These sorts of charts have been bothering a lot of people lately, including us:
This one, via UBS’ George Magnus, shows China’s debt back near a 2009, stimulus-era ratio. Only, this time, it’s without the stimulus-era boost to the economy. Read more
Every strategist around, it seems, was expecting an increase in China’s growth rate after the recent credit surge. Of course… it didn’t happen.
Yet much of the reason for those expectations of credit tightening are still there: credit really surged, particularly in March. Read more
Enjoy! Some 148 pages of accounting-for-loan-losses reading:
It’s the IASB’s latest version of its attempt to make banks recognise “lifetime expected” losses on loans or bonds as soon as there are “significant” signs of a credit going bad, instead of waiting until it’s too late and risking a sudden wave of defaults. Read more
The CLO kind of got off lightly in Fed governor Jeremy Stein’s “Overheating in credit markets” speech.
Makes sense, given what Stein was mostly talking about — places in the market where the yield chase could be relying on assets that in turn rely on short-term funding. In other words, leverage that turns “overheating” into a supernova. Read more
Taken together, the policy vol crunch and regret factor must be putting the remaining bears in a paroxysm of remorseful fear.
He’s very quotable, Nomura’s Kevin Gaynor. Read more
Plenty of analysts and pundits have gone to the trouble of explaining the challenge confronting savers in the current low-yield environment…
But how many of them go to the trouble of putting on a barbecue to illustrate various credit strategies one may respond with? Read more
Ireland: Eurostat is withdrawing a specific reservation, expressed in April 2012, on the data reported by Ireland, relating to the statistical classification of National Asset Management Agency Investment Limited (NAMA-IL). On the basis of documents provided by the Central Statistics Office of Ireland, NAMA-IL is majority privately-owned, following the sale by Irish Life of its stake in NAMA-IL to a private investor. This is a necessary condition for a special purpose entity to be classified outside the General Government sector, pursuant to Eurostat’s decision of 15 July 2009 on public interventions during the financial crisis.
That’s from Monday’s Eurostat release on European government debts and deficits. Monday, perhaps not coincidentally, also saw names put on the announced sale of Irish Life’s 17 per cent stake in Nama Investment Ltd. Read more
A safe assets-themed argument in three charts, from Barclays’ latest global outlook. (Click to enlarge)
US banks as one of the last big carry opps, really? Chart via Ralph Axel at BofA Merrill Lynch:
Here’s a call from Sober Look on Tuesday — Germany’s growth might be on the cusp of going negative:
So much for the hopes and dreams of German decoupling from the Eurozone’s economic troubles. How things have changed in just six months… Germany’s growth trajectory is now converging with the rest of the euro area’s weakened economic conditions. Read more
So farewell then, 10 per cent Fannie and Freddie senior pref dividends.
Here’s an interesting exercise in eurozone sovereign credit, courtesy of Francesco Garzarelli of Goldman — click charts to enlarge:
JP Morgan’s second-quarter 10-Q is out – and so is its restated filing for the first quarter.
Of course, the bank has already opened the kimono (as Jamie Dimon might say) on the unwinding – and transfer to its investment bank – of the synthetic credit trades built up by its Chief Investment Office. Read more
What would you think if this headline graced your inbox?
Managers triumph at credit event of the year Read more
We’ve discussed MMT’s recent foray into the mainstream, and the confusion it has consequently courted.
But that’s the funny thing about the theory. It is naturally divisive because most of the time it fails to communicate its message succinctly. Which is weird, since the premise is actually fairly simple to understand. We’d say it’s akin to looking at an autostereogram. Once you get it, you never see things quite the same way again. But at the same time, try as they might, some people will never be able to see the image. Ever. Read more
A five-page article in the Washington Post by Dylan Matthews over the weekend, finally thrust the theory of Modern Monetary Mechanics into the mainstream.
This was exciting news for fans of the alternative economic school, more popularly known as MMT, which asks people to think of money, credit and tax in a completely different way to what is usually considered conventional in economics. Read more
RTRS-KAZAKH BANK BTA IN OFFICIAL DEFAULT ON $2 BLN 2018 BOND AS JAN.3 COUPON FUNDS NOT RECEIVED-CREDITORS CITE EUROCLEAR
January 17 marked the end of the grace period for BTA’s missed coupon payment. Creditors wanted this coupon paid before opening talks. Therefore — this Kazakh bank’s second, fractious, complicated debt restructuring bid just passed a point of no return… Read more
We missed this earlier — these are Societe Generale credit strategists’ 2012 forecasts for supply of bank and corporate bonds issued in euros.
