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’But what does Mrs Watanabe think?
Apparently Sarkozy has phoned Hu Jintao on Thursday, to beg er, ask China to wire cash through the EFSF. Somehow.
Shouldn’t someone also be calling Mrs Watanabe?
Japanese investors are among the biggest private sources of demand for euro-denominated debt outside the eurozone.
Building a better bank recap, discount curve edition
At some point on Wednesday, eurozone governments will say they want banks to find an unspecified amount capital, based on revised sovereign haircuts which… we still don’t know a lot about.
We know that sovereign bond positions will be marked down,
Writing down Greece at Deutsche, encore
Deutsche Bank’s third-quarter results, 2011:
- A €777m profit, double forecasts but down from €1.1bn in the second quarter (excluding charges from the Deutsche Postbank merger)
- Sales and trading revenue €1.9bn (Q2:
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.
Keep on carrying on LTROs
It’s baaack! The prospect of eurozone banks buying more sovereign debt to take advantage of new cheap one-year ECB liquidity, that is.
You’ll have heard that the ECB will offer not one but two one-year Long-term refinancing operations to banks before the end of 2011,
IMF SPV — splatted
IMF European director Antonio Borges sallies forth to fix Europe’s sovereign debt crisis once mo — oh, hang on, oops:
Let me be clear about some earlier comments I made
The rest of it… is quite painful:
You can lever, but will you take the loss?
OK, you can’t lever the EFSF because the German government says no. Just no, no, no, no. Although even in the rare event that it changes its mind, there’s also this issue…
One of the problems with levering the EFSF by linking it to the ECB buying bonds,
Let them eat EFSF equity tranches?
Rather than start directly with the weekend rumour of using the European Central Bank to “leverage” the EFSF…
… instead we’ll start what the ECB has done with the current Greek bond swap (these are answers to questions from the official bond swap website):
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,
Operation sovereign debt net
From the ivory tower of academia has come a novel idea: why not just net away all those troublesome debt exposures?
For example, say Spain held Irish debt to the tune of €12bn and Ireland held €20bn of Spanish debt,
European repo turns to Japan
The latest European repo council survey is out, and some interesting new trends have been detected.
For example, since the last survey was taken in December 2010:
Dollar-denominated repo has fallen to make up 16 per cent of the market,
A Greek T-bill oddity
From the English edition of Kathmerini (hat-tip to a reader):
The prospect of a freeze in payments appeared even more serious on Thursday, after Greek commercial banks failed to cover the sum of 300 million euros of supplementary,
Greek default prediction du jour
It comes from Harvinder Sian of RBS:
Net/net, our base case that the default of Greece will centre around the Dec-11 review is still plausible and our arguments on why it can not come around the Sep-11 review are only tactical.
Where’s the ECB?
At pixel time, the Italian 10-year spread to Bunds was past 340bps — far above recent ECB intervention levels. One of the interesting things about current Italian spreads also is that they have remained wider than Spain’s throughout August.
Questions about the Greek restructuring?
Get them from the horse’s mouth. So to speak.
Yes, that’s Greece’s very own Q&A website for its recent bond swap offer — where some questions have already been submitted by bondholders, it appears.
Euro splurge!
Have you heard about this new euro daaaahling? Is great. Lets buy thingz with it!
Yes, that’s our best euro-trash impression.
And we bring it up because the first chart above — from David Watts at CreditSights — rather superbly illustrates the euro-area buying spree undertaken by the region’s banks after the adoption of the euro.
Finland’s Greek collateral plan breaks negative pledge [updated]
You might have heard of the latest Finnish proposal to collateralise loans to Greece. This would transfer Greek privatisation assets to a Luxembourg-based société anonyme to be held as security against default,
What price Europe?
Or what price a 10-year eurobond?
Bank of America Merrill Lynch analysts got straight to the point late on Friday:
Those representing the Eurobond as a panacea argue that since the average debt/GDP and deficit/GDP ratios in the EZ are comparable to,
Why yes, the Greek collateral grab is a big honking default risk
Over a week after FT Alphaville first revealed how Greece’s Finnish collateral “deal” threatened a default on its foreign-law bonds, given negative pledge clauses in the contracts…
From Handelsblatt on Thursday:
From 1896 to 2011, in UK borrowing costs [updated]
The 10-year gilt yield fell under 2.4 per cent early on Thursday:
It was 2.37 per cent at pixel time.
So we’re not just well under the twentieth-century record low (1946, when yields fell to 2.5 per cent).
Eurobonds and the shadow of the future
Sometimes, you have to turn to US history to realise how very confused the eurozone is at the moment…
Merkel and Sarkozy want balanced member-state budgets in 2012, but no eurobonds for the foreseeable future.
The price of JGB-isation
Japanese history lesson by Citi rates strategist Mark Schofield — probably you can guess the subject:
It is tough to just look at the price action in Japan as the policy process was so long and drawn out.
The difference of five billion euros [updated]
Update 1435 UK time: The number’s in and it’s €22bn, which takes the total for all ECB bond purchases to €96bn. Again, watch those sterilisation numbers (bid rate, total size of bid, etc). Related fact du jour — the ECB liquidity surplus currently stands at €160bn based on the lending operations that took place in August,
That was the ECB bond-buying week that was
The RBS economics team did a good summing-up on Friday:
In the week so far of intervention in Italy and Spain, the ECB Securities Market Program has cost somewhere between Eur 11-16bn on our estimates.
Was the 30-year UST auction really that bad?
The 30-year US Treasury bond auction spooked the market on Wednesday, seeing yields fall massively on the long bond, because the yield achieved was 3.75 per cent versus a yield of 4.375 per cent in May.
Sterilising Silvio
(More salubrious title: did the ECB just rescue Italy from a liquidity trap, or keep it there?)
Key points:
Italian government bonds outstanding: €1,597bn
Spanish government bonds outstanding:
Italian to be next ECB president
RTRS-ITALY’S BERLUSCONI -WE WILL ACCELERATE MEASURES IN AUSTERITY PROGRAMME WITH AIM OF BALANCED BUDGET IN 2013
Related link:
Here comes the rescue – FT Alphaville
There are many ways to impair a Greek bond
Many ways to fudge them too.
Compare and contrast…
1) Marking Greek bond impairments to market:
Examples du jour: RBS and Allianz.
RBS has written down £733m of its £1.4bn holdings of Greek bond holdings.