January, 2011
Correlation trading and the WTI-Brent spread
Another day, and another widening in the WTI-Brent front-month future spread — this time to what looks to be approaching record wides.
The spread hit as much as -9.50 on Monday and according to Bloomberg data the record for the differential stands at -10.67,
Markets Live transcript 24 Jan 2011
Markets Live chat transcript for the chat ending at 12:26 on 24 Jan 2011. Participants in this chat were: Neil Hume, FT bryce.elder
NHHola
NHMarkets rabble
NHit’s 11.03am
Great mysteries of our time… continued
That’s right, at pixel time shares in the loss-making UK internet grocer Ocado were changing hands for 242p, giving it a market value of a cool £1.2bn.
We think the most recent spike has been caused by short covering,
Buiter on Europe’s secret liquidity operations
Willem Buiter wants you to familiarise yourself with the ELA.
That’s the Emergency Liquidity Assistance that the eurozone’s national central banks (NCBs) are able to provide their local banks under some legal fuzziness in the eurozone.
Some UK M&A candour
As we have discovered in recent weeks there’s a greater chance of getting blood from a stone than a UK-listed company voluntarily confessing to M&A activity.
So it’s to Serco’s credit that it has has attempted to set the record straight following reports which claimed the outsourcing firm had made a $2bn offer for SRA International,
EFSF buyback maths
Here are some useful calculations courtesy of Bank of America Merrill Lynch.
They’re to do with that idea of using loans from the European Financial Stability Facility (EFSF) to let troubled eurozone countries buy back their own bonds.
Further reading
Elsewhere on Monday,
- Why volatility could spike.
- How I screwed Yasser Arafat out of $2m.
- “QE2 did seem to have an effect on public perceptions.”
- John Hempton does Fannie and Freddie.
Pink picks
Comment, analysis and other offerings from Monday’s FT,
Clive Crook: Obama must woo business to win
Asked last week what was needed to revive the US economy, Jeff Immelt, chief executive of General Electric,
Snap news
Breaking pre-market news on Monday,
- Greencore ‘considering its options’ after Northern Foods recommends Boparan bid – statement.
- Serco responds to weekend bid rumours; says not in discussions regarding any major transaction — statement.
FTfm on AV
Some highlights from Monday’s FTfm.
Momentum effect gains new admirers
Buying winners and selling losers is gaining popularity with the launch of a new class of ETFs and mutual funds based on momentum strategy.
Further further reading
For the commute home; have a great weekend:
- Jeff Immelt is the latest to join Obama’s bailout boys
- Jamie Dimon kisses and makes up with POTUS
- California’s treasurer rubbishes bankruptcy
Brains, games and automatons
‘But boss, my orbitofrontal cortex made me do it.’
You may want to try that excuse next time you’re in trouble with a bad trade.
That’s one possible implication from a primer on neuroeconomics published Thursday by the Royal Society,
Just another Chinese cash crunch
China is overheating, and it might have a wee inflation problem, but no bank liquidity crisis would ensue from compensatory tightening, right?
OK then. Move along, nothing to see here in the one-week repo rate,
Bankrupt ideas for states
Is this how it starts?
The New York Times has splashed on whispers of backroom (mainly Republican) Congressional musings on ways for states to declare bankruptcy — an option not currently open to states under federal law.
Why are gilts still going?
We ask, since ten-year gilt yields only just reached an eight-month high on Friday:
Remember when UK government bonds were on top of the world?
It was, err, four short months ago. Nomura’s Sean Maloney and Guy Mandy haven’t forgotten (emphasis ours):
More on silver backwardation
We promised some comment on the silver backwardation story we did earlier, and now we have some.
The story continues with Friday’s LBMA silver forward rates (SIFO) settling in at negative as far out as 12 months for the second day in a row.
A tale of a two execs (in one chart)
Click to enlarge:
Related link:
“Google Docks”, or, how to generically and pompously write the Schmidt story – FT Alphaville
From Fed run-offs to super-sized Treasury auctions
From RBC Capital Market’s Michael Cloherty:
As we discussed last week, the Fed is likely to start shrinking its balance sheet by allowing maturing Treasuries to run off as early as the fourth quarter.
Leaving the APS [updated]
RBS has moved smartly higher on Friday morning:
That’s in response to this story from the FT’s banking editor Patrick Jenkins.
Executives at Royal Bank of Scotland and officials at the Treasury
Markets Live transcript 21 Jan 2011
Markets Live chat transcript for the chat ending at 12:24 on 21 Jan 2011. Participants in this chat were: Neil Hume, FT bryce.elder NHHola NHand welcome to Markets Live
The food price vulnerability index
Behold, the Tilt countries where interest rates are most at risk in a food heavy inflation environment.
No prizes for guessing who comes out on top:
China!
The index has been created by Citigroup and its based on the idea that a country’s central banks are more likely to have to respond to a food price shock if:
FROB!
There a rising interest at the moment in how Spain would be able to get significant recapitalisation for its worst-off banks, the cajas, financed.
Private / Sovereign / Supra-sovereign?
At least we knew a bit more about what the recapitalisation fund itself thinks on Friday.
Silver backwardation is here
Something is definitely up with silver.
Earlier this week we reported that rumours of physical silver shortages were doing the rounds in Europe.
On Friday, something stranger has taken place.
The silver forward rate — known as SIFO and published daily by the London Bullion Market Association — did something very unusual over the course of Wednesday and Thursday.
China: Unstoppable powerhouse, or ‘more like us’?
Yes it might well be China’s year, or decade – or century, for that matter. But for now, at least, it’s China’s week, with leader Hu Jintao’s visit to the US generating a frenzy of deals and media coverage.
Further reading
Elsewhere on Friday,
- A people’s economics.
- Thatcher was right.
- The Dodd-Frank headache for small – and successful – hedge funds.
- What a difference 20 years makes: Shanghai in 1990 and 2010.
Pink picks
Comment, analysis and other offerings from Friday’s FT,
Gillian Tett: Lisbon move points to end of risk-free sovereigns
Another week, another bout of angst about sovereign and municipal risk. But as investors fret about Spain and Belgium – or Illinois and California – they should take a close look at a fascinating little development in Lisbon,
Snap news
Breaking pre-market news on Friday,
- Espírito Santo Financial terminates its contract with Fitch — statement.
- National Grid to review details of disappointing Niagara Mohawk rate case — statement.
“Google Docks”, or, how to generically and pompously write the Schmidt story
Lede: The regency is over. The young princes are all growns up. Marie de’ Medici Schmidt departs.
2nd par: Back in 200X Eric Schmidt was Google’s top search result. But worries that he has hindered the growth of a more diversified,
Further further reading
For the commute home, or while you’re waiting for Larry Summers to find you a job,
- The most overvalued currency in the world.
- Larry Summers is the worst.
- Larry Summers is not the worst.
Brics flip-floppery flimflammery
A tilt of the hat to our old friends for passing along this chart and commentary from Citigroup:
Global Emerging Markets — Long Big Countries
In 2011, our Global EM strategists expect their large markets to reverse last year’s underperformance.