Sid Verma
Belgium joins the spread-betting party
The lashing of non-Germanic eurozone sovereign bonds continues – but at a slower rate in Belgium’s case.
Just shy of its euro-era high of 273bp over comparable 10-year Bunds on Thursday, the country’s 10-year government bonds were trading at 268bp over at pixel time:
Pan-labyrinth
Market schizophrenia alert. The Monti put that might have triggered the Italian bond rally today seems to have inspired a rally in global stocks. Who knows how long this will last. And maybe that’s the point — it’s a game of gambling on possible outcomes rather than fundamental investing at this stage.
And the next dominoes to fall are..
The pain in Spain…
Chew over this morsel of bad news, from ING: (Emphasis ours)
The economic recovery in Spain has ground to a complete halt. According to first estimates by INE, Spanish real GDP was unchanged in the third quarter (0.8% YoY),
Bursting the MENA credit bubble
And now for something completely different..
Middle Eastern credit spreads could soon blow up amid an outbreak of political strife with potentially global consequences.
Another portion of grief to your plate then.
French exposure in pictures
Au bout du fossé, la culbute.
Brace yourself. Here are some reasons why markets are giving France, in particular, a kicking today, according to the Banca D’Italia’s latest financial sector report on November 2:
Goodbye risk-free, hello French spreads at 21-year high
Another nail in the coffin for old Europe’s risk free status.
The French 10 year note is now seen as a spread product over comparable Bunds — 153bp at pixel time.
Via Reuters.
(click to enlarge)
According to our quote machines,
Pink picks
Comment, analysis and more from Thursday’s FT,
John Gapper: Olympus’ deceit was dishonourable
It is still possible to believe that the accused trio of directors, headed by Tsuyoshi Kikukawa, the former chairman of the camera and medical equipment company,
What’s missing from China-Eurozone debate, RMB edition
It refuses to die. Buckets of ink are still being spilt on the will-China-save-Europe-narrative, looking at the political quid pro quos on offer, the incentive structure behind the EFSF and the relative size of China’s monetary fire-power.
Decline and fall of the Berlusconi Empire
And now for some light relief as the Italian bond market goes under…
As the self-declared Napoleonite met his Waterloo yesterday, FT Alphaville is wondering how Silvio will be characterised in the annals of history.
Euro whiplash
The Bunga Bunga euro bounce is over. The only way is down, it seems:
Source: Thomson Reuters Eikon
The currency’s litany of woes include its strong correlation with weakening euro stocks, the poor performance of recent PMIs,
The eurozone crisis as balance of payment problem
Or, is Germany right to worry about inflation?
A theory to chew over…
An excess of savings over investment helps to create a credit boom in a current account deficit country and legitimises pro-cyclical fiscal policy.
Long EM, short G10: FX hedge edition
Tin hats at the ready. If the eurozone trouble deepens, emerging market equities could once again overshoot fair value in a wave of deleveraging.
So it’s time to put a value on them hedges…
Let’s look at FX plays for now.
Slicing Italian debt, at the margin
Or, trying to reduce Italian solvency risk by changing the debt structure. Plus a little bit of financial repression?
FT Alphaville has just got off the phone with Luca Mezzomo, macroeconomist at Intesa Sanpaolo Group,
Savage wave of repricing hits EFSF’s €3bn deal
Compare this note from IFR on Friday…
Frankel [Christophe Frankel, CFO of the EFSF] said that the recent spread underperformance would not necessarily hurt the EFSF’s prospects. “A very important part of our investor base is buy-and-hold and mostly insensitive to mark-to-market and,
…And Justice for All (in emerging Europe)
CEE Banker: If everybody agrees I’m innocent, how come I’m going BACK to the market jailhouse? The ECB is guilty of failing to shore-up monetary conditions in the CEE!
European policy-maker: You are out of order! We have provided a liquidity backstop for eurozone banks that operate in the region!
CEE :
What lies beneath the IMF’s (liquid) blanket
At first blush, it looks like a damp squib but probably better than nothing: the G20 agreement managed to foster one agreement of sorts — a new liquidity line (new special drawing rights, so-called SDRs).
G20 defers
Or, alternative headline: World fails to save Italy.
Seems like little has changed from the d(r)aft communique.
Click to read in full:
Choice morsels and Translation:
We stand ready to ensure
Come on Buffett, be greedy in fearful Europe
If it costs you millions to spend a couple of hours with the Oracle of Omaha, you could just write him an open letter for free and hope the investment pitch finds its way to him via the power of diffusion.
Dicing with debt, EFSF edition
If the thing set up to borrow for the eurozone can’t borrow then the eurozone is screwed.
That was the lament from the market when the EFSF decided to postpone on Wednesday its ‘no-grow’ €3bn 10 year deal to finance Ireland’s next bailout loan tranche due November 11,
Cash in the attic, IMF edition
Fortifications at the ready! Given Merkel’s nein, Draghi’s pff and China’s err no to commit yet-more capital to the EFSF by process of elimination the only option left is…… the IMF.
Why not just beef up the policy lender to prop up the eurozone currency countries.
Italians: your country needs you
Still on a knife edge — 10-year Italian government bonds at pixel time: (click to enlarge)
Source: Reuters
On Thursday BNP Paribas poured fuel on the fire with its Q3 results, slashing its Italian exposure by 40 per cent over the last quarter to €12.2bn from €20.5bn.
Venizelos drops a bomb
Kaboom.
Greek Deputy PM Evangelos Venizelos’ bombshell statement upon arrival from Cannes on Thursday morning:
Kicking the Can(nes)
Under-promise then under-deliver. Then watch markets tank. That’s the prognosis for the G20 summit, courtesy of Capital Economics’ crystal ball.
After poo-pooing suggestions Bric nations will ride to the eurozone’s rescue or take constructive measures to resolve global imbalances,
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,