Kinda strange that markets should get all a-jitter just as the Cyprus crisis is moving towards a resolution.
Simon Derrick of BNY Mellon asked on Friday: “The red pill or the blue pill.” The answer — choose reality — seems pretty obvious, but let’s first run through Derrick’s handy re-cap…
What’s the problem?
An IMF working paper by Serkan Arslanalp and Takahiro Tsuda published last month runs through just how big the exposure is of advanced economies to foreign official debt holders (governments, central banks and the like).
As the authors write, holdings of sovereign debt by the foreign official sector are important, because shifts in the sovereign investor base can affect government borrowing costs and refinancing risks. The composition of sovereign debt holdings can also reveal a vulnerability to bank-sovereign linkages.
So far, so familiar. But stay with us. Read more
One way FT Alphaville has been covering the great Currency War of 2010 is by keeping a running list of recent sovereign interventionists.
But one issue that comes up time and again in doing so, is just how you treat the impressive array of constant interventionists — i.e. those countries that peg their currencies to the dollar, most notably China. Read more
Santander has revived talks with M&T Bank about a merger of the Spanish lender’s US operations with the regional, Buffalo-based bank, reports the FT. The talks about combining Santander’s US unit, known as Sovereign, with M&T collapsed in May, shortly before a planned announcement, amid disagreement over which bank would control the enlarged business. But the two banks restarted talks over the summer and have sounded out regulators, including the Federal Reserve, about a possible transaction.
Whilst our wives may not always agree, the time Kevin and I spend on the road seeing clients together tends to be the most productive in terms of getting a handle on what the global investor community is ‘thinking’.
I find it fascinating that during our last global tour, late in 2009, the overwhelming view in the investor community was that our message – that 2010 was going to be the year of sovereign risk – seemed to gain little traction. We saw sovereign credit ‘constraints’ as the inevitable follow up to 2008, the year the private sector credit bubble blew up, and 2009, the year this ‘risk’ was ‘transferred’ to the public sector’s balance sheet. Investors seemed, in general, to think that either such ‘limits’ do not exist/did not exist, or that such limits were many years away. Read more
Greek banking stocks were off more than 6 per cent most of Tuesday morning, following a move by S&P to put the Hellenic Republic on creditwatch.
Fitch, however, acted a tad more decisively on the day, downgrading the sovereign to BBB+. Read more
Adding to the deluge of 2010 outlooks — we’ve now had Morgan Stanley, UBS, and Standard Chartered — on Wednesday is Deutsche Bank.
And we’re sensing a theme in these things: sovereign debt. Read more
On Monday, we highlighted how BNP Paribas believed sovereign credit spreads were widening because markets were adjusting to the idea that central banks might soon remove liquidity measures implemented over the crisis.
Over at the Deus Ex Macchiato blog, however, another interesting point on the matter is raised by David. Read more