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’Farewell G7 AAA’s
As rumours (scurrilous, nonsense – Ed.) swirl in the market of a French rating downgrade, Citigroup’s chief economist Willem Buiter is considering a much bigger issue – a world without any AAA G7 sovereigns.
Where one rating agency goes…
… another fears to tread (at least for the time being).
(Nota bene – split ratings should mean fewer knock on effects.)
The (possible) future of US manufacturing
Even as it was becoming clear that first-quarter growth had decelerated, there were plenty of signs that the manufacturing sector remained an exception.
Factory production in the first three months of the year grew by 9.1 per cent (annualised),
Unfunded entitlements loom again
Ignore, for a second, Standard & Poor’s warning of political impasse on the US budget, or its talk of contingent liabilities like student loans and the financial system. That’s all short- to medium-term.
At the outer edge of ratings territory
A few, final thoughts on the negative outlook for the USA from Jan Hatzius and his team at Goldman Sachs.
First they look at the somewhat confusing market reaction — Treasuries were remarkably resilient following the move by S&P:
Losing my (AAA) religion
Alright, it’s waaayyy premature. But we thought we’d show the below — from RBC in response to Monday’s S&P action — showing change in 10-year bond yields after losing a triple-A:
Bob Janjuah – told you so America
Nomura’s sceptical strategist Bob ‘the bear’ Janjuah is feeling very pleased with himself, following S&P’s decision to revise its long term outlook on the USA to “negative”.
As well he might.
Only last week Bob wrote the following:
The importance of debt maturity
Boring title, we know. But stick with us ’cause there’s all sorts of thematic points in here — from sovereign debt crises to the weakness of short-term financing to interest rate shocks.
After the financial crisis,
Deutsche Telekom’s win/win deal
Wow!
The price action in Deutsche Telekom on Monday morning:
That’s a rise of 12 per cent for the €40bn company.
Make no mistake, the deal to sell its struggling US business to AT&T for $39bn in cash and stock is an excellent one.
US default risk is 0.05 per cent, Moody’s says
Once upon a time, credit default swaps on US sovereign debt hovered around 2 basis points. They’ve since gone up to a record 100bps and are now at about 40bps:
So the credit market’s pricing in higher default risk,
Highlights (and lowlights) from the Beige Book
Just as the US was turning its weary eyes to Barack Obama’s speech on the economy on Wednesday, the Federal Reserve Board released the sixth Beige Book report of the year. This most recent edition covers activity in the last half of July and all of August.
There’s hope for US payrolls yet, says RBC
US non-farm payrolls came in at a dismal -131,000 in July.
Even worse, the original June figure of -125,000 was revised downwards to -221,000. Meanwhile private nonfarm payrolls came in at +71,000 — weaker than the +90,000 that been expected.
Guest post: El-Erian on why the payrolls report matters
Today’s employment report was disappointing, writes Mohamed El-Erian. Nonfarm payroll employment declined by 131,000 in July, the rate and duration of unemployment remain stubbornly high, and other structural dimensions of the problem are deteriorating.
The Congressional Budget Office does a US fiscal crisis
If you thought the Bank of England’s fan charts were bad in terms of err, fanning uncertainty, take a look at the below from the US Congressional Budget Office’s economic and budget issues brief:
According to the CBO’s forecast,
The three risks to global growth, from Barclays Wealth
Three regions, three problems.
According to strategists at Barclays Wealth on Monday, the global economy is facing three big risks in three big regions:
The risks are that U.S. consumers do not increasing spending,
What’s going on with lumber futures?
The Baltic Dry’s losing streak – now into its 28th day – is becoming old hat. But have you heard the one about the lumber futures?
As Bloomberg reported, lumber fell limit-down on the CME on Tuesday,
US CRE prices rise, but fundamentals weak
US commercial real estate prices increased 1.7 per cent in April, according to Moody’s’ proprietary benchmark. That represented the first monthly increase since January — good news, right?
Not quite.
An initial double-dip indicator
Wells Capital Management wants everyone to forget Payroll Friday.
The number to focus on as an indicator for the shape of the US recovery, Wells’ chief investment strategist Jim Paulsen says, is not the monthly payroll figure,
US market snapshot: Dow(n)
The rout in US equities continued apace going into the final 30 minutes of trade on Wall Street on Friday:
via Google Finance
Get ready, get set, deleverage! With one notable (US) exception
Here’s something for the weekend — a nice overview of US debt, courtesy of BNP Paribas.
The idea is to look at all forms of American debt, private as well as government.
As you can see from the below charts,
More on those USD swap lines…
Here’s a timely working paper from the BIS.
It’s a 91-page review of liquidity provisions during the financial crisis, including the multitude of currency swap lines initiated by the globe’s central banks.
The commercial real estate-failed bank nexus
The warnings have become the reality. Back in October 2009, the NY Times cited an estimate by research firm Foresight Analytics that as many as 581 small banks were at risk of collapse by 2011, due in large part to their exposure to commercial real estate.
Martin Wolf v Stephen Roach on US-China relations
Who’s more opinionated? Tough call, when it’s Morgan Stanley’s Stephen Roach up against the FT’s Martin “Two Brains” Wolf on the small matter of US-China relations and the outlook for China’s currency policy.