October, 2010
King Euro-Canute
Yes, yes, we know the real reason King Canute told the waves to stop was to show ‘how empty and worthless is the power of kings’.
Whereas Luxembourgish prime minister Jean-Claude Juncker was quite serious on Friday in telling markets that the euro was too strong at $1.40.
A distorted US 10-year swap spread?
Spotted — a(nother) potential sign of QE distortion in the market:
BNP Paribas observes on Friday that the US 10-year swap spread — the difference between the swap rate on a contract and the yield on a government bond — has moved sharply out recently,
MERS, an acronym of mass foreclosure destruction
Financial ‘innovation’ coming back to haunt the system is something we are familiar with.
But do welcome a new toxic acronym to the stable — MERS — that’s Mortgage Electronic Registration Systems Inc.
US non-farm payrolls – down by 95,000
US non-farm payrolls fell by 95,000 jobs in September while the unemployment rate stayed at 9.6 per cent, according to the Bureau of Labor Statistics.
The decline was much more than expected by the market.
Gaming the Nobel economics prize
The Nobel Memorial Prize in Economic Sciences is to be announced next Monday, and currently — according to the New Zealand-based prediction website iPredict at least — Richard Thaler of the Chicago Booth faculty is seen as the most likely economist to win:
Markets Live transcript 8 Oct 2010
Markets Live chat transcript for the chat ending at 11:19 on 8 Oct 2010. Participants in this chat were: Neil Hume, FT Joseph Cotterill Tracy Alloway Izabella Kaminska NHHola markets watchers
Nouriel Roubini and the 40% Rule
Real Time Economics posts a funny item discussing the use of the “40% Rule”, which is a way to forecast a scenario with just enough conviction to ensure you’ll get credit if it materialises, while simultaneously protecting yourself if it doesn’t.
Guess the US jobs number
Competition time!
Guess the jobless number from Friday’s US non-farm payrolls report.
The winner will receive a special (yet to be determined) FT Alphaville prize.
The data will be released at 1.30pm (BST) and remember,
CoCos can cost – your bonus
Here’s a data point for those skeptical of CoCo capital’s saving graces.
(CoCos, or contingent convertible capital, are a kind of convertible bond that automatically switch into equity once certain capital or bailout triggers are breached.)
Earlier this week Switzerland moved to make CoCos a key element of future bank capital,
Compare and contrast – Petropavlovsk & Sons edition
Compare and contrast.
Bloomberg October 5, 2010:
Petropavlovsk Plc, Russia’s third- largest gold producer, plans to raise about $300 million by selling shares in its IRC Ltd. iron-ore unit in Hong Kong this month,
Further reading
Elsewhere on Friday,
- The blundering herd.
- It’s topsy turvy time for bond investors.
- Deflation through Tips-coloured glasses.
- The foreclosure scandal starts hitting home.
- The macroeconomic impact of Goldman Sachs.
Pink picks
Comment, analysis and other offerings from Friday’s FT,
Alan Beattie: Global economy going head to head
If the world is on the brink of an out-and-out currency war, a variety of battalions has been out on manoeuvres in the past few weeks,
Snap news
Breaking pre-market news on Friday,
- Potash CEO says BHP bid is “non-starter” – Reuters.
- Givaudan nine-month sales up 9.8 per cent – statement.
- Thomas Cook to merge high street travel and forex business with the Co-operative Group – statement.
HY default rates drop again
The Moody’s monthly report on speculative-grade default rates was released on Thursday, and it’s good news for investors with high-yield bonds and leveraged loans in their portfolios:
The issuer-weighted global speculative-grade default rate finished the third quarter at 4.0%,
Updating the US foreclosure scandal
As the foreclosure scandal in the US continues to expand, it’s becoming more and more clear that it will have ramifications well beyond problems for a few large banks and the so-called robo-signers.
The Washington Post digs a little deeper on Thursday (emphasis ours):
Risk on, risk off, risk on, risk off
A rather unusual chart from RBC Capital Markets:
And it comes with this commentary — a warning signal for all those enthused by the asset-pumping prospects of QE2. From RBC’s senior credit strategist Simon Ballard:
Currency conundrum
Courtesy of Ashmore, here’s a chart that captures the disconnect between the Chinese and American perspectives on the USD-RMB spat:
The US has repeatedly expressed disappointment that the RMB has hardly budged since June,
Dear CQS investor…
Estimated Sep performance numbers sent out to investors:
CQS Directional Opportunities: +7.69% (ytd: +21.92%)
CQS ABS: +0.34% (ytd: +14.09%)
CQS Convertibles & Quantitative Strategies: +1.39% (ytd:
Stiglitz takes down Nama
Spotted over in the Long Room — Joseph Stiglitz’s 44-page takedown of Ireland’s Nama.
But it’s not for the reasons you might think.
The Nobel-prize winning economist thinks Ireland’s National Asset Management Agency is able — and incentivised — to underpay for bank loans.
How low can Tips go?
Now this is fun.
The gravity-surrendering movements in Tips — the US Treasury’s inflation-protected securities — have made plenty of headlines recently. Most notably, the five-year Tip yield sunk to a new low on Wednesday.
Markets Live transcript 7 Oct 2010
Markets Live chat transcript for the chat ending at 11:21 on 7 Oct 2010. Participants in this chat were: Neil Hume, FT Joseph Cotterill NHHola NHmarket watchers NHwelcome to Markets Live
At the foothills of a gold parabola
From the FT’s global market overview on Thursday:
Commodities. Another day, another nominal record for gold, whose chart looks to be entering the foothills of the parabola. The precious metal has hit a fresh peak of $1,364.6 as ratcheting up of the forex spat rhetoric adds to the worry about the debasement of currencies.
Block trade watch – frothy markets edition
One big share placing in a week might be considered unfortunate. But two?
Passed to us by a broker on Thursday morning:
(The company in question in Kazakhmys, the Kazakh copper producer)
OFFER STRUCTURE:
Halifax UK house price fall is ‘off the scale’
Crash, bang and wallop.
Or, the sound of the UK house building sector on Thursday morning:
The thunderous thump comes on the back of Halifax’s monthly house price index, which revealed — in the words of Channel Four’s own Faisal Islam — a simply ‘off the scale’ monthly fall of 3.6 per cent in September.
Don’t bet against the euro
Goldman Sachs certainly isn’t.
The bank now sees EUR/$ at 1.55 in 12 months time, a marked change from its previous guess estimate of 1.38. Writes the bank’s Thomas Stolper:
We are revising the majority of our FX forecasts to reflect broad Dollar depreciation.
Let them eat Irish bonds
Here’s an, erm, simple solution to the problem of Ireland’s ballooning deficit and pension funds rocked by ultra-low bond yields; just have them buy Irish bonds:
(Reuters) – Ireland’s pension industry is seeking a change to regulations that would allow it to price annuities based in part on Dublin’s government bonds,
Gold stock in shock fall
Can this be right? And what would Peta make of it?
The share price of a gold company heading south!
No, your eyes do not deceive you. That really is the share price of a gold company going down.