September, 2011
Shortening MMF maturities, chart du jour
Via Fitch Rating’s latest report on US prime money market funds’ European bank exposure, and as reported by the FT on Friday:
It’s worth picking out the shortening trend in term funding. As Fitch notes:
Recession and rate cuts: RBS call ‘em in Europe
Here it is in full, from Jacques Cailloux and team at RBS:
Despite some early signs of a slightly firmer Q3 GDP (our GDP Tracker is at 0.2% q/q vs 0.1% q/q last month) on account of strong German industrial production (boosted by favourable working day effects),
Further reading
Elsewhere on Friday,
- Currency “tensions”, i.e. wars.
- Psychotherapy for cyclical bear markets.
- Corporate governance, HP edition.
- Anterograde and retrograde amenesia, a market deterioration update with pretty charts.
Pink picks
Comment, analysis, and other offerings from Friday’s FT,
Philip Stephens: Wanted — a plan to save Europe
It has become something of a mantra among European leaders that we can be sure they will save the euro because they have to save the European Union.
Snap news
Breaking pre-market news on Friday,
- Copper down 7 per cent amid commodities sell-off — report.
- G20 communique promises “necessary actions to increase the flexibility of the EFSF” — report.
- EasyJet says easyGroup withdraws request for EGM — statement.
Further further reading
For the commute home,
- Ireland, Spain, austerity, and the nearsightedness of the punditocracy.
- Will central clearing of CDS be a systemic double-whammy?
- This is a global bear market.
- Barr Rosenberg gets charged by the SEC (for background see here).
European bank recap recap
We’ll resist any further “spillover” jokes as we pass along the main points from this earlier article by our colleagues in Europe, which for mysterious reasons appears to have prevented today’s selloff from being worse:
CDS, Wanted: Banned or less naked
Ok, who moved first?? Was it you, bond yield? Or was it you, CDS spread? It was you, wasn’t it.. Quick, shoot the messenger! Get him!!!
Maybe that’s not exactly what’s happening in the discussion of the transition mechanism between CDS spreads and bond yields.
Markets Live transcript 22 Sep 2011
Markets Live chat transcript for the chat ending at 15:27 on 22 Sep 2011. Participants in this chat were: Joseph Cotterill, FT Cardiff Garcia LSPollack JCHello! JCAnd welcome to Meltdown Live
We submit — EMERGENCY MARKETS LIVE STARTING RIGHT NOW
We tried to resist, but let’s face it — we’re not gonna make sense of today’s events without help from the Rabble.
Here’s the link — let’s do this.
The trap door opens
Not yet, but getting perilously close to triggering an emergency Markets Live session…
Tin hats, kevlar armour and keys to the bunker at the ready.
The SNB presents…
… a monetary extravaganza.
(Nota bene. Figures till end of August — i.e. before intervention)
They’re interesting charts to consider anyway — and analysed by the FT’s James Mackintosh here — although it’s also intriguing to see how markets have treated the Swiss franc on a day like Thursday,
When Italian bonds trade as risk assets
Well, they’ve been trading like it since (ooh) July, but the relationship becomes really obvious on a day like Thursday, when fears of a global slowdown hit home again.
For example, European stock markets have fallen around 4 per cent,
US unemployment is, well, not so bad!
The Oregon Office of Economic Analysis has ventured an update to Carmen Reinhart and Ken Rogoff’s ‘This Time it’s Different’, the seminal work on financial crises of the past – and their related analysis on the aftermath of financial crises.
Markets Live transcript 22 Sep 2011
Markets Live chat transcript for the chat ending at 11:40 on 22 Sep 2011. Participants in this chat were: Bryce Elder/FT Tony Tassell BEGood morning BEAnd welcome to selloff live.
Chinese exporters starting to do it tough
HSBC/Markit Economics’ Flash China PMIs came in at 49.4 for August — suggesting it will be the third month in a row of contractionary indicators.
It’s lower than the July’s 49.9, but slightly higher than the June final figure of 49.3.
The not-so-fearless Fed?
The narrative around the Fed’s announcement on Wednesday is that it went ahead with a $400bn ‘twist’, towards the larger end of what was expected — despite some pretty heavy pressure from the Republicans a couple of days earlier.
The Twist tumble
Sure looks like the Fed tightened instead of twisting, doesn’t it?
Equities investors do. Not. Like:
The MSCI All-Country World index was off 2 per cent at pixel time, sending it to its lowest level in 2011.
Further reading
Elsewhere on Thursday,
- ‘“This is no market for young men,” Grantham said.’
- Why casinos are a pleasant kind of hell.
- Omens in the Hang Seng…
- …and why the Chinese bear market goes on.
Pink picks
Comment, analysis and other offerings in Thursday’s FT,
Charles Dumas: Spain, not Greece, may be biggest eurozone threat
Greek default is the high-profile threat to eurozone banks that hogs the headlines,
Snap news
Breaking pre-market news on Thursday,
- Sage sells US healthcare business to Vista Equity Partners — statement.
- Legal & General says CEO to leave at end of 2012 — statement.
- EasyJet lifts profit guidance — statement.
Further further reading
For the commute home,
- Fed to Congress: take that.
- Does HP have, like, the worst board ever?
- BlackRock is buying junk debt.
- The Fed statement was late because it still uses fax and copy machines.
A few more analyst reactions to the FOMC statement
We covered some of this in our Markets Live chat and would refer you to the transcript, but we’re posting some of the more interesting analyst reactions below.
Most focused on the Fed’s targeting the longer end of the curve more than anticipated and on what today’s announcement might imply for mortgage finance,
US Markets Live transcript 21 Sep 2011
Markets Live chat transcript for the chat ending at 19:33 on 21 Sep 2011. Participants in this chat were: Cardiff Garcia Joseph Cotterill, FT LSPollack Neil Hume, FT CGHello! CGWe’ll be taking bets about 3 minutes before the announcement
Reminder: Markets Live special FOMC edition starts at 2pm NY, 7pm London
As a quick reminder before our London readers head home, we repeat from our earlier post below and we hope to see you there.
—-
Much of the suspense about tomorrow’s FOMC announcement, set to be released at 2:15pm EST,
The IMF can make your €200bn capital hole disappear in days!
What capital hole? The hole was never there! We do not know this €200bn capital hole of which you speak. This is spillover risk!
Charts via Chapter 1 of the IMF’s latest Global Financial Stability Report,
Italy – bite-sized CDS, taste the volatility
The Markit iTraxx SovX CEEMEA contains a basket of 15 sovereigns from Central and Eastern Europe as well as the Middle East. Italy’s CDS spread is now wider than all but one of them – Ukraine.
Looking at the Markit CDX.EM,
ECB collateral changes…
Unveiled on Wednesday as part of the ECB’s usual tidying up of collateral eligibility criteria. This one seems to affect (unsecured) bank bonds a bit though…
First, the Eurosystem has abolished the eligibility requirement (Sections 6.2.1.5 and 6.2.1.6) that debt instruments issued by credit institutions,