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’Are western central banks having an existential crisis?
David Wessel over at the Wall Street Journal has followed up on a story FT Alphaville has been covering for a while. That the world economy is running out of super-safe financial assets, and that this is doing untold damage to central banks’ abilities to control interest rates (the last bit is our spin).
A mystery central bank in USTs?
FT Alphaville has already noted the extreme specialness of the current benchmark US Treasury 10-bond.
On Friday, however, that specialness reached new levels of extremity, with Bloomberg reporting repo rates of as low as minus 2.92 per cent.
Operation Twist — and shout
Strange, fast, markets. The S&P 500 closed at 1,172.53, up 53 points, or 4.74 per cent. That’s the biggest one day rise since 20 October, 2008. 10-year Treasury yields touched crisis lows. And the US dollar…
Found: the patriotic relief rally
The US treasury conducted its first post-downgrade auction of Treasuries on Tuesday and, guess what, it’s a record breaker.
Three-year yields were sold at a record low yield of 0.5 per cent, which means the US could easily be confused for a AAA sovereign:
Preparing for a US debt disaster
A deal required before an Asian markets drop on Monday. Bankers summoned to a joint meeting with officials in New York. Congress paralysed. Despite our continuing optimism and markets’ relative insouciance,
Is the debt ceiling drama really all about the GSEs?
You’re looking at an excerpt from the 2008 Housing and Economic Recovery Act. That’s the thing which created the Federal Housing Finance Agency (FHFA), which is currently charged with regulating the US’s massive Government Sponsored Enterprises (GSEs),
US Treasury: NOBODY MENTION CHINA
The Department of the Treasury
MEMORANDUM
To: Staff (All)
Re: C***A
Reuters has painstakingly followed up on a rule change made in 2009 to how bidders in US debt auctions are classified,
The shrinking AIG stock offering
Welcome back AIG, or um, another 15 per cent of you.
From the bailed out insurer’s public offering prospectus, released Wednesday morning:
American International Group, Inc. (“AIG”) is offering 100,000,000 shares of its common stock,
Delaying a US default 101
We are 12 days from hitting the $14,300bn US debt ceiling. And, perhaps more importantly, just a few months away from when the Treasury will run out of accounting moves that can prevent a default.
And if you’re wondering what these accounting moves are exactly,
US covered bond conundrums
Our colleague Jennifer Hughes cites the worries of fund managers over the underlying collateral that backs covered bonds in Europe, which reminds us that we’ve been meaning to write something about another recent proposal meant to jumpstart a covered bond market here in the US.
The Fed and its MBS portfolio
Interesting note, this.
It’s from the banks team at RBS and it looks at the reaction to Monday’s news that the US Treasury plans to sell $142bn of Mortgage-Backed Securities (MBS) purchased during the crisis as part of its Fannie Mae and Freddie Mac bailout.
Clear and present danger
This is barking — but rather readable if you’re the sort of person who enjoyed Oliver Stone’s JFK.
It’s a report commissioned by the Department of Defense Irregular Warfare Support Program which claims the US is facing an ‘Economic Pearl Harbor’ and the attack has entered its third and most critical phase.
Diplomacy by US Treasuries
Here’s a year-old quote from the Inner Workings blog of the Asia Times:
Dollar-denominated risk assets, including asset-backed securities and corporates, are no longer wanted at the State Administration of Foreign Exchange (SAFE),
From Fed run-offs to super-sized Treasury auctions
From RBC Capital Market’s Michael Cloherty:
As we discussed last week, the Fed is likely to start shrinking its balance sheet by allowing maturing Treasuries to run off as early as the fourth quarter.
The Pomo flip
The Federal Reserve bought $7.72bn worth of US Treasuries on Wednesday, and specifically $675m of Cusip No. 912828PL8 and some $7bn of Cusip No. 912828PQ7.
Why do we bring it up?
Because the US Treasury only just auctioned off that second Cusip:
Hank Greenberg takes on the government, Goldman, taxpayers
Oh, Hank.
In Wednesday’s Wall Street Journal, the AIG godfather inquires “why did we nationalise AIG?”
He’s puzzled, but thinks that the government and Goldman Sachs may have the answer (our emphasis):
From Hamp footnote to Hamp legacy
A footnote, from the US Treasury’s Hamp programme.
The Home Affordable Modification Plan was created in the spring of 2009 with the stated goal of keeping delinquent homeowners in their houses. It’s now widely regarded as a failure — with just 519,648 permanent modifications completed.
Fed to market: How much QE2 would YOU like?
That, we imagine, is what a purported Federal Reserve survey sent to the central bank’s 18 primary dealers looks like. According to Bloomberg News, which says it has seen a copy of the document, the New York Fed asked the dealers,
Goldman and those 50-year bonds
In another display of nifty tentacle work, Goldman Sachs on Tuesday sold $1.3bn in 50-year bonds to retail investors — vastly beyond its original plans to sell just $250m worth.
While investors were (quite naturally) drawn to prospects for high,
Performing PPIFs
The Public-Private Investment Program, or PPIP — do you remember it?
Appropriately, given its somewhat Dickensian name, it was like the orphaned child of banking stabilisation measures. Associated with a difficult early period of the Tim Geithner reign,
Sacrificing servicers on the altar of Hamp
We like to think of the foreclosure scandal as Hamp on super-steroids, with a hefty dose of litigation and structured finance for added fun.
Recall that the US administration’s mortgage modification program was aimed simply at keeping people in their houses.
Guest post: The Fed does not want debt monetisation
FT Alphaville presents a guest post from Jerry H. Tempelman, CFA, who was previously a Senior Financial and Economic Analyst with the Federal Reserve Bank of New York. The views expressed are strictly his own.
Tipsy in the TIPS market
The FT’s James Mackintosh makes an interesting observation about the US Treasury inflation-linked (Tips) bond market in Friday’s short view column:
…something weird happened this week in Treasury inflation-protected securities,
‘A lively debate followed,’ or, fun with Treasuries
Tip of the hat to Alea for this — an unusually interesting record of minutes for the latest meeting of the Treasury Borrowing Advisory Committee, released in tandem with the Quarterly Refunding Statement.
BarCap: 1 Hamp: 0
Barclays Capital has won its battle against Hamp stats.
BarCap analysts Sandeep Bordia and Jasraj Vaidya last week criticised the latest Hamp loan performance data, published on July 20 by the US Treasury.
Flight to safety? Follow the US Treasuries
Here’s an interesting data point from the US Treasury market overnight.
Some $40bn of two-year notes were sold at a record low yield of 0.789 per cent on Tuesday, with a bid to cover ratio of 3.45 — the highest since October 2009,
US Housing Bubble v2.0, charted
It’s no secret that the US government is trying to prop up house prices.
Its various programmes, Hamp, MHA, tax incentives, etc., have been explicitly linked to higher house prices before — most notably in Sigtarp’s first-quarter report to Congress.
Tarp-edoed dividends
Last week the US Treasury released its May Tarp report.
The department was quick to herald a milestone in the programme; Tarp repayments to taxpayers had, for the first time, surpassed the total amount of Tarp funds outstanding.
Pru/AIA – It’s alive
Shares in Prudential are strangely becalmed following Friday’s news of talks to renegotiate the $35.5bn price tag for the Asian business of AIG:
The markets seems to have no idea whether the deal will go ahead,