August, 2010
Of sovereign wealth and black swans
Further adventures in sovereign wealth fund knife-catching — of a sort.
We’ve noted before that equity volatility has hampered sovereign wealth fund returns a tad lately. Tuesday’s WSJ offered a glimpse of a potential flip-side to this — SWFs buying protection on even worse reiterations of that volatility.
Repo is still puzzlingly inverted
Barclays Capital’s latest collateral update continues to puzzle over why overnight general collateral (GC) is trading cheap to the overnight indexed swaps (OIS) — a.k.a. the effective Fed funds rate in the US.
Risk off, tin hat on
The risk switch was firmly flicked to “off” on Tuesday afternoon, following weaker than expected US housing data. Much weaker than expected. Sales of existing homes slumped to their lowest level on record in July according to the National Association of Realtors.
Decoding the Fed Deep Throat
There’s no need to read the minutes of the last FOMC meeting when they are published next week. The WSJ’s Jon Hilsenrath has saved everyone the trouble with an extremely detailed piece on the August 11 gathering.
A QWERTY-sized finger in London [updated]
Possible fat-finger — fat-fist? — drama in London markets on Tuesday:
U is for United Utilties…
H is for Hays…
B is for BT…
N is for NXT…
And funnily enough, U-H-B-N are all adjacent keys on a QWERTY keyboard.
Yen intervention 101: why it won’t work
Those yen-intervention rumours are flying, fuelled by reports of discreet phone calls between the Japanese PM’s office and the Bank of Japan, not-so-discreet complaints from captains of Japanese industry and dire warnings from economists.
Creating liquidity out of illiquidity
In a recent post, Felix Salmon of Reuters asks the question “Should ETFs be allowed to include illiquid stocks?” He notes:
I do think that a lot of investors like ETFs precisely because they have a certain degree of liquidity which is often missing from the underlying stocks.
Survivor’s gilt, again
This one’s dedicated to George.
We aren’t absolutely sure, but it looks like the 10-year gilt on Tuesday plunged to a 50-year low — well below March 2009 levels, anyway:
We blame Dr Martin Weale.
Markets Live transcript 24 Aug 2010
Markets Live chat transcript for the chat ending at 11:26 on 24 Aug 2010. Participants in this chat were: Neil Hume, FT Bryce Elder NHGood morning NHand welcome to Markets Live
BoJ – just checking
There was some talk on Tuesday that the Bank of Japan had been ‘checking prices’ in the foreign exchange market — a move that could suggest imminent intervention, or simply act as a sneaky reminder that the central bank is indeed around,
Promethean (World) Unbound
Ocado has competition.
Not from Tesco or one of the other big supermarkets groups, but a maker of interactive whiteboards called Promethean World, which is now a genuine contender for the worst UK IPO of 2010.
RBS go low, see 10-year bund yields at 1%
RBS rates strategist Andrew Roberts is only talking in quotes — and not the stock kind either.
His latest European Rates Weekly is chock-full of bond market soundbites, all of which would be music to a bond bull’s ears,
Those increasing Irish haircuts…
Thought 61 per cent was a hefty discount for the second batch of Anglo Irish loans going into Nama?
What about 72 per cent for loans from the Irish Nationwide Building Society?
Out on Monday — complete figures for the National Asset Management Agency’s second tranche of loan transfers.
The BoE behind closed doors – surprisingly philosophical
Or, what keeps Britain’s central bankers up at night.
The Bank of England and the Centre for Economic Policy Research hosted their fourth monetary policy roundtable on July 14, the summary report of which has only just been published.
Further reading
Elsewhere on Tuesday,
- The Dawes premonition.
- ‘Pending housing disaster will seal double-dip.’
- Now even the Dutch are getting cross with accountants.
- Is there a difference between branded and unbranded gasoline?
- Managing illiquid assets.
Pink picks
Comment, analysis and other offerings from Tuesday’s FT,
Sheila Bair: Road to safer banks runs through Basel
Of all the lessons learnt in the recent financial crisis, the most fundamental is this: excessive leverage was a pervasive problem that had disastrous consequences for our economy,
Snap news
Breaking pre-market news on Tuesday,
- Rio Tinto and Chinese partner consider PotashCorp bid — report.
- Xstrata acquires Sphere Minerals for $383m — statement.
- WPP pre-tax profit down 16 per cent to £816m — statement and statement.
Are stock prices still too high?
So long as we’re looking at long-term home values, we may as well continue the history lesson by also observing the last century-plus of stock market performance.
And, err, the lesson is roughly the same:
A mixed outlook for CRE and CMBS
As we have noted many times, exposure to commercial real estate loans has been among the biggest problems for small banks in the US.
Losses and potential losses on CRE loans, combined with regulatory capital requirements,
Housing delusions
Keep this chart in mind this week:
Updated in late July by Ritholtz commenter Steve Barry, the chart shows that until the boom preceding the recent recession, home values in the US had been consistently returning to a level first reached in the late 1940s.
EXCLUSIVE: MURDOCH CONTROLS ‘BANK’ FOR SUPER RICH (and poor)
If you register with Britain’s Financial Services Authority, you must be in the process of setting up an investment bank or something, right? And if you are doing that, then it must be for doing dodgy deals for squillionaires,
In the land of two curves, and one price
Marco Bianchetti, a senior quantitative analyst in market risk management at Intesa Sanpaolo Bank, has a very intriguing piece out in this month’s Risk Magazine.
It’s highly technical, but the main point is that swap pricing has changed significantly since the beginning of the crisis,
BHP and the cost of borrowing $45bn
Small wonder that, as we wrote on Friday, there’s a mini M&A boom at the moment – just look at the cost of borrowing for big, stable companies like BHP Billiton.
Citigroup reckons the $45bn credit facility put in place by the miner to finance its hostile offer for PotashCorp is likely to be just 3-4 per cent.
Linkers in a cold climate
Oh, not more UK inflation-indexing shenanigans.
Courtesy of Barclays Capital, here’s a quick update on the RPI-to-CPI indexation imbroglio that’s broken out in the UK linker market lately.
Bidding RIP to RPI and shifting pension liabilities to CPI instead — as the government outlined in the June budget and is now consulting upon — has rather worried the market in UK RPI-linked bonds.
Morgan Stanley really likes its new iPad
June 8 2010 — Morgan Stanley says iPad will reshape netbook market.
August 20 2010 — Morgan Stanley downgrades Blackberry-maker RIM.
August 23 2010 — Perhaps not coincidentally… Morgan Stanley unveils new iPad app for sending research to clients.
Moving targets, US housing edition
If at first you don’t succeed . . . move the goal-posts.
In the grand tradition of stimulus policy gone wrong, that seems to be just what the US Treasury has done in relation to its Hamp mortgage modification programme.
Bond switching in the eurozone
The 10 year German/Irish bond-yield spread appeared on Monday to be racing back towards the levels last seen in May — before the European Union’s €750bn bailout package for troubled sovereigns was announced.
Debacle Down Under: Winners and losers — so far
In every debacle, financial or political, there are those who come out smiling.
In the case of Australia’s weekend election shambles, resources stocks – big and small – are zooming, and punters who shorted the Aussie dollar are undoubtedly laughing in glee.
Markets Live transcript 23 Aug 2010
Markets Live chat transcript for the chat ending at 11:20 on 23 Aug 2010. Participants in this chat were: Neil Hume, FT Bryce Elder NHHola NHwe’re back NHwell, Markets Live is back