November, 2011
Sovereign CDS – still not dead yet, regulations helping
It’s the data you’ve all been waiting for. It’s from DTCC and it covers sovereign CDS. Has the market shrunk, given that whatever is going on in Greece hasn’t yet met the definition of a credit event?
Erm,
Re-recognised in 2011
What the market may have overlooked in the last quarter and this one, handily written up by Florida-based accountants MBAF (back in August):
During the final months of 2011, banks will need to begin preparing for compliance with a recent Financial Accounting Standards Board requirement on the accounting treatment of repurchase agreements.
Hello, Greek mopping-up law?
Reuters, on signs of a push to make Greece’s debt restructuring coercive rather than “voluntary”…
Athens could squeeze out bondholders by changing the law so that the terms of any untendered bonds would have the same terms as the new ones,
FOMC statement, 2 November 2011
Nothing to see here, catch you at the presser.
That seems to be the message of the FOMC statement, which included no meaningful new announcements.
The language on recent economic activity was slightly altered,
Cash in the Attic [updated]
DJ: Greek Govt Has Sufficient Cash To Last Until Dec -Source
Yes, although when you get to December…
Update — Not so sure about December… Reuters citing an EU source on the November payment of the sixth bailout tranche:
US Markets Live: Bernanke saves the world edition
And by “Saves the World” we mean “Thanks the stars that he’s not Mario Draghi”.
We’re kicking off at 2:05pm in New York (6:05pm in London), ten minutes before we find out that Ben is late and wait another ten minutes the presser is scheduled to begin.
And the G20 total returns winner is…
Something to take G20 Cannes delegates’ minds off Greece…
How’s this for evidence that the emerging markets growth story is overblown? Of all the G20 countries, the US would have given you the greatest equity returns over the past year,
Step away from the Greek political risk
If you’re trying to price political risk perfectly… you’re doing it wrong, we’d submit. The Greek referendum’s a case in point.
The referendum came out of the blue. It might not even go ahead, pending a government collapse or early elections. So,
MF Global – 2008 parallels like you wouldn’t believe
For today’s edition of history rhyming, have a look at this (seminal) piece of research from Citigroup’s Matt King.
On September 5 2008 — just weeks before Lehman Brothers collapsed — the Citi credit strategist sent out a research note carrying the provocative title of “Are the brokers broken?” The thesis was simple:
Emerging market yields are still enslaved to the G3
Here, charted, is the master-servant relationship between emerging and developed markets.
The following shows the average local-currency yield spread — 10-year government bond yields less 3-month interbank rates — in the G3 compared to the average spread across 25 major EM economies,
Headless horse (updated)
State owned rival RBS has wasted no time in sticking the boot into Lloyds Banking Group.
Here’s the take of its banking team on António Horta-Osório’s leave of absence.
It’s titled Headless Horse.
Eurozone PMIs – Feeling gloomy
Markit Eurozone Manufacturing PMIs released on Wednesday have shown just how bad a start the fourth quarter has gotten off to. As the massive repricing (or rather, pricing-in) of political risk continues apace in financial markets,
What is going on in Italian T-bills?
More to the point — this can’t go on, surely. The Italian 12-month BOT yield, via Reuters:
The yield has gone from 4 per cent on Friday to 5.4 per cent on Tuesday – ‘rallying’ to 5.1 per cent at pixel time on Wednesday.
Greece and its military
The jitters over Greece’s military amid its political crisis are now dying down, thankfully.
This is relevant because Prime Minister George Papandreou’s defence minister fired the armed forces chiefs of staff on Tuesday.
Markets Live transcript 2 Nov 2011
Markets Live chat transcript for the chat ending at 12:16 on 2 Nov 2011. Participants in this chat were: Neil Hume, FT Bryce Elder/FT NHHola NHand welcome to ML NHI think Bryce is here
The EFSF’s funding funk
Casualty of “market conditions” on Wednesday – the EFSF’s latest bond issue.
The EFSF had mandated Barclays Capital, Credit Agricole and JP Morgan on Monday to price off a ‘no-grow’ €3bn 10 year deal to finance Ireland’s next bailout loan tranche,
Not liking those odds of a China hard landing
A new Nomura report puts the odds at one-in-three of a hard landing in China in the next three years, which they define as four consecutive quarters of sequential GDP growth at 5 per cent or less.
It’s a pretty epic paper,
Lloyds, de-helmed
The price action in Lloyds Banking Group on Wednesday morning:
The follows confirmation that chief executive António Horta-Osório (47) is taking a break. In the words of Pestowire he is: “physically and mentally exhausted, as a result of the way he has immersed himself in running Lloyds Banking Group”.
MF Global and echoes of Repo 105
What caused MF Global’s downfall?
According to Bradley Abelow, MF Global’s Chief Operating Officer, much of the blame may lie with Finra’s unreasonable request for MF Global to add capital to support its off-balance sheet exposure to European sovereign debt and reveal them publicly.
Further reading
Elsewhere on Wednesday,
- Catch up on MF Global, by video.
- Or with the guy who wrote “When Genius Failed”.
- Or the woman who wrote “The Smartest Guys in the Room”.
- Then contemplate why MF Global failing matters.
Pink picks
Comment, analysis, and other offerings from Wednesday’s FT,
Martin Wolf: Creditors can huff but they need debtors
Blessed are the creditors, for they shall inherit the earth. This is not in the Sermon on the Mount.
Snap news
Breaking pre-market news on Wednesday,
- Lloyds Banking Group says António Horta-Osório taking leave of absence following medical advice; to return to position before end of year — statement.
- Standard Chartered says operating profits grew at double digit rate in first nine months of the year — statement.
MF Global 2010: Save us from MF Global 2011
What complications might the alleged commingling of accounts have for the bankruptcy of MF Global?
Well, let’s ask… MF Global!
Back in February 2010, then under the leadership of Bernie Dan, the broker wrote the following in a letter to the CFTC (our emphasis):
Further further reading
For the commute home,
- EFSF: how not to structure a CDO.
- Prison vs Princeton: a cost comparison.
- CDS and full capital relief.
- SecondMarket is planning to sell shares in the Groupon IPO to its clients.
“The protection of its customers’ funds is MF Global’s paramount concern”
MF Global used client money to trade from its own accounts in violation of government rules, reports the AP citing a “federal official”.
The discovery of a reported $700m hole in MF Global client accounts
Understanding your central banker
If you can tell a little about someone from the books they read, you can tell a lot about them from the books they write, especially if they’re a central banker.
Morgan Stanley economist Spyros Andreopoulos has dipped into the library at the “Global Central Bank” and draws comfort from the number of “depression economics”
Sovereign CDS — not dead yet, not even resting
This derivative market is not a parrot. It. Is. Not. A. Parrot.
It is a chicken!
Why? Cutting it’s head off only means it’s going to run around, spraying blood all over the bond market. Case in point,
Well, this was unintended…
… though we don’t know if it’s also unsecured. Stolen from Tom Brammar’s Twitter feed, and submitted without further comment:
FTSE anomalies: who’s your grandaddy?
ENRC, Essar Energy, Ferrexpo and Fresnillo. What do these four companies have in common?
Hmm…they are all commodity players. Yes, what else?
They all have the bulk of their operations in emerging markets.
Papandreou plunge… or Corzine crash?
Then again, it is 1.11.11, or 11.1.11 for our American friends.
Financials taking a battering on Tuesday morning in New York (S&P 500 down 2.46 per cent at pixel time):
