December, 2010
FTfm on AV
Some highlights from Monday’s FTfm.
Alarm over rise in US bond yields
The UK’s largest investment manager has warned of a potentially ’catastrophic‘ rise in US Treasury yields in the wake of the ’extremely irresponsible’ fiscal policy being adopted by Washington
Barclays set to launch own asset manager
Barclays UK Retirement Fund is setting up its own asset manager,
The deficit in public opinion
Opinion polls, like provencal steak, are best served with a fistful of salt.
However, a couple of releases from the Pew Research Center (Thursday) and Bloomberg (Friday) might be of interest to those who have been following the tax cut and/or deficit debates over the last weeks.
Further further reading
For the commute home,
- Build America Bonds: still not in the tax deal
- American well-being still at 2010 low, according to a Gallup survey
- Dani Rodrik: “For the moment, the eurozone may well have reached the point where an amicable divorce is a better option than years of economic decline and political acrimony.”
Another milestone for junk debt
Courtesy of Reuters, a new milestone for junk debt issuance:
The volume of global high yield corporate debt topped $300 billion this week, shattering the all-time annual record for high yield bonds set in 2006 ($185.0 billion).
US-China export puzzle
The big story on the trade balance figures released this morning is that US exports climbed to a two-year high in October on the back of a $4.9bn monthly boost over September. Imports declined by $0.9bn.
Merkel-mouth
NEIN
– Angela Merkel on expanding the EFSF (paraphrased, via Alea)
Interesting to note that Spanish and Italian government bonds have drifted higher this week (and Belgium just won’t budge or back down).
Goldman’s uneasy subprime short
In early 2007 Wall Street was in the early stages of the subprime crisis.
Spreads on the ABX indices, which had become synonymous with the crisis, were falling. And Goldman Sachs was about to do something which would eventually lead it to a $4bn profit and make it one of the last banks standing on Wall Street.
Bonds: Bubble, bubble, toil and trouble
After this week’s mass sell-off in Treasuries, debate is still raging about whether this is a bursting bond bubble — and whether we should all be stampeding into equities and out of commodities (or even,
What a difference an EFSF year makes [updated]
There’s something not quite right about this Goldman chart:
Oh yes — now we realise. The European Financial Stability Facility was originally supposed to be able to take peripheral sovereigns off the debt market for three years,
Markets Live transcript 10 Dec 2010
Markets Live chat transcript for the chat ending at 12:08 on 10 Dec 2010. Participants in this chat were: bryce.elder Tracy Alloway BEGood morning BEAnd welcome BETo Markets Live
China: The kings of quantitative easing
There’s a smashing point made by Richard Duncan, chief economist at Blackhorse Asset Management, in the following Bloomberg article on Friday.
When it comes to QE2, he says, China is in no position to complain about anything.
Spain is all about the banks
Fact du jour — Spanish debt-to-GDP ratios aren’t actually (relatively) that bad.
In terms of eurozone contagion then, what tends to spook investors is really the possibility of a banking crisis swiftly feeding into Spain’s public finances — especially given that Spanish banks are still quite reliant on short-term wholesale funding.
Contingent liabilities, letter of credit edition
The Lehman Crisis of 2008 had a conflicting effect on the use of letters of credit (LCs) in trade finance and collateral markets.
On the one hand, companies using LCs issued by what were then considered vulnerable institutions got locked out of markets as suppliers and trade partners refused to accept the paper for fear of bankruptcy exposure.
Further reading
Elsewhere on Friday,
- A Treasury curve refresher.
- ‘Back to the Future’ in forex.
- How Gordon Brown saved the euro.
- The eurozone needs a psychiatrist.
- Does the US need factories to be an economic power?
- Will Poland rethink the euro?
- Copper ETF reality check.
Pink picks
Comment, analysis and other offerings from Friday’s FT,
Philip Stephens: A risen China reaches for power
China is in unapologetic mood, writes the FT’s Stephens. Not so long ago Beijing routinely protested its anxiety not to disturb the established international order.
Snap news
Breaking pre-market news on Friday,
- Flybe prices IPO at 295p per share — statement and statement.
- City Link managing director resigns; Rentokil Initial warns full year performance unlikely to improve — statement.
Further further reading
For the commute home,
- Barry Eichengreen: European debt restructuring is inevitable.
- Household worth in the US rose by 1.2 trillion in Q3.
- Author of a book called “End the Fed” to take over House panel that oversees the Fed.
Charts du jour, the next phases of Dodd-Frank
Dates for the diary, courtesy of KBW’s Washington research group:
US unemployment, qualified
It’s been nearly a week since the atrocious payroll report for November seemingly put a halt to what was starting to look like a nascent jobs growth recovery. The report was especially surprising as it defied favorable economic indicators released in the preceding weeks.
Stimulating, selectively and statistically significantly
The tax cut package is proving stimulative already – at least in terms of encouraging debate in the wonkosphere.
We continue to share the unoriginal view that extending the tax cuts for those earning above $250k will not provide the best bang to buck ratio.
The bloodbath dries up, for now
As any scotch drinker will tell you, 30-years are a strong tipple:
Results just out on Thursday from the auction of $13bn worth of 30 year Treasuries:
Treasury auctioned $13B re-opened 30-Yr bonds at 4.410% versus a 1pm level of 4.463% so the auction came through by -5.3bps.
Rollover is all
Chart via Stefano Di Domizio of Lombard Street Research. Here’s another chart via Zero Hedge — purportedly of Wednesday’s price list of Greek, Portuguese and Irish government debt sent across to bond trading desks by the ECB:
Further confessions from a banknote printer
What chance an increased offer for troubled banknote printer De La Rue? Not much, if the 2009 consolidated accounts of French bidder Oberthur Technologies are anything to go by.
Analysts have crunched the numbers and calculated that a fresh offer of 905p would take gearing at the private company to five times,
Everyone should relax about rising nominal yields
Dan Indiviglio writes on what is turning out to be a common (and reasonable) worry about the rising yields on US Treasuries in the aftermath of the tax cut deal:
This must be pretty discouraging for the Fed.
Italian sub debt differenza
So what’s up with Banco Popolare and Monte Dei Paschi Di Siena?
We ask, because credit default swaps on these two Italian banks’ subordinated debt have recently rocketed off from their peers.
Here’s a chart we’ve made courtesy of Markit data:
Central bank mash-up, carry bash-up
China started it.
Quantitative tightening has been bandied about recently as the way in which the People’s Bank of China is combating QE. At a time when rate hikes may not be enough, other tools have to be considered for dealing with surging capital inflows in search of Chinese yield.
Markets Live transcript 9 Dec 2010
Markets Live chat transcript for the chat ending at 12:16 on 9 Dec 2010. Participants in this chat were: Neil Hume, FT bryce.elder NHHola Rabble NHwelcome to Markets Live