July, 2011
So stressed we’re suspended
Europe’s biggest fallers by the end of Monday’s trading — and notice a similarity with the moves in Spanish and Italian sovereign debt?
Intesa, Unicredit and BMPS had all been suspended at various points before pixel time.
Collective action problem du jour
Chart from SocGen’s stress test note:
Geddit? (Hint: roll-over)
Related link:
Volunteer’s dilemma – Game Theory
Carson Block drinks beer, leaves questions
The Globe & Mail continued its coverage of the Sino-Forest story by sharing a few beers and a Cobb salad with Carson Block.
In a “dude”-laced interview with Andy Hoffman published Saturday, Block reiterates his belief that Sino-Forest is a “fraud”.
Tabb: HFT makes up a third of OTC energy swap trading
Attention over-the-counter (OTC) energy traders who think there’s no prominent high frequency trading (HFT) presence in their section of the market.
A Tabb Group research piece on how HFT practices are likely to creep into credit default and interest rate swaps once the market becomes centrally cleared,
Even more Greek exposure, at local banks
Actually, to put a number on it, the Greek banking system and the two biggest Cypriot lenders possess €13.8bn more exposure to the Greek sovereign than we thought they did, according to stress test disclosures.
Is the debt ceiling drama really all about the GSEs?
You’re looking at an excerpt from the 2008 Housing and Economic Recovery Act. That’s the thing which created the Federal Housing Finance Agency (FHFA), which is currently charged with regulating the US’s massive Government Sponsored Enterprises (GSEs),
The Italian panic, seconda parte [updated]
Italian and Spanish 10-year bond yields — both north of 6 per cent at pixel time (chart via Reuters):
Since Italian political risk isn’t a factor this time, we assume this is evidence of that “liquid proxy for eurozone break-up”
BTPs, the ECB and the SMP
Monday, 3.30pm (CET) is the time.
The time when the ECB releases the data on bond purchases settled in the first part of last week under its Securities Markets Program (SMP).
The SMP has been on hold since the end of March but is widely rumoured to have stepped back into the market last week to halt the advance of Spanish and Italian government bond yields.
Markets Live transcript 18 Jul 2011
Markets Live chat transcript for the chat ending at 11:20 on 18 Jul 2011. Participants in this chat were: Neil Hume, FT bryce.elder NHHola Rabble NHand welcome to Markets Live
Goldman answers 10 questions on Italy
Got questions? Goldman has answers.
The calamari bank — like most of the market — turned its attention to Italy late last week. In particular, economist Lasse Holboell Nielsen took some time to answer 10 “key questions”
Playing provisions to pass a test
It’s not hard to criticise the methodology of Europe’s stress tests.
From the inclusion of mitigating factors not yet undertaken by banks, to the lack of a full sovereign default, you can take your pick,
Market stress
A stress test theme in the biggest fallers in Europe at pixel time:
Although shares in Greece’s Atebank (which failed) were up 8.8 per cent. Marvellous!
European bank admirers anonymous
Let the stress test analyses commence…
Aside from the their acceptance of “mitigation” measures taken by the tested banks, one of the big criticisms European Banking Authority’s stress tests is the rather mild sovereign scenarios they considered.
Further reading
Elsewhere on Monday,
- “You’ve never heard of Jon Stewart?”
- German banks and the PIIGS.
- The difficult business of Greek CDS triggers.
- News Corp: “…the whole thing has a BP feel to it.”
Pink picks
Larry Summers: How to save the eurozone
With last week’s tumult in Italian markets, the European financial crisis has entered a new and far more dangerous phase, writes the Charles W. Eliot university professor and president emeritus at Harvard University and former Treasury secretary .
Snap news
Breaking pre-market news on Monday,
- Glencore to acquire 70 per cent stake in Mina Justa Project for $475m – statement.
- Man Group to acquire Lehman exposure from its GLG Partners subsidiary – statement.
FTfm on AV
Some highlights from Monday’s FTfm
Private banks make lukewarm recovery
Europe’s private banks made a tepid recovery last year but the industry’s fragile profitability will come under new pressure from pending regulation,
The weekender
This week on FT Alphaville,
- We paid peanuts for ETFs and got… a lot of comments.
- Italy found itself the new star of the eurozone debt show.
- China just couldn’t slow down.
- And it continued to have troubles with misvalued land.
Further further reading
For the commute home,
- Les Hinton, Dow Jones CEO, resigns. All Things Digital has posted his memo to WSJ staff and his letter to Rupert.
- Tim Harford on error and the God complex.
- Transitory alert:
No, no, no it ain’t CME babe
Here’s some genuinely sad news out of Chicago on Friday.
Courtesy of Reuters:
Friday, July 15, 2011 3:25:13 PM RTRS – CHICAGO MERCANTILE EXCHANGES SAYS CLOSING ICONIC PORK BELLY FUTURES MARKET
FT Alphaville — or at least this reporter — was blithely unaware of this fascinating part of the commodities business.
Welcome to the Global Sovereign Crisis, says Deutsche
Deutsche Bank’s fixed income research team don’t see any need to beat around the bush.
We’re in the early stages of the Global Sovereign Crisis. End of.
A theme they’ve been pushing for some time now.
The New York Fed’s Maiden Lane pain
The New York Fed may be wishing it cashed in its Maiden Lane II chips back in March.
On Friday it released the first batch of quarterly data on counterparties to its partial sale of Mortgage-Backed Securities acquired as part of the AIG bailout.
Stress, mitigated
So, eight banks officially failed Europe’s 2011 stress tests.
Exactly 20 banks would have dipped below the 5 per cent Core Tier 1 capital pass rate had it not been for capital raising undertaken between January and April of this year,
The evolution of systemic risk
Macro Risk Advisors, headed by Dean Curnutt, are specialists in derivatives strategy. One of their chief occupations is thus evaluating risk and volatility.
Given that, it’s probably fair to say they’re in a good position to comment on matters “systemic risk”
Those European bank stress test results…
They’re here!
Eight banks failed — five Spanish, two Greek, one Austrian — by posting capital ratios below 5 per cent. But sixteen almost failed, posting ratios between 5-6 per cent.
The names of the fallen (we’ll add capital shortfalls as we get them):
Startup stagnation… maybe
We finally got around to reading Kauffman’s new report aggregating various measures of job creation by startups, and which paints a depressing picture of entrepreneurship’s recent contribution to the US economy.
Imagining hypothetical split €-periphery exchange rates
HSBC’s macro currency strategy team has a vision.
A vision of how the euro might have performed had it been split into two currencies back in 2009.
Using the performance of the Swiss franc as an input,
Eurozone CDO – it’s triple-A time
Readers may recall a likening of the eurozone to a giant collateralised debt obligation earlier this week.
Greece, Ireland and Portugal formed the equity slice, with Italy in the middling mezzanine,