July, 2011
Debt talks and the Monday reaction
In a word: muted.
The lack of progress on US debt ceiling talks over the weekend hasn’t caused a spiral of chaos.
Ten-year Treasury yields were up a few basis point early on Monday. Mohammed El-Erian wrote that the US AAA rating was “extremely vulnerable”.
FTfm on AV
Some highlights from Monday’s FTfm
Focused firms lose market share
Bank and insurance-owned asset managers lost market share in the UK last year, with independent fund managers elbowing the more
[Paul Donovan] Guest editing for the day
Mark your calendars.
On Tuesday July 26, FT Alphaville will be taken over — again.
Paul Donovan, global economist at UBS, will be seizing the reins.
Donovan is not one to shy away from the harder topics in his field so expect some intriguing posts from him come Tuesday,
The weekender
This week on FT Alphaville,
- We counted down to debtmageddon.
- Twice.
- Dodd-Frank celebrated its first birthday, artfully.
- We annotated the Greek financing offer.
- Willem Buiter said water will be bigger than oil.
Further further reading
For the commute home,
- The BBC, Reuters and Al-Jazeera are live blogging events in Norway.
- It’s hot in the US. And in weather derivatives.
- The New York Fed has released its annual report.
August 10 may be the real debt ceiling deadline, says BarCap
Nobody tell Washington, but it may have another week to avoid debtmageddon. Perhaps Congress can have the weekend off after all.
In a note published on July 14, BarCap’s Interest Rates Research team looked at US treasury data from the day before and agreed with Tim Geithner that August 2 was the best guess for when his bag of accounting tricks would be empty.
Doing a Newfoundland
The Amulree Commission on a peripheral debt crisis, 1933:
No part of the British Empire has ever yet defaulted on its loan obligations; in the absence of any precedent, the consequences which would follow from a default by Newfoundland must remain to some extent a matter for speculation.
SOMA takes duration risk on your behalf
Did you know that the Fed’s System Open Market Account (SOMA) — the portfolio in which the Fed stashes all the lovely Treasuries it picks up as a result of its quantitative easing asset purchases — has seen its average duration rise from between two and three years to over 4½ years at the end of June this year?
Its holdings meanwhile have risen by an additional $1,600bn worth of assets.
US Markets Live transcript 22 Jul 2011
Markets Live chat transcript for the chat ending at 15:08 on 22 Jul 2011. Participants in this chat were: John McDermott Cardiff Garcia Joseph Cotterill, FT JMGood morning CGHello!
Licence to Kreil
Investing is difficult. Fortunately, there are wise heads willing to share all of their wisdom and experience in exchange for a modest fee.
Anton Kreil, the portfolio manager in the BBC programme that let eight members of the public trade $1m (£620,000) and run their own hedge fund,
Reminder: US Markets Live starts at 10am New York time
That’s 3pm in London for those who prefer their Americans said in funny accents.
The price is right, Greek bond offer edition
Baa-doing-a-doing! Big jump in Greek bond prices on Friday after Thursday’s “financing offer” agreement. Look at this 2013 bond go. Actually, look at them all go, across maturities.
Deranged relief rally or something else? We are going to go with something else.
A taxing debt issue
Flying beneath our radar last week was a hearing on the tax treatment of debt for both households and business, held by the Congressional Joint Committee On Taxation (tip of the Stetson to Simon Johnson,
That Greek financing offer — annotated
And lo — the cherubim descended on the Institute of International Finance’s Greek bond exchange, and sang… well, what were those dulcet tones, exactly? The Ode to Joy – or the Argentine national anthem…
Why water is energy, not an asset class
On Thursday, the highly esteemed Willem Buiter, chief economist at Citigroup, declared boldly in a research note that water would soon become the next big thing when it comes to commodity asset classes.
Markets Live transcript 22 Jul 2011
Markets Live chat transcript for the chat ending at 11:18 on 22 Jul 2011. Participants in this chat were: Neil Hume, FT bryce.elder NHThat’s better NHIt seems to be working
Piggy banks
This is timely given the relief rally in the European banking sector.
It’s some back-of-the-envelope calculations from Citigroup on the potential magnitude of underinvestment in Europe’s peripheral banks:
Bob Janjuah’s 3 Words
Bob ‘The Bear’ Janjuah has filed his last piece before heading off for his summer hols.
The Nomura man is still forecasting a risk-on melt-up over summer (the S&P 500 into the 1,400s by September,
What’s prudent in collateral portability
Did you notice this bit from the reams of CRD IV material released on Wednesday?
Where an institution acting as a clearing member enters into a contractual arrangement with a client of another clearing member in order to ensure that client the portability of assets and positions referred to in point (b) of paragraph 5,
HBOS uncovered
What’s this that has quietly appeared in the correspondence section of the Treasury Select Committee website?
It’s only a letter from FSA chairman Adair Turner announcing plans to publish (yes publish) a report into the downfall of fat bloke finance house HBOS.
Further reading
Elsewhere on Friday,
- Debt and delusion.
- So can the eurozone survive?
- The subprime crisis, alternative theories.
- The long shadow of (sovereign) CDS.
- Market thickness matters — insights from an Irish fire sale.
Pink picks
Comment, analysis, and other offerings from Friday’s FT,
Barney Frank: We are on course to stop a new financial crisis
One year on from it being signed into law, the Wall Street Reform and Consumer Protection Act is on track to meet its promise,
Snap news
Breaking pre-market news on Friday,
- Vodafone reiterates guidance but sales performance in Europe disappoints — statement.
- TomTom reports Q2 loss after taking large impairment charge — statement.
Further further reading
For the commute home,
- Here’s the deal “for Greece and only Greece.”
- And here are the “voluntary” options open to private creditors.
- The Economist is asking if the eurozone will be here in five years.
Deal announced “for Greece and Greece only” [updated]
And they’re calling it a European Marshall Plan. Really.
The press conference was happening here at pixel time.
Update (8:52pm, London time): The full — finished — statement is here (click to access):
Goldman’s countdown to debtmageddon!
Tick-tock-tick-tock-tick-tock-BOOM!
Okay, not quite.
But we did find this debt ceiling itinerary from Goldman Sachs quite useful. There are more moving parts than a Honda commercial, but it provides a decent description of what happens when (assuming the ‘McConnell plan’ is passed by the US Senate and then mauled to pieces refined by the House):
The debt ceiling and money market funds
Thursday’s New York Times article on Wall Street’s fallback plans for a technical US default and/or a downgrade of the US credit rating has generated a bit of buzz. Here’s the gist:
On Wall Street, Treasuries function like a currency,
That eurozone summit draft — annotated
Via the Telegraph — a complete, but draft, statement from the euro summit being held on Thursday. Seems an official version is still long off but this is well worth filleting in the meantime. Update — PDF copy via the FT here as well.
Some disturbing vehicle correlations
Nicolas Colas, ConvergEx Group chief market strategist, likes looking at correlations.
On Thursday, he’s at it again. This time with respect to the latest seasonally adjusted annualized rate for light vehicle (cars and trucks) sales in the US.