Posts from Friday Feb 14 2014

I, Claudius, caller of bank bonds

Claudius was a Roman emperor from AD 41 to 54.

Claudius notes are Tier 1 instruments that were issued by Credit Suisse back in 2010 and which feature a call date that first comes into effect in December 2015. Except, as bank bond investors have experienced from time to time, the issuers of such securities have an unnerving tendency to sometimes behave unexpectedly. Credit Suisse made some noise when it released earnings last week that it may call the Claudius bonds thanks to something known as a “regulatory par call.” Read more

The €1,000,000,000,000 question

Just how much would tickets go for at a German Constitutional Court hearing into any future quantitative easing programme by eurozone central banks… if a €1tn programme could easily buy a fifth of German bonds in a year?

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The Fed, reverse repos and tri-party/bilateral repo market wedges

This is a guest post by Manmohan Singh, a senior economist at the IMF. Views expressed are his own and not those of the IMF.

The idea of eliminating the present wedge between Fed’s reverse repo program (RRP) floor and the interest on excess reserves (IOER) is intriguing because such a change would only allow the Fed to set the price on such operation (P), and would leave the market to determine the quantity of reserves (Q) on Fed’s balance sheet (Gagnon/Sack proposal).

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QE in the popular lexicon

For a bit of Friday fun, we thought we’d trawl through the Factiva archive (which goes back to 1969) and the New York Times archive (which goes back to 1851) to search out some economic terms to see how they’ve been popularised over the last few decades. This is to ascertain how their popularity may have contributed to the collective knowledge base.

Starting with…

“Quantitative Easing” Read more

Markets Live: Friday, 14th February, 2014

Live markets commentary from FT.com 

The promoter problem in Indian banks

Or — watch the rate of stressed asset growth in the industry:

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The (early) Lunch Wrap

France returns to growth in fourth quarter || Letta to submit resignation to Italy’s president || Anglo American results hit by strikes || Anglo American results hit by strikes || China serves up subdued inflation as food prices fail to rise || Pernod Ricard growth hit by China crackdown on officials’ spending || Markets Read more

Information asymmetry, bad incentives and Taibbi

Alert, alert! Matt Taibbi of Vampire Squid fame has discovered contango in a five-page mega opus for Rolling Stone magazine, in which he blames all the usual names for crimes against markets, people and everything good in the world. It’s also a running continuation of his “everything is rigged” theme.

But it’s a terribly nauseating read for anyone following the story since 2008.

First off, Taibbi turns out to be a dependable repackager of other people’s stories. Facts and ideas unearthed by others are borrowed and twisted until they fit his own version of reality (often without citation or attribution). Case in point, the “vampire squid” description is surprisingly similar to popular writer ‘Coin’ Harvey’s 1894 description of the Rothschild bank as a black octopus stretching its tentacles around the world.

True, Taibbi never claimed to have come up with the term himself and perhaps it is just a coincidence, but one can’t deny he’s benefited immensely from borrowing it and applying it to Goldman Sachs. Read more

How Scotland really lost sterling union

This post is just to flesh out a point in this great piece by John McDermott — so read that first.

But we think it’s an important point. An alternative title for this post: What’s under your gilt?

After all, it is the debt that has enabled Her Majesty’s government to turn so breezily confident that currency union with an independent Scotland “is not going to happen”, fully seven months before an independence referendum. Read more

Further reading

Elsewhere on Friday,

- “It’s the good ship Galleon“.

- Fama with a brief history of the efficient markets hypothesis.

- Faking itRead more

The 6am London Cut

Markets: “Asian stocks outside Japan rose and silver headed for its longest streak of gains since March 2008. The yen climbed against most major peers, Indonesia’s rupiah led emerging-market currencies higher and palm oil advanced to a two-month high.”(BloombergRead more