March, 2010
Devaluing the yuan
Continuing with Thursday’s China theme, SocGen’s Albert Edwards has been looking at the emergence of a trade deficit in the People’s Republic and the implications.
The backstory here is the recent, surprise announcement from Premier Wen Jiabao and Commerce Minister Chen Deming that China would record a trade deficit in March – the first since April 2004.
Ambac’s regulator moves in, CDS likely triggered
Ambac’s shares tumbled more than 20 per cent in mid-morning trade in New York on Thursday, after its regulator moved to take over some of the bond insurer’s more troubled assets – some $35bn worth.
Regulators in Wisconsin,
It is / isn’t Greek IMF bailout decision day
Neither the IMF, Greece, or European leaders have confirmed a deal to resolve Greece’s debt crisis ahead of Thursday’s European Union summit. Greece needs some €20bn of funding available over the next 18 months or no.
Markets Live transcript 25 Mar 2010
Markets Live chat transcript for the chat ending at 12:15 on 25 Mar 2010. Participants in this chat were: Neil Hume, FT Bryce Elder NHHola NHit’s 11.03am NHish
Now, China is bashing the euro
Remember, the good old days of China’s dollar bashing?
Well, no more. There is a new victim in town, and it’s called the euro.
In today’s sovereign crisis-filled world, it seems bashing the euro is fair game — even if it’s counter intuitive.
Down the drain in China
It probably won’t impress Willem Buiter, but the Chinese authorities have attempted to suck some more liquidity out of the system.
Via Bloomberg on Thursday:
The People’s Bank of China sold three-month bills at a yield of 1.4088 percent,
Is China blowing bubbles?
Yes, says Citigroup’s Willem Buiter, who thinks the Chinese authorities will fail in their efforts to prevent a classic boom, bubble and bust asset sequence.
Higher interest rates, renminbi appreciation and additional macro-prudential controls have all been mooted as way to prevent booms and bubbles developing in the Chinese land,
Negative swaps, the Japanese experience
Negative swap rates: credit risk or corporate hedging?
The debate rages on, but we’re betting either side could use the below for fodder.
Thanks to the Asia Times’ Inner Workings blog for bringing up a Japanese precedent:
My Big Fat Greek Collateral Conversion
Happy National Day, Greece!
Here’s your present from the European Central Bank — some collateral flexibility.
Remember that in the beginning, the Bank’s collateral requirements for its repo operations were firmly set in stone at securities rated A- and above.
Libor-gazing, counterparty-casing
Does anyone remember Libor?
The London Interbank Offered Rate, the reported cost of borrowing between banks, has fallen by the wayside a bit since it shot to infamy — and a record high — in October 2008,
‘Internal Dubai government resources’ to the rescue
Breaking — Dubai’s palm-shaped islands would appear to be safe once more.
The emirate’s government said on Thursday it would stump up cash for the firm’s debt restructuring — including the liabilities of property developer Nakheel — to the tune of $9.5bn.
Further reading
Elsewhere on Thursday,
- The greatest short ever told began with a meeting…
- Booms and busts 1775-1944.
- Homework assignments for central bankers.
- Is principal reduction around the corner?
- Howie Hubler’s second act.
Pink picks – UK budget special
Comment, analysis, and other offerings from Thursday’s FT,
Martin Wolf: Mistakes that drained the fiscal reservoir
If a government can announce annual net borrowing of £167bn – or 11.8 per cent of gross domestic product – as good news,
Snap news
Breaking pre-market news on Thursday,
- Dubai World and Nakheel announce restructuring proposals – statement.
- Jarvis to be put into administration, requests share suspension – statement.
- Petropavlovsk announces JORC classified proven and probable reserves of 6.67m ounces – statement.
A private equity Catch-22
Moody’s published a report on private equity on Wednesday that, in the words of Erin Griffith at PE Hub, “reveals a troubling paradox”.
As Griffith summed it up:
Private equity owned-companies are more likely to default,
CDS report: Portugal causes a ripple
European credit markets were resilient today in the face of sovereign volatility and directionless stock markets. The Markit iTraxx Europe index was about 1bp tighter at 78.75bp, while the Markit iTraxx HiVol was also 1bp tighter at 119bp.
