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’Europe’s grand bargain
Some required reading for us all.
Published in September, the authors of this Occasional Paper, who include Jurgen Stark, spell out their ideas for the future of widely abused Stability and Growth Pact.
One Eurobond to rule them all
In order to be effective, a central bank must act as a monopoly. It, just like Sauron, must control all. That’s the point.
All central banks thus routinely corner markets. If they didn’t, they would compromise their own position.
German bund watch [updated]
Thursday early price action:
Almost level pegging with gilts! Who’s the haven now? Mwahahaha.
Update: 10.44am (London time)
Two excellent charts from Scotty Barber at Reuters.
Related link:
Germany – the only first class passenger on the Titanic?
Further reflections on that German bund action fail from RBS rate guru Harvinder Sian.
He says there are lots of excuses and explanations for Wednesday’s flop ( it’s year-end for primary dealers, the bond was off-benchmark,
The ‘Last Days’ of the Euro
Alternative title: Why France and Germany are likely to strike a momentous deal on fiscal union sooner than anyone thinks.
Welcome back, Jonathan Wilmot.
It’s some time since we heard from Credit Suisse’s chief global strategist (and occasional FT Alphaville contributor) but he’s made up for that with a short,
The risks of sticking to über harte währung strategy
Germany’s ‘hard money’ principles and opposition to Quantitative Easing by the ECB are, more often than not, framed with reference to the hyperinflation in the Weimar Republic.
Indeed, it’s a widely accepted truth that the horrors of the Third Reich were caused by the three year period of hyperinflation between June 1921 and July 1924.
Mariano Rajoy – Europe’s quarterback
Europeans tend not to understand American football, not least because the ‘ball’ seems to rarely make contact with the ‘foot’.
But let’s hope Mariano Rajoy, the candidate expected to win Spain’s general election on Sunday,
Something for the bail-out sceptics
We won’t know until early next year how much the ECB has spent on its efforts to defend Italy and Spain facilitate the transmission of monetary policy across the Eurozone.
However, Gary Jenkins at Evolution Securities has crunched some numbers and he reckons the bank is now sitting on up to €100bn of Italian debt alone.
French bonds — some (parabolic) perspective
Chart of French 30-year bonds’ spread to German debt over the last five years (via Reuters):
We think it’s a good chart… because it shows that investors really, really want Bunds, and this is why spreads even among the AAA members of the eurozone are moving out so much.
The trouble with seigniorage
Gavin Davies asks a good question on his FT blog: Does the ECB really have a silver bullet?
An increasing number of market participants want to believe it does, and some have even convinced themselves that the ECB will pull the trigger on unsterilised bond buying,
The wrong technocrats
I guess you guys have to be creative here.
– Barack Obama to Angela Merkel
Spot the odd one out:
Greek politicians defenestrate George Papandreou. They await a caretaker coalition government to push through tough reforms, ”opening the way for a non-political personality with a strong economic background to serve as interim premier,”
About that last bastion of health in Europe
Here’s a nice chart showing German new factory orders from Sean Corrigan at Diapason Commodities:
As Corrigan notes to FT Alphaville, orders have now suffered their worst three-month run in post-Reunification times (apart from the 2008 crash).
The Papandreou plunge
Ten- and 30-year US Treasuries yield below two and three per cent, respectively…
The German 10-year now under 1.8 per cent…
And the Italian 10-year now trades below 90 cents on the euro with a 6.3 per cent yield.
The central bank cannot, will not hold?
These prices (for the 10-year Italian benchmark bond) are after the ECB intervened on Tuesday:
Ten-year Bund yield is below 2 per cent at pixel time. Despite it all, clearly the ECB is buying in strength.
Bundesverfassungsgericht risk — again
Today in epic Reuters flashes:
Just another EFSF tape-bomb from the German constitutional court!
In its last foray into the financial headlines, the court approved Germany’s role in EFSF bailouts,
Sovereign CDS posterchildren
Now that a debate is brewing over survival probability of the European sovereign CDS market itself, FT Alphaville thought it’d be a good idea to look at some more recent trends in order to try to discern where the demand for these financial products has come from.
Edwards: Going bust and ECB QE
What’s come over über bear Albert Edwards? The day after Europe’s leaders reached a deal (of sorts) to tackle the region’s sovereign debt crisis the SG strategist is relatively chipper:
I have minimal confidence that governments can turn this around within the confines of the eurozone project.
Breaking: Europe is saved! Actually, wait…
Well, you’ve heard of the FT effect, what about the Guardian effect?
“Breaking” on Tuesday afternoon New York time, reports of a €2,000bn deal between Germany and France to augment the EFSF, save the euro,
Eventually, French Spreads Fail (E.F.S.F.) — redux
Some nasty bond moves in the eurozone sovereign debt “senior tranche” at pixel time (also in CDS — chart via Markit)…
(DBR – Germany, FRTR – France, BELG – Belgium, UKIN – United Kingdom, included for solidarité)
Ten-year French government bonds have finally gone and done it – trading more than 100bps wider than German debt.
Caption competition! German EFSF vote edition [updated]
That winning Merkel smile — via our colleagues at The World:
Stick your best work-safe captions below and the winner will get this special FT Alphaville Stein…
Update: We forgot to put a time limit! Entries in by the close of US markets this Friday,
Six weeks to save the eurozone
There might have been nothing concrete from the IMF meeting in Washington over the weekend, but the outline of a plan to rescue the Eurozone and its banks was sketched out.
- There would be a haircut or writedown of Greek sovereign debt of 50 per cent.
It still all depends on the humble Greek depositor
There’s been plenty of comment, and prodding, about how European politicians need to man (and woman) up, bite the bullet, and start acting with conviction. After all, with every passing day, the price tag rises as the level of distress increases and lack of growth butts up against austerity measures.
When Italian bonds trade as risk assets
Well, they’ve been trading like it since (ooh) July, but the relationship becomes really obvious on a day like Thursday, when fears of a global slowdown hit home again.
For example, European stock markets have fallen around 4 per cent,
Siemens in knots
Oh no no, of course we didn’t take cash out of a French bank!
RTRS-SIEMENS BANK SAYS FT REPORT THAT IT TOOK MONEY OUT OF FRENCH BANK AND DEPOSITED IT WITH ECB IS FACTUALLY NOT CORRECT
Oh, er, maybe we did or maybe we didn’t!
RTRS-SIEMENS GROUP SPOKESMAN DECLINES TO COMMENT ON FT REPORT THAT COMPANY SHIFTED FUNDS FROM FRENCH BANK TO ECB
Oh,
And we cross to Karlsruhe (updated)
Breaking (via Reuters)….
RTRS-GERMAN CONSTITUTIONAL COURT SAYS REJECTS LAWSUITS AIMED AT BLOCKING GERMAN PARTICIPATION IN EURO ZONE BAILOUTS
RTRS-GERMAN CONSTITUTIONAL COURT SAYS RULING ON BAILOUTS WAS “VERY TIGHT”
Bundesverfassungsgericht risk [updated with decision]
Nomura doesn’t want you just to think about the German constitutional court’s decision on the legality of EFSF bailouts (coming later today. Should appear here).
Nomura wants you to think around it:
Beware of low-flying bund yields
Did you know? 10-year bund yields just fell to a record low of 2 per cent. As the below chart from German financial consultant Achim Duebel points out — it’s very much a changed trading world:
