October, 2011
QE2 collateral damage
No wonder the National Association of Pension Funds has been wailing about the Bank of England’s plan for another round of QE.
September’s update from the UK’s Pension Protection Fund makes for grim reading.
The translated Troika
11 October 2011 – Statement by the European Commission, the ECB and IMF on the Fifth Review Mission to Greece
Staff teams from the European Commission (EC), European Central Bank (ECB), and International Monetary Fund (IMF) have concluded their fifth review mission to Greece to discuss recent economic developments.
Taking the stress test to seven
(Reuters) European Union banking regulator EBA has demanded that lenders achieve a core tier one ratio of at least seven per cent in the current round of internal stress tests, banking and regulatory sources told Reuters on Tuesday.
Markets Live transcript 11 Oct 2011
Markets Live chat transcript for the chat ending at 11:36 on 11 Oct 2011. Participants in this chat were: Neil Hume, FT Bryce Elder/FT NHHola NHrabble NHsorry we are a bit late
Britain’s Dick Bove
Ian Gordon is fast becoming the UK’s answer to Dick ‘I ♥ banks’ Bove.
Last week, the Evolution Securities analyst and bank apologist rodeto the rescue of RBS, dismissing reports that the state-controlled lender might need another injection of capital.
The Greek bailout — now selling Slovak beer
Sign of the times (doing the rounds as a prelude to Slovakia’s EFSF vote later on Tuesday):
You can expect a beer ad to abuse national stereotypes. The point is, Slovakia really is a much smaller economy than Greece.
It’s not prop trading, it’s ‘liquidity management’
On Monday, FT Alphaville alerted you to one potential hole in the leaked draft of the Volcker rule. That related to what one may be able to get away with in the name of managing a portfolio of positions,
Business as usual at ENRC [updated]
Corporate governance is alive and well at ENRC.
Just weeks after the Kazakh miner said it was committed to a strong and independent board, it’s announced plans to buy a thermal coal producer from its founding oligarch trio.
Regulators unite!
You have nothing to lose but your capital requirements.
Some choice excerpts from the Basel Committee’s new report finding that global growth would face relatively few effects from making the world’s biggest banks (“G-SIBs”) hold extra capital:
Further reading
Elsewhere on Tuesday,
- If Neal Stephenson, JG Ballard, Charlie Stross, and Mervyn Peake had collaborated on a movie about the economy.
- What the Steve Jobs obituaries left out.
- HFT no longer bound by trade through rules.
Pink picks
Comment, analysis, and other offerings from Tuesday’s FT,
David Owen and David Marsh: It’s time for a radical blueprint for a new Europe
Whatever happens in the stand-off pitting Greece and other indebted countries against their creditors,
Snap news
Breaking pre-market news on Tuesday,
- ENRC to pay $600m for mine owned by founding shareholders — statement.
- British Retail Consortium reports modest improvement in retail sales in September — statement.
Behold the dangers of contaminated collateral [updated]
Yale University’s Gary Gorton and Guillermo Ordoñez have a new working paper out on the role of collateral in financial crises. This may not pass for exciting news in some places but FT Alphaville is not like other places. Gorton is renowned for his work on shadow banking and wrote an excellent short primer on the recent crisis.
Further further reading
For the commute home,
- The methodology behind that surprising income trend. See also Felix.
- The 18-year round trip journey of Greek bond yields (HT Lorcan).
- Short-selling just had its biggest one-month increase since 2006.
Ignorance is not bliss: it can ruin your economy
Or, why national accounting issues threatened to send an econo-blogger into a nihilistic vortex of swirling epistemological doubts.
Last week, introducing our interview with the Federal Reserve’s Jeremy Nalewaik about the flaws in measuring economic output,
Suited, booted and UBS looted
We didn’t realise broad arrows were in this year.
From the entry: “Under all the pressure from the case his fashion taste never once took a down turn. That is why he should win Best Dressed Banker.”
The mystery of US banks’ second mortgage exposure
How big a hit should US banks take on their second mortgage portfolio?
A question that’s been asked again and again (and again and again) by this blog and others. Regulators are worried: Bloomberg reported last month that the Fed and the OCC are checking whether banks have put aside enough reserves to cover losses.
Cocaine is to blame
Baffled by recent stock market volatility?
Don’t be.
Silvio’s men have the answer.
Oct. 10 (Bloomberg) — Italian Prime Minister Silvio Berlusconi’s Undersecretary Carlo Giovanardi said the government will study if it’s feasible to conduct drug tests on stock- exchange traders,
Dealing with a global Triffin dilemma
We love a little bit of Triffin’s dilemma on FT Alphaville.
It refers to the idea that whoever has reserve currency status thrust upon them, is simultaneously lumbered with the burden of supplying the world with extra currency — thus entrapping themselves to a permanently indebted existence.
On the clairvoyance of sovereign CDS
In which FT Alphaville asks, should you really take CDS default probabilities at face value?
It will come as no surprise to readers that the clairvoyance of CDS is open to question. CDS spreads are more likely to be steered by frightened bond portfolio managers or CVA desks dealing with volatility than by the invisible hand.
A systematic approach to the eurozone CDO
Credit Suisse have embarked on a more technical approach to our old friend, the eurozone CDO. They’ve used the five-year CDS spreads to organise the “tranches” like this:
Greece is equity; Ireland and Portugal junior mezzanine;
ETF phantom liquidity
What’s the difference between ETFs and derivatives?
In our opinion, one can skew market fundamentals by messing with underlying assets, while the other one can’t.
Let us explain using an analogy.
Volcker’s ‘Delta one’ loophole
Last week, Bloomberg provided more details of what’s to be expected from the upcoming Volcker rule.
The headline focused on the fact that all bank divisions would be subject to restrictions that would limit their ability to take advantage of short-term price movements in securities and derivatives markets for proprietary gain (or loss,
Markets Live transcript 10 Oct 2011
Markets Live chat transcript for the chat ending at 11:26 on 10 Oct 2011. Participants in this chat were: Neil Hume, FT Bryce Elder/FT NHHola NHwelcome to another week of Markets Live
Erste’s extraordinary loss, and CDS philosophy
Erste Group announced some colourful extraordinary charges on Monday morning. Austria’s biggest lender, and the second biggest bank in Eastern Europe, still hasn’t paid back the €1.2bn injection of state funds it received back in 2009,
The cost of an RBS bailout
A trip down memory lane.
It’s December 2009. Details of a scheme to insure £280bn of RBS’s most toxic loans have finally been announced after months of discussion.
The chairman of RBS writes to shareholders trying to explain why the bank is joining the scheme and is being forced to raise an additional £25.5bn of capital via an issue of B shares to HM Treasury.
China’s local governments dig deeper
… into a hole, that is.
So, China’s Golden Week was not as great for property sales as it usually is. Sales were down 32 per cent on the previous year in 20 major cities, Bloomberg tells us. Which has prompted a big fall for some property developers and financials,
Shorting bans aren’t much use
Nothing surprising here…
… move along please.
Undexia
DJ: DEXIA CEO: BANK TO REMAIN PUBLICLY TRADED
Update — speaking of zombies… Interesting to note that the €90bn 2011 edition of Dexia’s state guarantee bears a term of 10 years. The €150bn 2008 version guaranteed debt with a maximum maturity of three years.