November, 2011
Further further reading
For the commute home,
- John Kay on John Maynard Keynes on the limits of knowledge.
- The revolution according to Steve Jobs.
- James Hamilton on this morning’s coordinated central bank announcement.
Rally monkey makes a splash in global liquidity
The almost-useless DJ Industrial Average on Wednesday climbed nearly 500 points – its largest one day gain since March 2009 – returning it to positive territory for 2011.
The ‘dollars for euro collateral’ crunch
Back in September 2010, the European Repo Council’s survey of the European repo market noted a striking anomaly.
The European repo market — worth approximately €6,979bn — had seen a near doubling in the amount of repo being used for dollar funding.
Financial comet crashes into planet hyperbole
Well, we asked for an update. Now let’s play spot the difference.
Before (about 10am New York time):
After (about noon New York time):
Warning: Financial comet spotted
There’s talking one’s book and then there’s setting it alight and throwing it in a vat of petrol.
And Forbes contributor Nigam Arora appears to have taken the latter approach with this post.
It appears that a big European bank got close to failure last night.
The collateral limits of coordinated action
Wednesday’s central bank intervention is impressive in its symbolism but unlikely to do much more than buy eurozone leaders a few days.
RBS’ US rates team has provided a useful analysis of the move. The immediate background to the intervention,
So much for that impact on currency basis swaps
Was Wednsday’s cordinated central bank intervention in currency swap markets all for nothing?
Currency basis swap markets certainly seem to think so.
As Citi’s CitiFX Wire notes on Wednesday London afternoon time:
NYSE invokes rule 48 for Wednesday’s open
Tin trampolines at the ready, it’s set to be a fast open:
Wednesday, November 30, 2011 9:13:02 AM RTRS – NYSE AND NYSE AMEX CASH MARKETS INVOKE RULE 48 FOR OPEN.SPXNYX.N
And before you ask, here’s what it means via the NYSE website:
Guest post: El-Erian on central bank action
Mohamed El-Erian, chief executive and co-chief investment officer at PIMCO, submits this guest post to FT Alphaville in reaction to this morning’s coordinated announcement.
Risk markets love liquidity injections,
More on the dollar crunch and the liquidity drop
Right, here’s some early reaction to the latest central bank liquidity drop.
It comes from RBC’s Michael Cloherty, who makes the astute observation that it is now cheaper for foreign banks to borrow dollars from their central bank than it is for a US bank to borrow from the Federal Reserve:
Central banks move to ease European dollar crunch
Readers take note. This is a chart of the one-year German note, currently yielding less than zero. An unprecedented event according to Reuters:
So much for the much talked about flight from German bunds?
If anything,
Debt and CDS: It’s complicated
In which we attempt to explain the complexities at the heart of the CDS trigger debate…
Debt is nothing more than a financial relationship between two parties, whether individuals or institutions.
Markets Live transcript 30 Nov 2011
Markets Live chat transcript for the chat ending at 12:27 on 30 Nov 2011. Participants in this chat were: Neil Hume, FT Tony Tassell NHHola NHand welcome to markets live
Equities, Japan and next decade
Morgan Stanley’s Graham Secker makes some interesting observations in his 2012 outlook report.
Chief among them is that the investment framework of the last 25 years is increasingly irrelevant and that Japan offers the best guide to what might happen in the equity market over the next decade.
Italy’s very own special liquidity programme? [Updated]
Fresh off the wire on Wednesday:
RTRS – ITALY TREASURY SAYS TO LAUNCH AUCTIONS TO LEND OR BORROW SIGNIFICANT AMOUNTS OF CASH ON MONEY MARKET USING TRSY’S ACCOUNT AT BANK OF ITALY
RTRS – ITALY SAYS AUCTIONS TO NORMALLY OFFER OVERNIGHT MATURITIES WITH CREDIT LIMITS,
Hedge fund survey says
That hedge fund clients get itchy feet far easier these days, and that some of them look at the credit default swap spreads of their counterparties when deciding whether to stick with them or get out of dodge.
EFSF expansion agreed (to be inadequate)
The European Financial Stability Facility announced that eurozone finance ministers have agreed measures already discussed to boost the fund’s firepower – the 20 to 30 per cent guarantee on sovereign bonds,
Further reading
Elsewhere on Wednesday,
- Prop trading under the guise of hedging.
- The trouble with liquidity.
- What a liquidity crisis looks like.
- Some debt history.
- And the staying power of debt.
Pink picks
Comment, analysis and more from Wednesday’s FT,
Martin Wolf: What the IMF should tell Europe
Can the International Monetary Fund save the eurozone? No, writes Wolf. But it can help. The world, whose interests the IMF represents,
Snap news
Breaking pre-market news on Wednesday,
- BSkyB launches shares buyback — statement.
- Cairn Energy reveals further disappointments in Greenland drilling campaign — statement.
- Marston’s sees encouraging state to new financial year — statement.
Further further reading
For the commute home,
- Yes, Virginia. The banks were bailed out.
- Fears of shortfall lead to moves to boost the EFSF.
- The plight of the middleman.
- On the CFA exam.
- How the bankruptcy of American Airlines stacks up.
Nomura on European bank deleveraging and US loans
Nomura has a new report showing that US loan growth is having a good quarter thus far, even after accounting for the normal seasonal boost, but what caught our eye was the excellent series of charts on the activities of foreign bank subsidiaries in the US.
Behind those Bloomberg banks-profit-from-Fed figures
Bloomberg fought and won a lengthy case against the Federal Reserve to obtain the details of the various US bailout programmes. That was back in the summer. FT Alphaville salutes them for it, as have many others.
The OBR “perhaps” stress tests a eurozone crisis
The central forecast in Tuesday’s OBR report predicts that the UK will return to trend growth within three years and eliminate the structural deficit in 2016-17, one year later than the chancellor’s previous commitment.
UK economic policy: less plan B, more plan A+1
If you liked the Bank of England inflation fan charts, then you’ll love the OBR’s fan charts.
GDP:
Public sector net borrowing:
Cyclically-adjusted current budget (i.e. when will the structural deficit be eliminated?):
Any port in a storm – UK gilt edition
After a splurge in September, overseas investors scooped up a more gilts in October, according to figures released by the Bank of England on Tuesday.
(Graphic via Divyang Shah at IFR).
Mix in some QE,
ECB as Pawnbroker of Last Resort (POLR)
First we had the ‘credit crunch’. Now some warn what Europe might in fact be experiencing is better described as a ‘collateral crunch’.
Ever since banks turned to the secured collateral markets known as ‘repo’ for their funding needs, especially over longer durations,
SMP sterilization *fail*
*ECB FAILS TO FULLY STERILIZE BOND PURCHASES
We will look at what, if anything, this means a bit later. But there’s already plenty of theories flying around the interweb.
For example:
ECB fails to full sterilize bond purchases #euro — ie it is engaging in QE to finance deficit spending
For now,
Markets Live transcript 29 Nov 2011
Markets Live chat transcript for the chat ending at 12:14 on 29 Nov 2011. Participants in this chat were: Neil Hume, FT Tony Tassell NHHola Rabble NHWelcome to ML TTgood morning..