March, 2011
Chasing shadows
FT Alphaville suggested on Wednesday that Dodd-Frank is likely to be a bigger boon to the shadow banking system than — as others have suggested — to European banks.
We’re still getting our heads around the right approach toward shadow banking (and how best to define it) but a couple of insights from recent speeches on the topic caught our attention and may be of interest.
The great Gaddafi cash call
By this point, the assets of the Libyan Investment Authority are frozen in just about every major financial jurisdiction. Except, of course, Libya.
So, a quick question. Is a sovereign wealth fund financing a war?
Because here’s a revelation from the NYT:
China’s copper as collateral addiction
On Wednesday, we drew attention to a Standard Chartered report which claimed that as much as 550kt of copper was stockpiled in bonded warehouses in Shanghai by late February — the majority of it being used as collateral for securing financing deals.
Markets Live transcript 10 Mar 2011
Markets Live chat transcript for the chat ending at 12:31 on 10 Mar 2011. Participants in this chat were: Neil Hume, FT bryce.elder NHMorning markets rabble NHwelcome to Markets Live
How big the BoE’s interest rate bind?
Europe’s central bank is in a tight spot when it comes to rates and mortgages.
That much we know.
The ECB can’t raise rates without causing at least a degree of pain for home owners in the periphery — where most of local leverage is based on floating rates.
TalkTalk(ing) non bid rumours
Shares in TalkTalk Telecom Group, Britain’s second-biggest broadband provider, are sharply higher on Thursday morning.
But if any broker tries to push the tired old Vodafone takeover story, tell them to xxxx off.
China’s surprise trade deficit? Blame it on the moon
The markets are all a-flutter with news of China’s ‘shock’ trade deficit.
The People’s Republic posted a deficit of $7.3bn in February, its biggest in seven years, according to Reuters. Initial reaction was swift,
Carry trade as canary in the coalmine
BNY Mellon’s Simon Derrick briefly mentioned the carry trade last week.
This Thursday, the currency strategist is back with more detail
Think of the trade (where investors buy low-yielding currencies to fund purchases of higher-yielding currencies/assets) as a canary in the (crisis) coalmine,
Shooting the messenger – Spanish edition
It’s not quite as forceful as the Greek response — not yet anyway — but Spain has hit back at Thursday’s Moody’s downgrade.
Via Reuters:
RTRS-SPAIN’S TREASURY SAYS SURPRISED BY MOODY’S DOWNGRADE BEFORE BANK OF SPAIN BANK CAPITALISATION DATA.
The mysterious disappearing exchange tie-up, Japanese-style
It was all looking so good for Japan’s markets — just for a little while — on Thursday.
That was after Bloomberg picked up on Japanese media reports that the Tokyo Stock Exchange was planning merger discussions with the Osaka Stock Exchange.
Further reading
Elsewhere on Thursday,
- Kim Jong-Il and the carbon markets.
- Has the Hotelling moment arrived?
- The new normal at Bank of America Merrill Lynch.
- A black market for mobile food carts.
Pink picks
Comment, analysis and other offerings from Thursday’s FT,
John Gapper: McKinsey model springs a leak
The vast probe into insider trading on Wall Street that culminated this week in the trial of Raj Rajaratnam in New York was always likely to ensnare a large institution,
Snap news
Breaking pre-market news on Thursday,
- Home Retail Group warns group profits are now expected to be between £250m and £255m — statement.
- WM Morrison invests £32m in FreshDirect, a New York based internet grocer;
Further further reading
For the commute home, and to help you qualify the recovery,
- David Wessel spots three storm clouds in the US recovery: oil, rich-country government policy, and emerging market slowdown.
- David Leonhardt spots a few more.
US Markets Live — tell us what you want to know… [updated]
Update (9:16pm GMT): Yup, that’s right, we’ve just splashed out on a new logo. Hope you like it. (H/T @tombrammar)
FT Alphaville can exclusively reveal the real reason Bill Gross is stockpiling cash today — he’s waiting for the first US Markets Live on Friday,
More proof the Chinese have been using copper as collateral
The disconnect between oil prices and copper prices is gaining increasing attention.
Naturally, the curiosity boils down to the fact that while oil prices are rising, copper prices are doing anything but:
The where and what of regulatory arbitrage
Get the little flags at the ready: on Tuesday JP Morgan Cazenove published the final installment of its trio of reports on regulatory arbitrage.
It is stirring patriotic sentiment up on Capitol Hill,
Two years of sovereign debt solitude
We’re not inclined to call Portugal’s €1bn auction of 2013 bonds on Wednesday a failure exactly. At least the bonds were actually sold.
Even if at a yield of 5.99 per cent, versus the last auction price of around 4 per cent.
A big Treasury short
US Treasury repo rates are back in negative territory.
According to Reuters, both 10-year and 30-year bonds are currently trading “special” in the general collateral market.
The 10-year’s repo rate to March 15 was quoted on Tuesday at minus 45 basis points,
Gross dumps his US government debt
Holdings of US Treasuries at the world’s largest bond fund — Pimco’s Total Return — have fallen to zero. Bill Gross really isn’t hanging around for the waitress’s reaction.
(Via Zerohedge).
Dual track no more
Nestled in the 27-page mortgage settlement term-sheet which surfaced earlier this week, is a clause that could have big consequences for mortgage investors.
It looks like this:
It’s been a while coming — but it looks like the US will move towards eliminating the process,
A Greek diaspora bond odyssey
Filed to the SEC on Tuesday — Greece’s shelf registration for the diaspora bonds aimed at widening the Hellenic Republic’s investor base. All the way to the US.
A key point — regarding jurisdiction:
Synthetic junk
Here’s an interesting Wednesday story from the Financial Times’ Aline van Duyn.
It concerns growing demand for a synthetic product — this time linked to junk, or high-yield, bonds. The market size of the product (which is tranched and linked to Markit’s CDX index) is still relatively small.
‘Robert Tchenguiz knows a good deal when he sees one’
From page 75 of the Kaupthing annual report, 2006:
Robert Tchenguiz knows a good deal when he sees one. In fact, it is precisely this business acumen that enabled him to grow an enterprise,
Iceland vs Greece
The comparison between Iceland’s banking crisis and Europe’s debt version has been made before — most notably by Paul Krugman, and regarding Ireland specifically.
Iceland, the theory goes, declared a swift bankruptcy and devalued the krona.
A call for a global independent central bank
Lorenzo Bini Smaghi, European Central Bank executive board member, has made a beautifully coherent argument for the need for a global independent central bank.
In a speech made on March 4 (via the Bank of International Settlements), he points out:
Markets Live transcript 9 Mar 2011
Markets Live chat transcript for the chat ending at 12:35 on 9 Mar 2011. Participants in this chat were: Neil Hume, FT bryce.elder NHMorning rabble NHwelcome to ML NHfirst
More on Japan’s odd metamorphosis…
No, it wasn’t Wednesday’s earthquake, even though it prompted the normally staid fixed income commentators at RBS Securities Japan to end their daily Japanese government bond market note thus:
Northern Japan was hit by a 7.3-magnitude earthquake at lunch time.
What’s going on at the Tchenguiz bros’ offices? [updated]
Curzon Street in London’s Mayfair, Wednesday morning:
Update: And the Serious Fraud Office’s statement.