsel Mark Harding, its general counsel, will both be retiring in coming months. Lucas, 52, will remain in post until the lender finds a replacement, a process which could take up to a year as his successor is likely to come from outside the bank – a move to signal a clean break with the past, people familiar with the matter said. The announcements came two weeks before new chief executive Antony Jenkins unveils his plan for the bank. Jenkins said both had said they wanted to step down late last year. (Financial Times)(Wall Street Journal)

Asian markets rose on Monday, with the MSCI Asia Pacific Index 0.9% higher on economic data from the US and China and Japanese earnings. (BloombergRead more