Spot the odd (shrunken) one out? Read more
What are chances of a soft landing for the Chinese economy? Pretty slim if you ask über bear Albert Edwards.
The Société Générale strategist reckons “blind faith” in the competence of the Chinese authorities to guide the economy to a soft landing is misguided. He says: Read more
Clearly, gaining $1.9bn in revenue from your own credit spreads blowing out must be the trophy asset for the A/W ’11 US bank earnings season…
Citigroup’s Q3 results, out on Monday (total revenue $20.8bn): Read more
Some very interesting proposed changes to Standard & Poor’s rating methodology for CDOs made of stuff like ABS, in the following request for comment, we think:
Standard & Poor’s Ratings Services is requesting comments on proposed changes to the methodologies and assumptions it uses to rate collateralized debt obligation (CDO) transactions backed by structured finance (SF) securities… Read more
It’s a good job no one is sad enough to make drinking games* out of US bank financial results (it’s way too early in the morning, anyway)…
Because if you’d taken a swig every time JPMorgan Chase mentioned “DVA” (or “CVA”) within Thursday’s Q3 earnings release — you’d be absolutely smashed right now: Read more
Banks are offering easier credit terms to hedge funds in an increasingly fierce competition for their business, according to new Federal Reserve survey data, the FT reports. The Fed’s poll of 20 of the largest securities dealers, launched last year in an attempt to fill in information black holes that stoked the crisis, also found a rebound in their clients’ leverage. Nasdaq adds that the survey found lenders gave more-favorable credit terms to hedge funds, private equity, insurance companies, pension funds and other big investors. The reasons cited were more-aggressive competition from other lenders and an improvement in market liquidity. Read more
Maiden Lane’s no lady. She continues to harass Wall Street.
The Federal Reserve has been selling off the portfolio of dodgy Mortgage-Backed Securities (MBS) it acquired as part of its bail-out of AIG. Bloomberg reports that falls in the credit default swap (CDS) indices used to protect against losses certain types of debt has been accelerating this month. Read more
Seniors have had a hard time of it lately.
They’ve been usurped by a trendier generation, buffeted by changing times. Now Morgan Stanley analysts want you to consider this frail group. They want you to … focus on senior bank debt, of course! Read more
Credit strategies are leading the way for hedge fund managers as funds adjust to volatile trading conditions, the FT says. Credit is the best performer so far this year, without the benefit of leverage, among funds managed by John Paulson & Co. The group’s $9bn Credit Opportunities fund returned 1.4 per cent in April and is up 7.8 per cent for the year, according to investors. Paulson’s credit funds were up between 5.92 per cent and 6.34 per cent in the first quarter. The robust performance in credit comes as it emerged leading hedge fund managers were caught out by a pause in the swift rise in gold, volatile prices and a resilient stock market in the first quarter. The San Francisco Chronicle adds that Paulson’s biggest fund, Advantage Plus, is said to be down 1.7 percent in 2011 after gaining 0.1 percent last month. Read more
It’s money money everywhere and not that much to buy.
Citigroup credit strategist Matt King has a nice note out on Wednesday attempting to delve into the ‘cash on the sidelines‘ notion — or the idea that there’s a wall of money just waiting to be invested. (It’s true, of course. In the credit space, King points out that inflows to corporate credit have more than doubled since 2007, while net issuance has fallen. This means most new issues are oversubscribed and investors are left feeling they have to buy the market, regardless of whether they actually like it.) Read more
The Banque Générale Privée was to France, as Chinese banks are to _____.
It’s not a tough analogy, that. Though the idea of comparing an 18th century French bank to modern-day Chinese financials is rather original. It comes to us from Shenyin Wanguo Securities analyst, Beijing nightclub-owner, and all ’round China expert, Michael Pettis. Read more
CDS liquidity –> lower yields –> lower cost of sovereign funding. Without protection, many are less likely to buy in the first place, pushing up borrowing costs.
We’ve said it before. Read more
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