March, 2011
[Gavyn Davies] MPC still split in four directions
The minutes of the Bank of England’s MPC meeting in March released on Wednesday morning show that the committee lines up in exactly the same way as it did last month.
One member (Posen) wants to ease monetary policy,
ESM panic! Subordination, restructuring, CDS, oh my!
Out, erm, yesterday. The term sheet for the ESM.
Details of the European Stability Mechanism, released on Tuesday, promptly sent European peripheral bond yields in a reverse tail spin. As we’ve noted before,
[Gavyn Davies] Has global economic growth peaked?
Risk assets have not had a great month so far, with global equities now having eliminated most or all of the gains they recorded during January and February.
It is tempting to view recent setbacks as a natural response to the heightened uncertainty which has been caused by an extraordinary combination of exogenous shocks hitting the system.
Egypt reopens for business
The Egyptian stock exchange has reopened for business on Wednesday morning but not without a hiccup or two.
Seconds after trading commenced the circuit breakers kicked in and the exchange was forced to suspend business.
‘The Central Bank of Benghazi’
Money is the artery of war.
- Peter the Great (attributed)
For a market missing some high-quality Libyan oil and wondering what happens if there’s going to be a long civil war there,
[Gavyn Davies] Did Her Majesty sign the OBR Act?
I am informed that the Treasury was on tenterhooks last night, waiting for confirmation that the Queen had given the royal assent to the bill which establishes the Office of Responsibility in its final official form.
A warning signal from the Bund/Treasury spread
This sounds a bit disconcerting from Charlie Diebel at Lloyds TSB on Wednesday:
One of our key comparative metrics is flashing Red this morning and that is in the 10yr Bund/T-Note spread. Our models have
[Gavyn Davies] A very big day for UK economic strategy
This is a very big day for the UK economy, with the MPC minutes at 10.30am [GMT] and the Budget at 12.30pm, so I am going to kick off with that.
I wrote a commentary on UK macro economic strategy for the FT on Wednesday,
The 2011 Budget – a fine print primer
Ah, the Budget.
Taxes, benefits, sweeteners, dubious forecasts, the Gladstone box, drinking in the House (just the Chancellor, mind, if he so chooses), and Treasury civil servants staggering out of 1 Horse Guards Road to the nearest pub like students after a final exam.
[Gavyn Davies] Further economics reading
Elsewhere on Wednesday,
- Cullen Roche on what really causes hyperinflation.
- Ex maestro Greenspan attacks policy activism in the US.
- Berkeley Prof Brad DeLong says Greenspan is wrong.
- Paul Krugman on why economists disagree about the stimulus…..
Pink picks
Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: How China should rule the world
“Reform and opening up” has been China’s mantra for more than three decades, writes the FT’s Martin Wolf.
Snap news
Breaking pre-market news on Wednesday (UK Budget Day),
- Unicredit says profits down 22 per cent; blames Kazakh business — statement.
- Portugal’s Espirito Santo Financial Group sees net income fall 22.4 per cent year on year — statement.
[Gavyn Davies] Guest editing for the day [updated]
FT Alphaville is being taken over … again.
On Wednesday March 23, Gavyn Davies, the FT.com blogger, former Goldman Sachs economist, adviser to No 10 and chairman of Fulcrum Asset Management, will be taking the controls.
Further further reading
For the commute home, or while wondering if expedia also does tax holidays,
- Do not gloss over munis’ frailties.
- Gulf SWFs (unsurprisingly) are revisiting their investment strategies.
- A tax holiday for MNCs is a very bad idea.
Yemen matters
Yemen continues to crumble on Tuesday, Reuters reports:
Yemeni President Ali Abdullah Saleh’s 32-year rule seems near collapse. His exit would spell uncertainty for his broken country and discomfiture for U.S.
From the Libor file
FT Alphaville loves documents sent in anonymous brown paper envelopes.
Here’s one we received Tuesday:
The envelope’s contents?
A 2008 paper by a group of academics (plus a Moody’s credit officer) that’s become suddenly re-relevant (new word) given the investigation into suspected Libor manipulation by a number of banks announced last week.
Beware your Japan ETF exposure
Every time you switch on the financial TV networks all anyone is talking about is the EWJ exchange-traded fund.
As if it’s a perfect proxy for Japan.
Well, it’s not.
Well, not completely.
We’ve already noted the weirdness of the huge inflows experienced by US-listed Japan ETFs last week — something that was definitely not connected to the Bank of Japan’s asset purchases,
Student loans: debt, defaults and delinquents
The Everest for-profit education network says of a decision to attend one of its colleges: “It’s a decision that deserves respect.”
Perhaps — but it’s definitely risky.
According to new provisional data from the US Department of Education assembled by the Chronicle of Higher Education,
Allied Irish coupons: still alive
Some palaver in the market on Tuesday that one or the other of a) Ireland or b) Allied Irish Banks had missed a coupon payment…
It’s not true. On either count.
But there’s an interesting anatomy to the rumour.
More on that 100,000-year ‘tail risk’
The above is a presentation from a representative of Tokyo Electric Power on the subject of spent fuel storage at the Fukushima nuclear power plant. In November 2010, it was delivered to the IAEA.
The Fed and its MBS portfolio
Interesting note, this.
It’s from the banks team at RBS and it looks at the reaction to Monday’s news that the US Treasury plans to sell $142bn of Mortgage-Backed Securities (MBS) purchased during the crisis as part of its Fannie Mae and Freddie Mac bailout.
The rantings of an ex-maestro
Alan Greenspan’s latest in CFR’s International Finance, wherein the former Fed chair blames ‘government activism‘ for the current (paltry) state of the US recovery.
And a big thanks to Paul Krugman for the title.
Europe’s baffling secret liquidity
Right. Ignore our eurozone liquidity maths from last week.
ECB unlimited liquidity + ELA unlimited liquidity = eurosystem unlimited liquidity, more or less. That should be; ECB unlimited liquidity + ELA unlimited liquidity ≠ eurosystem unlimited liquidity,
Markets Live transcript 22 Mar 2011
Markets Live chat transcript for the chat ending at 12:22 on 22 Mar 2011. Participants in this chat were: Neil Hume, FT bryce.elder NHHola Rabble NHwelcome to ML NHan hour or so of markets fun
It’s not the BoJ that’s been buying the EWJ
Here’s a quick supplement to FT Alphaville’s post on Friday about post-earthquake flows into the iShares MSCI Japan fund.
Citigroup confirmed in a note on Friday that the flight from disaster took place everywhere but the disaster site:
Japan: supply chain update
We’ve brought you an update of the situation at Japan’s strickent Fukushima nuclear power plant. So here’s a bit more from JPMorgan economist Masamichi Adachi
In terms of the macroeconomic impact in the aftermath of the earthquake and tsunami,
Japan: the nuclear backlash
There is a growing backlash in Japan about what many Japanese — and also expats, judging by sentiments voiced in conversations we’ve had in Tokyo — see as sensational or even hysterical reporting in the wake of Japan’s March 11 earthquake and tsunami.
The wrong kind of inflation, the ironic austerity [updated]
Update: The inflation number’s out — and higher than expected. February saw CPI at 4.4 per cent, RPI at 5.5 per cent, which rates are at highs not seen since 2008 or 1991 year on year, respectively. The ONS said that clothing,
The Ian Dyson detox plan
Punch Taverns — aka the Toxic Pub Company — won’t be handing back the keys to its troubled tenanted inns after all.
Chief executive Ian Dyson has decided on a break-up instead, creating a pub world equivalent of a ‘good bank’ and a ‘bad bank’.