No sex please, we’ve got an IMF loan to rearrange
News came to us on Wednesday, via the Daily Mail (yes, sorry), of an interesting twist in the saga of Ukrainian reform.
According to the report, the country’s new prime minister, Mykola Azarov, made a strategic decision when appointed to form an all-male cabinet because,
What’s in a company name? If it’s ‘China’, it matters
Interesting story from the WSJ on the positively bubblicious effect that adding the word ‘China’ has on a company’s equity:
Dozens of tiny companies have gotten big stock-market boosts simply by adding the word “China”
[Darling: Budget Highlights 2010] Reforming financial services — some details
FT Alphaville finally got its hands on a nice, fat hard-copy of the UK’s 2010 Budget on Wednesday, freshly couriered over from Westminster.
We were intrigued by this section of the Budget Report, on ‘reforming financial services’ (emphasis in the original):
[Darling: Budget Highlights 2010] And the analyst verdict is…
Ah-ugh. (click for sound effect.)
At least, that’s the initial view from City analysts. Here’s a fresh batch of commentary on the UK’s budget for your reading pleasure.
First the highly reactive and always prolific Howard Archer,
[Darling: Budget Highlights 2010] A bitter sweet cider party?
UK Chancellor Alistair Darling’s decision to raise duty on cider has already caused a bit of a stir. We note the term is trending on Twitter, with many tweets advocating an impromptu cider party for the nation on Wednesday night.
The negative swap time-warp
FT Alphaville has already noted on Wednesday how financial markets have breached new negative territory.
The 10-year US swap spread — the price to swap floating for fixed-rate payments — dipped below zero for the first time on record.
[Darling: Budget Highlights 2010] Lending
Are you listening Mr Hester and Mr Daniels? From Reuters:
DARLING-HAVE AGREED THAT RBS AND LLOYDS WILL PROVIDE 94 BLN STG NEW BUSINESS LOANS OVER NEXT YR
[Darling: Budget Highlights 2010] GDP and borrowing stats
The bond markets will be squinting at these. GDP projections, via Reuters once more:
DARLING FORECASTS GDP TO GROW BY 1-1.5 PCT IN 2010
DARLING FORECASTS GDP TO GROW BY 3-3.5 PCT IN 2011, IN LINE WITH BOE FORECASTS
DARLING SAYS GDP FORECASTS FOR FOLLOWING YEARS UNCHANGED
And on to borrowing projections:
[Darling: Budget Highlights 2010] The Colour Purple
Ok, so who told everyone to wear purple?
The Conservatives, by the way, stuck to a blue theme.
Some purple facts from Wikipedia:
Blue + Red = Purple
In Japan, purple is known as the colour of death.
[Darling: Budget Highlights 2010] Housing
And on to housing. Via Reuters again:
DARLING – RAISES STAMP DUTY EXEMPTION THRESHOLD TO 250,000 STG FOR FIRST-TIME BUYERS
DARLING – STAMP DUTY EXEMPTION WILL APPLY FROM MIDNIGHT FOR THIS YEAR AND NEXT
And take this,
[Darling: Budget Highlights 2010] Opening remarks
The banks and bashing of. Via Reuters:
DARLING – WILL SELL SHARES IN RBS, LLOYDS, NORTHERN ROCK IN WAY THAT MAXIMISES TAXPAYER VALUE
DARLING – BANK BONUS TAX HAS RAISED 2 BLN STG, MORE THAN TWICE AS
Markets Live transcript 24 Mar 2010
Markets Live chat transcript for the chat ending at 12:11 on 24 Mar 2010. Participants in this chat were: Neil Hume, FT Bryce Elder NHGood morning NHand welcome to Markets Live
Euro *fall*
Post the Fitch downgrade of Portugal, the euro has extended its recent fall.
The eurozone currency is now at its lowest level since May 2009:
Meanwhile, the FTSE 100 has surrendered its early gains…