December, 2010
Markets Live transcript 14 Dec 2010
Markets Live chat transcript for the chat ending at 12:37 on 14 Dec 2010. Participants in this chat were: bryce.elder Neil Hume, FT
BETake 2.
BEOkay – we’re rolling now.
Markets Live transcript 14 Dec 2010
Markets Live chat transcript for the chat ending at 11:05 on 14 Dec 2010. Participants in this chat were: Neil Hume, FT NHuh oh NHwe have a bug NHrestarting
UK inflation – still rising
Another month, another dismal UK inflation report.
From the Office for National Statistics:
For the Bank of England, about the only crumb of comfort is that November’s inflation rise was primarily due to higher food prices.
The ECB’s technical insolvency
€60bn worth of covered bonds + €70bn of government bonds = €130bn of potential problem assets on the European Central Bank’s balance sheet.
A 1 per cent interest rate increase at a 3 per cent coupon with an average of seven years maturity makes just under a 5.32 per cent loss rate — which is quite a rough (but conservative) estimate by German financial consultant Achim Dübel.
Spanish debt watch, exploding yield edition
The yield on Spanish 10-year debt has exploded on Tuesday morning:
It’s now close to a fresh high for the year:
The trigger was an auction of 12-18 month bills.
Now, the bid-to-cover ratios in the auction were good,
Dell and the data-storage M&A frenzy
Dell’s nifty deal to buy US data storage group, Compellent Technologies, must have restored its faith in the world of M&A, after its dismal ordeal earlier this year in one of the most excruciating bid battles in recent times,
Betfair falls at the first (results) hurdle
Betfair hasn’t been the thoroughbred IPO success many people expected.
In fact the internet betting exchange already looks like something of an old nag:
And Tuesday’s maiden (half-year) results spell out exactly why.
Goldman says don’t fear the rising bond yields
At least, not until they reach 5 per cent mark in Europe.
Out on Monday — a Goldman Sachs strategy note arguing that all those rising core bond yields (think US Treasuries, bunds or JGBs) have more to do with a global growth story than old-fashioned bond vigilante-style bearishness.
Further reading
Elsewhere on Tuesday,
- The hottest commodity for 2011: Energy bankers.
- Leave sterling where it is.
- Lessons from Madoff’s Ponzi scheme.
- Europe’s bankers, enjoy your bonus season — it may be your last.
Pink picks
Comment, analysis and other offerings from Tuesday’s FT,
Analysis: Currencies – yuan direction
Warily yet deliberately, China is internationalising its renminbi – in a process that could have a big impact on trade,
Snap news
Breaking pre-market news on Tuesday,
- Allied Irish Banks won’t make bonus payments — statement.
- BT completes sale of 5.5 per cent stake in Tech Mahindra — statement.
- Betfair on track to meet forecasts — statement.
Further further reading
For the commute home,
- The tax cut deal passed a test vote in the Senate late Monday afternoon.
- How much of the deleveraging in the US economy is due to defaults rather than paying down debt?
- Wall Street has made record revenues in the two years since the bailouts.
Arbitrasel and the deployment of capital
Don’t be too comforted by this chart of US banking industry capital from broker-dealer Keefe, Bruyette & Woods:
Why not? First have a look at what KBW thinks is significant about these increased capital levels:
The emigration of the money market funds
And we thought the Mediterranean was nice this time of year.
Research released by Fitch on Friday shows how the ten largest US MMFs have eroded their exposure to banks in peripheral Europe during the last few years.
Negative equity still declining, for now
CoreLogic released its quarterly report on US underwater mortgages on Monday, showing that negative equity has declined for a third straight quarter — though not for the best of reasons:
CoreLogic reports that 10.8 million,
Ireland: doomed
Here are Ernst & Young’s latest eurozone real GDP projections, to 2014 (underlining in blood-red ours):
And here are the Irish government’s real GDP projections for the purposes of the make-or-break 2011 budget for consolidating Irish finances:
Christmas shopping for US Treasuries
Have US bondholders gone on holiday already?
10-year Treasuries reached a high of 3.39 per cent on Monday before falling sharply.
This course wasn’t altered by a cautious warning from Moody’s that stimulus without future offsetting increases the likelihood of a US rating revision in the medium term.
Ding dong! merrily on high
6 per cent and rising….
Anthony Bolton, manager Fidelity’s China Special Situations Fund, on what lies behind December’s stock market rally:
During the last few weeks the global bull market appears to have resumed.
Mechanics of a European capital flight
A big thank you to Deutsche Bank strategist Peter Garber for this.
It’s a nine-page note oozing with detail about how — precisely — capital flight amongst eurozone members impacts the eurosystem. And it’s timely stuff given that the Bank for International Settlements just reported a (very rough) $107bn outflow from Greece,
The peripheral bond buyer of last resort
As widely speculated — the European Central Bank did indeed ramp up its bond purchases in the week ending December 9, with the Securities Markets Programme buying a further €2.7bn of peripheral eurozone government paper.
BIS > stress tests
Here’s more on those big BIS numbers on banks’ peripheral exposure, complete with a faint haughty whiff of ‘my banking statistics are better than yours’.
We merely think it’s a useful public service announcement.
Profit & loss ‘reversal’ at RBS
It’s October 2008.
We’re in the depths of the financial crisis.
And one almighty debate about mark-to-market accounting.
Under an amendment to IAS39, the International Accounting Standards Body quickly grants banks a temporary reprieve from fair value forces.
Markets Live transcript 13 Dec 2010
Markets Live chat transcript for the chat ending at 12:26 on 13 Dec 2010. Participants in this chat were: Neil Hume, FT bryce.elder NHHola markets rabble NHwelcome to ML
Simon says… how about this for a screeching U-turn?
The bust-up over one of the UK’s largest property transactions continues.
Having said Capital Shopping Centres was “substantially overpaying” for the Trafford Centre, shareholder Simon Property Group performed a spectacular U-turn over the weekend.
China’s non-appearing rate hike
The red hot inflation figures out of China on Friday make it all the more curious why China is pursuing what FT Alphaville calls an “anything-but-rate-hikes” strategy — evident in its move on Friday to raise banks’ reserve requirements,
EFSF capitulation
What fresh EFSF hell is this?
European officials are considering measures to overhaul the eurozone’s €440bn rescue fund, including using it to buy bonds of distressed governments, say people involved in the deliberations.
Big numbers from the BIS
$2,281bn — Foreign exposures to Greece, Ireland, Portugal and Spain.
$107bn — Decline in foreign exposure to the above between April and June.
$81.1bn — German loans to Spanish banks at the end of Q2.
Further reading
Elsewhere on Monday,
- Investing losses: Death by opinion.
- So what kind of investor was John Maynard Keynes?
- The secretive elite that rules derivatives trading.
- 10 business lessons from Christmas movies.
Pink picks
Comment, analysis and other offerings from Monday’s FT,
Paul Myners: Break up Britain’s uncompetitive big banks
The Independent Commission on Banking, chaired by Sir John Vickers, has the task of balancing bank competition with stability,
Snap news
Breaking -re-market news on Monday,
- Wellstream recommends £800m (780p a share) cash offer from GE; to pay a 6p special dividend — statement.
- Capital Shopping Centres knocks back latest proposal from Simon Property Group — statement.