August, 2011
A CDS basis “pain trade”
There is much speculation of short-selling bans in one or more European equity markets at pixel time. An old fear in the credit and fixed income markets trading the sovereigns, of course. An old fear with a deeply ironic effect on sovereign CDS at the moment…
Fundamental investing
To those who say the stock market is nothing more than a casino we present the following:
Add to that Thursday’s 192 point swing…
… and we get the big dipper (which has been seen in other stock market constellations)
Perhaps it would be best if the equity market went on holiday for the rest of August.
When a government bond becomes a Giffen good
So, Swiss short-term market rates are now fully negative:
But it’s not just short-term rates. As of Thursday anyone holding two-year or three-year Swiss bonds is apparently demanding that the price exceeds the coupon-included return in order to be tempted to sell.
Introducing: the Black Cod Index
Regular readers may be familiar with The Big Mac Index, The Economist’s beef-based gauge of international purchasing power parity (PPP). They should also be aware of its biggest limitation, namely the socioeconomic uniqueness of every country measured.
Well played, NY Daily News
Marginally more tasteful than a hooker’s drawers anyway… (H/T Michael Roston)
There are many ways to count Chinese debt
Let us count them… or at least, begin to.
The People’s Bank of China in February acknowledged that official credit financing figures weren’t adequately capturing non-bank lending, so they began to publish broader figures under the moniker “total social financing”
La chute, encore
Having rallied up earlier on Thursday — European bank share are promptly de-rallying. And on no news so far as we can tell.
Société Générale:
Unicredit:
Intesa Sanpaolo:
Markets Live transcript 11 Aug 2011
Markets Live chat transcript for the chat ending at 11:29 on 11 Aug 2011. Participants in this chat were: Neil Hume, FT bryce.elder Izabella Kaminska NHBonjour NHBienvenue
Funding stress in Euroland, continued
SocGen CDS is still sticking out like a sore thumb even if the equity panic is over for now. Up 37bps to 371bps on Thursday — whereas Credit Agricole swaps have fallen according to Markit.
So, Nomura’s European banks equity analyst Jon Peace,
Goldman delivers another Ocado downgrade
And now for something a little lighter than all this sovereign debt, bank funding stuff.
It’s Webvan 2.0, or Ocado as its sometimes know.
Joint house broker Goldman Sachs has lowered its forecasts for the internet grocer by a third with just a couple of months to run to the end of its fiscal year.
[Competition] A Swiss CPI basket
Consumer prices are on everybody’s mind in Switzerland.
World Radio Switzerland (the English-speaking Swiss network) kicked things of this morning with a debate about why on earth prices in Switzerland are refusing to budge lower,
Further reading
Elsewhere on Thursday,
- Whispers of Kreditanstalt.
- Stock market metaphor du jour…
- … and a US banks (scary) chart du jour.
- More cheers for negative rates.
- It’s all the evil speculators’ fault!
- Congressman has good idea on debt ceiling.
Pink picks
Comment, analysis and other offerings from Thursday’s FT,
Frank Partnoy: The coming world of smaller banks
How many people does it take to operate a modern bank and how much should such a bank’s shares be worth,
Snap news
Breaking pre-market news on Thursday,
- SocGen sent to open higher after CEO reassures — report.
- Anheuser-Busch InBev report rise in Q2 core profit — statement.
- Q2 results from Zurich Financial beat expectations — statement.
Further further reading
For the commute home,
- Dismal thoughts.
- Handbags at the ready for Santelli vs Whitney.
- Was the Fed secretly bold?
- An experiment in classroom ethics.
- Losing your AAA.
- Wall Street to everyone re French banks:
Swiss rates go negative
Looks like le plan, negatifs taux d’intérêt is being tested.
Nice spot on Wednesday by Citigroup’s Michael Saunders:
Swiss 3-month rate futures today have rallied beyond 100.0 (the September contract is at 100.08),
What price, sovereign risk? Revisited
The equity market panicked on Wednesday, particularly in French banks. So — maybe time for a quick credit perspective.
First up — chart of movements in the Markit senior financials index during Wednesday at the height of the equity sell-off.
Banks: QE3 is coming
Hope springs eternal in the investment banks.
Tuesday’s FOMC statement drew attention for its commitment to 0 – 0.25 per cent rates until at least mid-2013. This led to the less than sudden realisation that holding (some) stocks was more attractive than nursing the corpse of a 2-year bill.
Kids, can you count to 15 Enrons?
Fresh out of the SEC on Wednesday morning, a depressing allegation of fraud that hints at the absurdity of the working definition of “fiduciary duty” when it comes to municipalities.
In a complaint filed in federal court in Milwaukee,
Farewell G7 AAA’s
As rumours (scurrilous, nonsense – Ed.) swirl in the market of a French rating downgrade, Citigroup’s chief economist Willem Buiter is considering a much bigger issue – a world without any AAA G7 sovereigns.
Markets Live transcript 10 Aug 2011
Markets Live chat transcript for the chat ending at 15:42 on 10 Aug 2011. Participants in this chat were: Neil Hume, FT Izabella Kaminska Paul Murphy John McDermott NHHola NHAGAIN
SocGen and the hand of GOFO
For those just tuning in, the story so far…
Having noticed a sharp sell-off in the French banks in European afternoon trading, FT Alphaville compiled a post looking to understand the move. We noted a number of rumours which were circulating.
Mon dieu – Emergency Markets Live
Join us a couple of minutes for another emergency session on the latest market convulsions — with particular emphasis on La République.
Keeping it classy, Rupert
Wednesday 10 August, New York. Tabloid discovers volatility.
The Grantham manifesto
Albert Edwards has a soul mate — GMO’s Jeremy Grantham.
Like the SocGen strategist, he too is worried about the massive transfer of income to the very rich that has occurred and has been tolerated only because Central Bankers have created housing booms.
Why is Socgen offering 12-month gold for less than spot? Or is it a typo?
[ATTENTION - It is very possible the data in the Reuters chart could be wrong]
Something is afoot at the French banks.
At pixel time Societe Generale was trading 11.5 per cent lower:
BNP Paribas was off 7.5 per cent:
Twisting the Twist
Confused by the late, powerful rally on Wall Street overnight, that saw the Dow Jones Industrial close up 4 per cent?
Don’t be.
On one level, Federal Reserve chairman Ben Bernanke is targeting the stock market with the deliberately ambiguous statement that economic conditions “are likely to warrant exceptionally low levels for the federal funds rate at least through mid-2013″.
Markets Live transcript 10 Aug 2011
Markets Live chat transcript for the chat ending at 11:26 on 10 Aug 2011. Participants in this chat were: Neil Hume, FT bryce.elder NHHola rabble NHWillkommen NHto Markets Live