Izabella Kaminska
From the BoJ with love
From the Bank of Japan on Tuesday, February 14:
At the Monetary Policy Meeting held today, the Policy Board of the Bank of Japan decided to amend the “Principal Terms and Conditions for the Asset Purchase Program”
Further reading
Elsewhere on Tuesday,
- It’s deflation and inflation.
- Why art isn’t a commodity.
- Everyone loves VXX options.
- Understanding the great trade collapse of 2008-2009.
- And about that 1987 myth.
Pink picks
Comment, analysis and other offerings from Tuesday’s FT,
Gideon Rachman: Germany faces a machine from hell
The press review from around Europe does not make pleasant reading for the German foreign ministry these days.
Natural gas outrage of the day
The natural gas market has always behaved a little oddly.
First, it’s always been hugely seasonal, thus responsible for many a widow-maker trade. But now investors and traders have to contend with the impact of fracking too,
European repo has been contained!
From Icap’s latest repo weekly report:
See that? That’s Italian general collateral trading more-or-less in line with the Eonia OIS curve after a good few months of haywire behavior. What’s more,
Overplaying the role of haircuts in the crisis
ICMA’s European Repo Council has taken a look at the role of haircutting repo collateral in the current crisis on Wednesday. It’s decided that, overall, (and especially in Europe) there is little reason to believe the practice of discounting repo assets’ market value has had much of an impact.
Snap news
Breaking pre-market news on Wednesday,
- Statoil raises 2012 capex, Q4 beats forecasts – statement.
- Supergroup sales growth slows in January – statement.
- SAS posts fresh loss, boosts cost-cut pace – statement.
Global liquidity fail — the role of skewed incentives
Presenting, one of the best accounts of how the current crisis came about that we’ve read to date.
It comes courtesy of Benoît Cœuré, member of the executive board of the ECB, and should be required reading for every player in financial markets,
From deposit stashing to repo lending at UBS
UBS announced lacklustre results on Tuesday, saying it expected further weakness in investment banking in the first quarter.
But the bank also provided details of some interesting underlying trends at the bank,
Collateralised commodity borrowing, BP edition
From BP’s fourth quarter results on Tuesday:
At 31 December 2011, $131 million of finance debt ($128 million at 30 September 2011 and $790 million at 31 December 2010) was secured by the pledging of assets,
Freight rates go negative
Negative bond yields, negative repo rates, and now… negative freight rates. At least route-specific ones.
Bloomberg has the story here (our emphasis):
Glencore International Plc (GLEN) hired a commodity ship with the operator of the vessel earning nothing and contributing to some of the fuel costs after freight rates for hauling raw materials had their worst-ever start to a year.
Economics, a space opera
FT Alphaville would like to survey the following statement:
Economists are failing to account for mass technological innovations when making forecasts and constructing models.
Agree/disagree.
And we don’t just mean critiquing the Fed’s new long-range forecasts.
Further reading
Elsewhere on Friday,
- Why the collapse of the euro could be good.
- The Target2 reference guide.
- The deleveraging cycle is far from over.
- Realised volatility is absurdly low.
- Why Facebook isn’t worth $100bn.
That Eurozone repo contraction, charted
We’ve had the results of ICMA’s European repo survey, but the following chart — by way of the ECB’s statistical data warehouse — offers a much more contemporaneous view thanks to data collected by the ECB via its MFI balance sheet reporting regulation .
Further reading
Elsewhere on Thursday,
- You know what’s cool, $1bn in profits.
- Entering the intervention zone.
- Eurocrash, the MUSICAL!
- We’re blaming capitalism, but maybe we should be blaming corporatism.
Breaking up is hard to do — but here goes, anyway
From Jonathan Tepper, economist, chief editor of Variant Perception and co-author with John Mauldin of Endgame: The End of the Debt Supercyle…
A thirteen point guide to breaking up the euro.
Those countries that opt to remain in the euro will,
Let there be credit claim collateral… just not everywhere
Turns out that not all the national central banks of the European System of Central Banks (ESCB) are so keen on widening collateral criteria, especially the idea of taking on more bank loans (tweaking the eligibility of credit claims) in exchange for central bank lending.
Gangster economics
Struck by a recent report about how the Italian mafia was now Italy’s largest ‘bank’, Nicholas Colas, chief market strategist at ConvergEx Group, has decided to take a closer look at what one might call “off the grid”
The NBBO flutter
Oh the weird and wonderful charts of Nanex.
Here’s the latest one from the market data analytics firm (click to enlarge):
In Nanex’s opinion this is one of their most amazing and clear images yet.
Further reading
Elsewhere on Wednesday,
- Europe’s massive shipping exposure.
- Adam Curtis on the rise of the modern cruise ship industry.
- Projections from the Congressional Budget Office.
- And how a deficit drop will threaten economic stability.
Chinese New Year and the BDI
Should you be worried about the Baltic Dry Index’s recent sharp selloff? Or should you be more worried about developments in China?
We bring this up because there is apparently somewhat of an après-Chinese New Year effect when it comes to the Baltic Dry Index.
Would you join a monetary union like this?
That, essentially, is what many Poles are currently asking themselves.
After all, Poland has been aboard the euro-adoption boat for a long while. Expectations for eurozone entry were so ingrained in the population they even managed to spawn a euro-denominated mortgage binge.
The Vix feedback loop, analysed
Are VIX ETNs and Vix-related funds influencing the Vix futures curve?
Has the popularity of Vix trading come to impact wider volatility surfaces, if not the S&P 500 options used to construct the Vix index themselves?
Is the Vix tail wagging the implied volatility dog?
Quick answer:
Looking at UK repo trends
We’ve already brought you one collateral crunchy statistic from the Bank of England’s latest monetary and finanical statistics. But here’s another interesting trend from the Bank’s gilt repo and stock lending numbers.
Further reading
Elsewhere on Tuesday,
- The million dollar mailman.
- China’s secret province, part II.
- Of human bond-age.
- Eurozone crisis, charted.
- Could intervention derail the yen?
- Bitcoin:
Risk on/risk off is changing
Standard Chartered’s Priyanka Kishor has spotted an interesting new development in correlations.
As has been well documented, since the 2008 crisis, ‘risk off’ market temperament has strongly coincided with dollar inflows.
Awaiting the MBS settlement fail fee
It’s been a while since FT Alphaville looked at settlement fails, but the following chart from RBC Capital Markets did catch our eye this week:
As RBC notes, there’s a new settlement failure fee coming into force in the US for MBS securities on February 1,
Further reading
Elsewhere on Friday,
- The high yield ETF is really, really popular.
- The bubble in central banking.
- Why people become investment bankers.
- Is the natural gas rebound sustainable?
- Now this is a jolly.
US MMFs versus the Eurozone, Part 2
In the first installment of US money market funds versus the eurozone, the funds were seen fleeing the continent as quickly as possible, leaving all sorts of funding chaos in their wake.
In part two,
The ‘QE-exit’ inflation paradox
RBC Capital Markets takes an interesting take on the Fed’s newly released Fed Funds projections.
First the projections, which look like this:
As the note under the chart declares, each circle represents an individual FOMC member’s judgment of where Fed Fund rates should be at the end of the specified year.