November, 2010
Luck of the Irish… promissory notes
Or, Anglo Irish indigestion in Ireland’s accounts.
Ireland’s government has just doubled the amount of fiscal cuts it expects to make in the next four years, from €7.5bn to €15bn — of which €6bn will be front-loaded into 2011.
[Shameless FT Tilt promo] Argentina: Dangerous Precedent
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The Rock of O’Sisyphus is getting mighty heavy [updated]
Thursday is budget announcement day in Ireland. (Update: See below for the actual announcement.)
And given it’s Ireland — this budget, which sets out fiscal plans across 2011 to 2014, will do a lot to determine if the country can avoid a trip to Europe’s bailout fund early next year.
Claims, productivity, and a payroll preview
We haven’t written much about weekly initial unemployment claims recently, but we should probably take a quick look ahead of Friday’s big payroll announcement.
The first thing to remember is that the weekly reading itself tends to jump around a lot and subject to later revisions.
The lonely long bond, the steepening curve
The Fed doesn’t always live up to market expectations.
Some traders had been expecting the central bank to buy 30-year bonds as part of its Wednesday QE2 announcement. But the long bond has largely been left out of the latest US Treasury-purchasing programme,
Shedding light on repo financing costs
In a move that brings some much needed transparency to the global repo market, the DTCC announced this week it would begin publishing a daily index of general collateral repo rates.
As the DTCC explained about its index:
The liquidity and momentum trade de rigueur
We’ll skip the stuff on the Ice Age, looming recession, competitive devaluation, protectionism and the 60 per cent off equities forecast (all of which is getting a little bit repetitive) and get straight to the freshest bit of the latest Global Strategy Weekly from SocGen’s Albert Edwards.
We’ll sit this one out, Ben
HMS QE2 will not set sail from the Bank of England … this time.
Instead, the same old song from Threadneedle Street:
Was it the UK’s above-target inflation wot sunk it? We’re getting the BoE’s latest Inflation Report on November 10,
Collateralised contagion
Interactive graphics at their best, this.
Network scientist Valedis Krebs has created a visualisation of ownership in Collateralized Debt Obligations (CDOs) — all that securitised cross-ownership.
To make it,
BofA sheds awkwardness along with BLK shares
When Bank of America received a much-hyped letter from bondholders two weeks ago, we didn’t say much (though others did) about how awkward it was for the bank ostensibly to be facing the threat of legal action from one of its own holdings.
The real loser in the Potash compost heap
The “obvious loser” from the Canadian government’s rejection on Wednesday of BHP Billiton’s $39bn hostile bid for PotashCorp is BHP chief Marius Kloppers, according to the Wall Street Journal’s Heard on the Street column.
Markets Live transcript 4 Nov 2010
Markets Live chat transcript for the chat ending at 12:34 on 4 Nov 2010. Participants in this chat were: Neil Hume, FT bryce.elder Tracy Alloway NHhola NHmarket waifs and strays
Another ‘successful’ IPO
Remember that ‘succesful’ Enel Green Energy float?
The one where the dozen or so bookrunners and joint bookrunners were forced to price the stock at the bottom end of a lowered range and with mainly retail investors?
(The IPO,
Soma confusion in US Treasuries
As part of QE2, the Fed relaxed its System Open Market Account (Soma) limits restricting it from buying more than 35 per cent of any single issue in US Treasuries.
Sort of.
Because the actual statement reads rather weirdly:
The QE2 Vix untwist
Kathleen Brooks, research director at Gain Capital, warned on Wednesday how a quantitative easing boost from the Fed would, most likely, reverse a recent and unusual trend in the Vix Index.
As she explained,
House price rant
Pressure can do funny things. Just ask Steve Morgan.
The chairman and biggest shareholder of housebuilder Redrow has let rip at the company’s AGM on Thursday morning, accusing the government and regulators of deliberately suppressing housing demand at the very time a chronic housing shortage is laying the foundations for the next boom and bust cycle.
The world backs away from Ireland, Spain, Portugal
There’s something missing from the Russian Finance Ministry’s website.
Via Google Translate:
Ireland and Spain are no longer eligible for investment by Russia’s two sovereign wealth funds — a canny spot by Bloomberg.
A380 engine failure hits EADS, Rolls-Royce
Shares in European planemaker EADS fell as much as 2.5 per cent on Thursday after an Airbus A380 operated by Qantas, was forced to make an emergency landing in Singapore. It seems one of the plane’s four Rolls-Royce-manufactured engines exploded — causing the flight to be abandoned just 15 minutes after takeoff.
Europe’s response to QE2
Equity markets advance:
While, the euro climbs against the dollar:
Ben Bernanke’s further reading
Here’s some more context on Wednesday’s $600bn QE2 announcement from err, the chairman of the Federal Reserve. From a Washington Post Op/Ed:
Two years have passed since the worst financial crisis since the 1930s dealt a body blow to the world economy.
Further reading
Elsewhere on Thursday,
- Is $600bn enough?
- “The mountain labored, and gave birth to a mouse.”
- The Fed statement in plain english.
- GE tests gold bars.
- Who’s really behind Foundation X?
- Revisiting Richard Fisher’s darkest moments.
Pink picks
Comment, analysis and other offerings from Thursday’s FT,
John Gapper: Don’t turn back on financial reform
As the Republicans take control of the House of Representatives, their first temptation as upholders of the free market and limited government will be to roll back swaths of the Dodd-Frank financial reform act.
Snap news
Breaking pre-market news on Thursday,
- Vince Cable refers News Corp bid for BSkyB to Ofcom — statement.
- BT says pension liabilities have fallen by £2.9bn as a result of the government’s indexation move — statement.
QE2: analyst reactions
Yes, we know — the markets were expecting more, at least on the long end of the curve, and 30-years got shellacked like Democrats.
But now that analysts have had some time to interpret the news, we thought it would be worthwhile to post what some of them have been saying about the broader implications of today’s events.
Canada says no to BHP Billiton
Get your hands off our potash!
Ottawa, November 3, 2010 — Today, the Honourable Tony Clement, Minister of Industry, made the following statement regarding an application submitted by BHP Billiton Development 2 (Canada) Limited (BHP Billiton) on a proposed acquisition of Potash Corporation of Saskatchewan Inc.
Further further reading
For the commute home,
- Bank of America is offering its 34.5 million shares of BlackRock.
- The Reformed Broker says QE2 was a $600 billion non-event.
- Brad DeLong also is unimpressed (and has a great headline).
The QE2 sails right over the 35 per cent rule
How we’ve waited. The Federal Reserve Open Market Committee’s has unveiled $600bn — $900bn counting MBS re-investments — of Treasury purchases to combat weak inflation.
Here’s the key bit from the FOMC statement:
Macro Live transcript 3 Nov 2010
Markets Live chat transcript for the chat ending at 18:45 on 3 Nov 2010. Participants in this chat were: Neil Hume, FT Cardiff Garcia Joseph Cotterill Izabella Kaminska
NHGood evening
NHGood afternoon
When Irish margins are biting
The spread between Irish government bonds and German bunds hit another record wide on Wednesday — although what’s really worth noting is the fact it’s now trading wider than 500bps (chart via Bloomberg):
RE-ally good news?
Readers will have heard the case against real-estate and commercial real-estate investments. But here, courtesy of Patrick Moonen of ING IM, is a more optimistic view on Wednesday:
Real estate outperformance could continue in 2011.