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Posts tagged 'Eurozone'
Just to put an already-huge year-end move in Portuguese bond yields into some wider context…
Here’s a chart (via Reuters) of the five-year yield since August 2010 — to which levels it’s now, roughly, returned. Click to enlarge.
Icap’s Chris Clark alerts us on Friday to the fact that European liquidity markets are already preparing themselves for a potential liquidity squeeze come the end of the year.
As he notes:
Month-ends have become increasingly significant events for the Eurozone repo markets over the second half of this year as levels of excess liquidity have diminished and market rates have slowly edged higher. This Thanksgivings Day/November month-end liquidity hump has proved a tricky one for the market to manoeuvre, but already attention is focusing on the impending year-end as evidence stacks up to suggest funding might be problematic for some.
Here’s an essay published by the Bruegel think tank, penned by Ashoka Mody, currently a visiting professor at Princeton. He argues that if Europe wants to move forward in terms of integration, it first needs to stop. Click to read.
Update – It’s not just the rate cut, as Mario Draghi opens the presser at pixel time:
Earlier – Bold move or way too late? You decide: Read more
According to Morgan Stanley’s banking research team, one of the focus areas of the upcoming AQR and banking stress tests is likely to be the definition of a non-performing loan (NPL).
These, as FT Alphaville has noted in the past, vary somewhat radically across Europe.
What’s more, even with recent reclassifications, they’re are still rising: Read more
Courtesy of Icap’s market analysis team, here’s the turnaround in the Eonia December 13-January 14 spread this month:
That’s because it’s ghostly and hard to spot. (And it is All Hallows’ Eve.)
First it was the buried announcement that Irish banks with government share ownership are about to get Spanish-style flexibility on deferred tax assets… (though not nearly as far as the Spanish proposal for tax-credit conversion) H/T Lorcan
Next it was Bank of Ireland’s stock rising by more than 4 per cent in Dublin late on Thursday. Read more
Finland’s Chancellor of Justice, Jaakko Jonkka, has criticised the decision to keep the Greek transaction under wraps in the first place: Read more
Click for the ECB’s official introduction to its year-long “supervisory risk assessment… asset quality review and a stress test” for 124 European banks (who are all listed)…
FT Alphaville began writing in detail about emergency liquidity assistance in the eurozone — that is, national central banks lending to stricken, but supposedly solvent banks on highly secretive terms, against collateral not accepted at the ECB — some two and a half years ago.
Throughout that period, the ECB’s precise oversight of this liquidity assistance remained in the dark. Despite the risk being taken by taxpayers, and despite the fact ELA effectively stopped the Greek, Irish and Cypriot banking systems from going under at various points. And despite procedures having been in place since 1999 for the ECB to restrict ELA by a national central bank if it endangers the rules of the euro (as used in Cyprus). Read more
Of course, there are plenty of difficulties lying in wait. As the FT’s Peter Spiegel and Alex Barker write, once a new German government is in place after this weekend’s election, fraught negotiations about Greece, Portugal, Ireland and the banking union will quickly return to the fore. Read more
An interesting pair of charts to juxtapose on a Monday morning, and a PMI day… courtesy of Societe Generale. They point out that the eurozone is straggling to recovery, though apparently in spite of the ECB failing to shore up money growth: Read more
Ok, we’ve been slow to get this up. That’s because…
But here, belatedly, is a paper from Achim Dübel of Finpolconsult: Creditor Participation in Banking Crisis in the Eurozone – A Corner Turned? Read more
Olli Rehn (left) and Valdis Dombrovskis, the Latvian prime minster, (right) regrettably seem to have got lost in a Powerpoint presentation. Read more
Yes, it’s time for a trip back into those Cypriot debt contracts.
Cyprus announced the results of its sovereign debt restructuring on some €1bn of domestic-law bonds earlier this week. The one the Troika wanted for — OH. Oopsy-daisy. Did FT Alphaville say sovereign restructuring. We meant “debt management operation”. Read more
The International Monetary Fund’s “ex post evaluation” of its involvement in the Greek bailout continues to generate debate over the weaknesses revealed. Gabriel Sterne, a senior economist at Exotix with two decades of public sector experience including at the IMF, argues that the issues for the fund go much deeper.
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Like other Europe-focused strategists, William Porter at Credit Suisse has had some fun scrolling through the IMF’s mea culpa on Greece.
He notes that the IMF now admits that its actions were affected by a fear of market contagion, a misunderstanding of how to do a restructuring within a currency union and, most importantly perhaps, a dysfunctional dynamic within the Troika itself. Read more
The short answer, when it comes to eurozone adjustment post-crisis, is No. David Mackie and team at JP Morgan reckon we are maybe halfway there.
The bank has a fresh tome out presenting the progress so far as a set of journeys for each EZ member — covering sovereign deleveraging, competitiveness adjustments, household deleveraging, bank deleveraging, structural reform, and national-level political reform. Read more
Quite a lot to ponder really. Members of the IMF’s executive board were set to meet on Wednesday to discuss whether to approve lending to Cyprus, more or less behind closed doors.
But maybe not so much this time. It looks like Stockwatch in Cyprus has obtained a copy of the members’ comments on the Cypriot bailout — a rather high-level internal document to find its way to the public… and it makes for fascinating reading. Read more
A telling chart (which you can click to enlarge) from BNP Paribas’ Ricardo Santos and Michelle Lam. As they note — after a break particularly in the second half of 2012, there’s recently been a marked increase in banks’ holdings of sovereign debt… especially in Italy, France, Portugal and Spain. Read more
Hans-Werner Sinn — he of Target2 imbalance fame — had a piece on Project Syndicate last week in which he stood firm against George Soros and his demands for Germany to leave the euro if it continues to block the introduction of Eurobonds.
Though not because he thinks Germany is wrong to oppose Eurobonds, but rather because he believes there is no legal basis for such demands. Article 125 of the Treaty on the Functioning of the European Union, he says, expressly forbids the mutualization of debt. Read more
There’s been some thought-provoking revisionism floating around about Cyprus lately.
The gist seems to be this: Why not push bank bail-in policy in the eurozone much harder, right into uninsured depositors if need be, if Cyprus has not (yet?) budged most gauges of bank funding from their current calm. And more importantly, when there is a vicious circle to resolve. Read more