August, 2011
Bank of England: “substantial downward risks”
Or to put it another way, the Bank’s fan charts are fanning out so much it’s ridiculous.
Here are two, via the Bank of England’s latest Inflation Report:
First on GDP (getting a bit negative there…):
Another way to impair Greek bonds
Another way to swap them too?
Interesting fact: Commerzbank’s Greek bond exposure is almost all positioned in maturities after 10 years. Ostensibly, the current IIF financing offer for Greece targets bonds maturing before 2020.
Nobody messes with the SNB
Tuesday’s FOMC decision to extend a low rate environment until at least 2013 caused both the euro and the dollar to weaken quickly and significantly against the Swiss franc.
Never to be upstaged, the Swiss National Bank has now come out with its own counter-appreciation move for the Swiss franc.
Further reading
Elsewhere on Wednesday,
- Michael Lewis does Germany.
- Ben “SCOTUS” Bernanke.
- Why mid-2013 isn’t a random date for the Fed.
- China can’t carry on like this forever…
- The uncertainty shock.
Pink picks
Comment, analysis and other offerings from Wednesday’s FT,
Martin Sandbu: Beware the ECB’s brave new world
Jean-Claude Trichet, president of the European Central Bank, has torn up his institution’s implicit rule book by buying Italian and Spanish sovereign debt, writes the FT’s economics leader writer.
Snap news
Breaking pre-market news on Wednesday,
- Commerzbank profits wiped about by €760m Greek impairment hit; but loan provisions elsewhere show improvement– statement and report.
- HSBC sells US credit card and retail services business to Capital One;
Further further reading
For the commute home,
- Why the Fed move has pushed investors into stocks.
- Whack-A-Mole in China’s housing market.
- Sayonara, recovery?
- The economics of riots.
- The difference between S&P and Moody’s.
Operation Twist — and shout
Strange, fast, markets. The S&P 500 closed at 1,172.53, up 53 points, or 4.74 per cent. That’s the biggest one day rise since 20 October, 2008. 10-year Treasury yields touched crisis lows. And the US dollar…
Yields at record lows and it’s EURUSD vs CHF
Looks like QE2.0 is going down a treat in the FX and bond markets.
First, 3-year, 5-year, and 10-year charts.
Nice little price bump here for those buying 3-years at the first post-downgrade auction.
FOMC statement – 9 August 2011
It’s here! We’re saved!
Wait a minute….
The full FOMC statement for August 9 is pasted below for your reading pleasure.
It’s more QE2.0 than QE3.
There are two key changes.
First, the Fed has given a semi-specific date for the continuation of the federal funds rate at “exceptionally low levels”.
Found: the patriotic relief rally
The US treasury conducted its first post-downgrade auction of Treasuries on Tuesday and, guess what, it’s a record breaker.
Three-year yields were sold at a record low yield of 0.5 per cent, which means the US could easily be confused for a AAA sovereign:
Anarchy in the UK
Relax everyone, the UK’s haven status and AAA rating is safe.
Or so says Nomura in a ‘Riot’ special.
Selected highlights, emphasis ours:
The initial spark was a protest over the fatal shooting of a man by the police.
Flat BAC
Seems the only way to describe Bank of America’s CDS curve after Monday’s (margin?) disaster. Citi appended for contrast:
One-year BAC CDS jumped from 99bps to 285bps, according to Markit data. Well.
Goldman: cutting, repoing, provisioning, losing
Goldman’s 10Q was released this morning and it adds some interesting detail to its mixed Q2 earnings.
There were 15 days when it posted a trading loss in daily trading revenues, compared to just one day in Q1.
What price, sovereign risk?
…And whither banks?
RBS with some interesting detail on ECB bond-buying tallies so far:
ECB intervention by a consensus of various polls that we have heard and our own estimates coalesce near Eur3-4bn yesterday,
Edwards says this has nothing to do with that downgrade
Thought the current turmoil was down to the downgrade of US debt? Wrong!
According to Societe Generale’s uber bear, Albert Edwards, this has absolutely nothing to do with S&P, the White House, Tea Party etc.
The distressed euro, via French (and German) CDS
The ECB managed to reduce Spanish and Italian borrowing costs on Monday. But both French and German yields rose, and CDS widened. France was apparently one of the most heavily traded sovereign CDS on Monday.
Markets Live transcript 9 Aug 2011
Markets Live chat transcript for the chat ending at 11:26 on 9 Aug 2011. Participants in this chat were: Neil Hume, FT bryce.elder NHhola NHso NHLondon on fire
Großdeutschland, CDS edition
GERMAN 5-YEAR CREDIT DEFAULT SWAPS RISE ABOVE UK CDS FOR FIRST TIME-MARKIT
An up-scaled EFSF being priced in? Or something else. Discuss.
Canaries and mines
Nothing has been harder hit in the current market swoon (in London at least) than the mining sector.
Which begs the question of what’s now being priced in?
As luck would have it, Citigroup has run some numbers and concludes:
Official: FTSE 100 in bear market
Low on Tuesday at pixel time of 4855.35 = off 20 per cent from the FTSE 100′s February 2011 high of 6091.33:
MSCI All-World not far off a bear market either. This sucker’s going planetary. Update (0938 UK time):
Let’s twist again…
… like we did in the 60′s, when President Kennedy was in the White House. The US economy was in recession, had trouble with a lingering trade deficit, and there was an outflow of gold from the United States to Europe amounting to several billion dollars per year.
The QE3 rallies start here
We may need that other rally monkey.
The one for rallies that go, er, upwards. At least in Australia, where the ASX/200 has closed higher. Helped no doubt in part by the roller coaster journey taken by the AUD:
Further reading
Elsewhere on Tuesday,
- “The underclass lashes out.”
- July 2010: ”Krugman or Paulson: Who You Gonna Bet On?”
- Krugman, as it turns out.
- (Cue typical Krugman modesty)
- More on those equity margin calls (and high yield)
- Treasuries as Giffen goods.
Pink picks
Comment, analysis and other offerings from Tuesday’s FT,
Otmar Issing: Slithering to the wrong kind of union~
The crisis of European economic and monetary union seems to confirm a long-standing belief that monetary union cannot survive without political union,
Snap news
Breaking pre-market news on Tuesday,
- HSBC confirms discussions to sell US credit card and retail services business — statement.
- Danske Bank Q2 profits beat expectations; impairments fall — statement.
Asia update: It’s getting grimmer
Firstly, the Chinese official inflation figures for July came in higher than expected: 6.5 per cent compared with an average forecast of 6.3 per cent in Reuters and Dow Jones polls — the highest monthly increase for three years.
Don’t come looking to Asia for relief
Just in case you were thinking of it. The un-rally monkey is here, too:
Except for gold:
Hang Seng opens soon.