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’The EFSF’s funding funk
Casualty of “market conditions” on Wednesday – the EFSF’s latest bond issue.
The EFSF had mandated Barclays Capital, Credit Agricole and JP Morgan on Monday to price off a ‘no-grow’ €3bn 10 year deal to finance Ireland’s next bailout loan tranche,
Failing to Byzantium
Greek RMBS news that makes you go hmm (via Fitch, earlier):
Fitch Ratings-London-31 October 2011: Greek banks and RMBS transactions are at risk of losing interest payments because a Greek housing agency has delayed,
The ECB is not here to save the world — redux
Weirdly, the ECB does seem to be here to play chicken with Silvio Berlusconi, though:
That’s the only reason we can give for Italian 10-year bonds yielding 6.1 per cent on Monday. The debt last reached this level before ECB intervention began in August.
MF Global’s eurozone trades
Just fishing this out of MF Global’s fiscal Q2 results…
These repo trades are the ones against which MF Global was recently told to back with more capital. Moody’s said on Monday that the move ”raises questions about the firm’s risk governance”,
EFSF as bond-buyer (and repo monster)
Presenting… how to buy sovereign debt if you are the EFSF:
(Big hat-tip to Tracy Alloway — click images for documents)
Those are: full draft guidelines on the EFSF buying debt in primary markets and in secondary markets – and some bonus guidelines on constructing bailout-lite credit lines to states.
Will EFSF insurance actually help bond prices?
Another good point on EFSF bond insurance, the subject du jour — from Shahin Vallée of the Bruegel think-tank:
The entire proposal rests on the premise that financial markets are now shunning these debts because of marginal doubts about their recovery value in the case of a credit event and that therefore by guaranteeing a small portion of this debt,
ETF phantom liquidity
What’s the difference between ETFs and derivatives?
In our opinion, one can skew market fundamentals by messing with underlying assets, while the other one can’t.
Let us explain using an analogy.
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,
Crunch de crédit
Credit:
Crunch:
Both charts from the ECB’s latest lending survey of banks. Clear signs, we’d argue, that funding pressures did spike over the third quarter, and critically, to the extent that these pressures also pushed banks to choke off corporate credit — alongside signs of a deteriorating economy.
Dexia garantie (encore) [updated]
RTRS-FRENCH, BELGIAN GOVTS, WITH CEN BANKS WILL TAKE ALL NECESSARY MEASURES TO SAFEGUARD DEXIA SA ACCOUNT HOLDERS, CREDITORS -FRENCH MIN
RTRS-BELGIUM AND FRANCE WILL GUARANTEE DEXIA’S FINANCING -FINMIN STATEMENT
(Chart via Scott Barber of Reuters)
There is already a patchwork of state guarantees within Dexia’s capital structure but this new statement is an important move.
Her Majesty’s SME CLOs?
It’s like putting your foot on the accelerator but because the transmission mechanism isn’t working properly, the car wheels don’t respond.
Actually George, that might be because the car is on fire,
Dexia en chute encore
Sauver le financement des collectivités, oui, sauver le soldat Dexia, non!
…Or Dexia, getting in trouble, again.
There’s a meeting between the French and Belgian finance ministers on Monday about its future,
Put (CDS) trading activity where your mouth is
The Federal Reserve Bank of New York came out with a very interesting study about activity in CDS markets on Tuesday. It demonstrates the bifurcation of the market, into low activity and high activity segments.
Gold, puking, and vodka
“Liquidation” seems to be the word here…
Seems clear that the unwinding of gold longs is crashing into equities longs on Friday. Though it’s also worth standing back and looking at commodities leading sovereign credit — such as Russia and crude,
Shortening MMF maturities, chart du jour
Via Fitch Rating’s latest report on US prime money market funds’ European bank exposure, and as reported by the FT on Friday:
It’s worth picking out the shortening trend in term funding. As Fitch notes:
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,
Sundry secret Greek liquidity [updated]
Update — See reader comment below. This may be a case of mistaken identity (or a Bank of Greece accounting change), not liquidity usage in July. We stand corrected if this is accounting changes. ELA’s not easy to spot!
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sun·dry
Adjective:
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,
BNP Paribas on BNP Paribas
We’re not sure if we’ve ever heard of a bank doing anything like this before. Ever. But here it is. Presenting BNP Paribas on BNP Paribas:
(Click image above for full FAQ or see here)
Includes details on funding,
Liquidity lessons
Two pertinent ones, via London Banker:
Liquidity means you can generate cash from a physical asset or paper claim.
If you can’t exchange the asset for a major currency to meet a sudden funding need,
ECB turbulence [updated]
Something to keep an eye on — there’s been a bit of a bump in bank borrowings from the ECB’s overnight Marginal Lending Facility:
Mostly because we can’t see an obvious explanation for it.
At €2.82bn it’s a jump up from the previous day’s €555m (or €90m before that),
Basis swaps and beer
One way to visualise the pressure at the short end of the euro basis swaps curve — indicating trouble getting short-term dollar funding for an unknown number of European banks there — is to go 3D.
Such as here.
A dollar bidder at the ECB
OK — caveats first. It’s only one bank and the amount it’s tapped at Wednesday’s ECB dollar swap, $500m, isn’t exactly a systemic sum.
But a taboo has been broken…
Banks appear to have feared the stigma of approaching the ECB for dollar funding so far,
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.
A European collateral crunch
First, a chart from ICMA’s December 2010 European repo survey:
It’s newly relevant in August 2011. The clue lies in the share of repo collateral rated BBB- and below (in other words – rubbish assets on balance sheets).
A CDS basis “pain trade”
There is much speculation of short-selling bans in one or more European equity markets at pixel time. An old fear in the credit and fixed income markets trading the sovereigns, of course. An old fear with a deeply ironic effect on sovereign CDS at the moment…