February 22nd, 2012
Further further reading
For the commute home,
- Reactions to Obama’s corporate tax proposal.
- Calculated Risk on existing home sales and inventory.
- Guerrilla libraries invade Manhattan phone booths.
- Josh spots a new study showing the consequences of war on the US economy.
Double trouble in TVIX
What on earth is going on with the TVIX ETN?
Last week we pointed out that there has been a hugely unusual rush into the double volatility ETN — which is managed by VelocityShares but backed by the banking prowess of Credit Suisse.
Twist again, again?
Given the recent improving economic data in the US, the consensus likelihood of getting QE3 later this year seems to have gone from probable to uncertain.
Obviously it all depends on what happens in the next few months,
Will the Greece CDS auction be ‘fair’? — Part 2
The use of collective action clauses in Greek bonds, as part of the country’s sovereign restructuring, seems set to trigger credit default swaps. For the $3.2bn of net notional still outstanding on the contracts,
Will the Greece CDS auction be ‘fair’? — Part 1
Are you feeling relieved that the whole CDS trigger debate for Greece might be over? Well, you may have been relieved too soon. There may well be a big, nasty hitch.
A hitch involving how the credit event auction for Greece — where CDS payouts are determined — works.
Urgent sovereign action required
No, not sovereign debt or something even vaguely related. We’re talking here about input from Her Majesty The Queen.
Consider Lord James of Blackheath, speaking in the House of Lords last week…
Now,
“Bond market returns are about as attractive as following a plague of locusts across a field of corn”
Presenting, a public plea to portfolio managers from Kit Juckes, head of currency strategy at SocGen (our emphasis):
I’ve attached a piece on month-end flows and pension re-balancing which hit my inbox from our US equity derivs folks last night.
Why MMT is like an autostereogram
We’ve discussed MMT’s recent foray into the mainstream, and the confusion it has consequently courted.
But that’s the funny thing about the theory. It is naturally divisive because most of the time it fails to communicate its message succinctly.
Diagram du jour: How the ECB transmission mechanism is broken
Courtesy of Nomura’s euro area economics and strategy team (click to enlarge):
And as Nomura explains, in normal times…
…the level of ECB liquidity support is minimal as banks are able to lend and borrow funds via the interbank money markets.
Yes Virginia, there really is Modern Monetary Theory
A five-page article in the Washington Post by Dylan Matthews over the weekend, finally thrust the theory of Modern Monetary Mechanics into the mainstream.
This was exciting news for fans of the alternative economic school,
Markets Live transcript 22 Feb 2012
Markets Live chat transcript for the chat ending at 12:05 on 22 Feb 2012. Participants in this chat were: Paul Murphy Bryce Elder/FT PMMorning PMWelcome to Markets Live
A case of the mild PMIs
Some mildly positive PMI data from Markit this morning (published as the Bank of England’s minutes heaped praise on the readings’ accuracy - see page 3).
Flash Eurozone PMI Composite Output Index at 49.7 (50.4 in January).
An (EFSF) credit derivative is born
Anyone remember the EFSF’s ersatz CDS?
They announced it back in November 2011. Another measure to eke the bailout fund’s resources out a bit more in a bad patch of the eurozone crisis.
A societe anonyme would be hived off the EFSF,
Further reading
Elsewhere on Wednesday,
- USA! USA!
- WA! WA!
- May Greece survive long enough to tell the tale.
- Although the CDS trigger looks a cert
- A template for future European sovereign restructurings.
Pink picks
Comment, analysis and other offerings from Wednesday’s FT,
Martin Wolf: Prepare for a golden age of gas
The world is in the midst of a natural gas revolution, writes the FT’s Wolf. Even the sober International Energy Agency refers to a scenario it calls a “golden age of gas”.
Snap news
Breaking pre-market news on Wednesday,
– Kevin Rudd resigns as Aussie foreign minister, expected to challenge Gillard for prime minstership – Bloomberg
– Shell bids for Cove Energy – statement
– BHP Billiton prices $5.25bn bond – statement
– Strong take-up of DS Smith rights – statement
Other corporate: