A lot is going on.
• Gold surges past $970... moving closer and closer to $1,000.
• Gold stocks enjoy huge spike with gold... big gold stock fund up 7% to reach highest high since early June.
• No rest for natural gas... more miserable new lows for natural gas funds.
• Muni bonds continue amazing rally... scores of muni bond funds reach another round of 52-week highs.
• ECB keeps rate unchanged at 1% and gives money in the one year at 1%.
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Showing posts with label ECB. Show all posts
Showing posts with label ECB. Show all posts
Thursday, 3 September 2009
Tuesday, 7 July 2009
No job today... what about tomorrow
What about this message:
If you are 35 years old, have only ever worked in the City and have lost your job, then the chief executive of Britain’s biggest listed recruitment company has a grim message for you on the prospect of a recovery in financial sector employment: “Those jobs have gone and they’re not coming back any time soon.”
These are the words of Alistair Cox from Hays Recruitment.
And I think the guy is right. Especially with what the ECB has in mind, things never will come back as they were. A draft report is expected today from the EU and this report states that there us a strong case for curbing existing rules on banks’ funding needs, accounting reforms and other policy changes in order to prohibit banks to lever themselves again to the tune of 30-1.
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These are the words of Alistair Cox from Hays Recruitment.
And I think the guy is right. Especially with what the ECB has in mind, things never will come back as they were. A draft report is expected today from the EU and this report states that there us a strong case for curbing existing rules on banks’ funding needs, accounting reforms and other policy changes in order to prohibit banks to lever themselves again to the tune of 30-1.
Tuesday, 30 June 2009
Christmas comes early this year
Last week we mentioned the ECB liquidity-operation where almost 440 bln EUR was handed out to European banks at 1% for the duration of 1 year. An early Christmas present.
Willem Buiter comments as follows:
You may think that this implies that the cost to the banks of borrowing from the Eurosystem for a year - 1.00% - does not imply a subsidy, as the banks’ borrowing from the Eurosystem is secured against collateral. You would be right if the collateral consisted of German government bonds. My guess (I don’t have hard information) is that this was not the case, and that instead the borrowing banks stuffed the Eurosystem with the worst quality collateral they could put their hands on, subject to the constraint that a rating agency had rated it at least BBB-. Given the well-established practice of Eurozone banks that are eligible counterparties of the Eurosystem in repos and at the discount window, to carefully structure collateral packages that just meet the letter of the ECB’s collateral eligibility requirements, I am happy that I am not responsible for vetting and verifying the credit risk present in the portfolio of that increasingly speculative, highly leveraged entity known as the Eurosystem.
Everything is quite simple these days: banks clean up their crapy balance sheets by transferring the risks to the ECB and receiving risk-free money instead at an absolute fire sale rate. It’s a kind of subsidy.
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Willem Buiter comments as follows:
You may think that this implies that the cost to the banks of borrowing from the Eurosystem for a year - 1.00% - does not imply a subsidy, as the banks’ borrowing from the Eurosystem is secured against collateral. You would be right if the collateral consisted of German government bonds. My guess (I don’t have hard information) is that this was not the case, and that instead the borrowing banks stuffed the Eurosystem with the worst quality collateral they could put their hands on, subject to the constraint that a rating agency had rated it at least BBB-. Given the well-established practice of Eurozone banks that are eligible counterparties of the Eurosystem in repos and at the discount window, to carefully structure collateral packages that just meet the letter of the ECB’s collateral eligibility requirements, I am happy that I am not responsible for vetting and verifying the credit risk present in the portfolio of that increasingly speculative, highly leveraged entity known as the Eurosystem.
Everything is quite simple these days: banks clean up their crapy balance sheets by transferring the risks to the ECB and receiving risk-free money instead at an absolute fire sale rate. It’s a kind of subsidy.
Monday, 29 June 2009
This must be Europe...
From Europe, with love:
ECB's 1-year money: The highlight was of course the huge 1-year provision of money at 1% by the ECB, which has set in motion a decline in money market rates that I suspect will broadly equate what would have happened if they had cut their policy rate to 0.5%. Bending to the evidence that the ECB prefers to provide the last bit of monetary easing via liquidity provisions rather than rate cuts, Goldman changed their forecast for policy rates to “unchanged” at 1% for the next 12 months.
ECB's 1-year money: The highlight was of course the huge 1-year provision of money at 1% by the ECB, which has set in motion a decline in money market rates that I suspect will broadly equate what would have happened if they had cut their policy rate to 0.5%. Bending to the evidence that the ECB prefers to provide the last bit of monetary easing via liquidity provisions rather than rate cuts, Goldman changed their forecast for policy rates to “unchanged” at 1% for the next 12 months.
On the policy side: The Spanish government approved a EUR 9bn fund to bail out needy banks, while the Germans are focusing on their fiscal exit strategy via a rule-bound fiscal consolidation that’ll limit the cyclically adjusted deficit to 0.35% from 2016.
Latvia help: In a stunning move, the European Commission announced last Friday that it'll disburse a EUR1.2bn loan tranche to Latvia in the next few weeks as the revised memorandum of understanding between the EC and Latvian government is finalised. This should be positive for CDS spreads for the Baltic states and Sweden, and also (at least temporarily) dampen a potential source of volatility in the CEE region.
Thanks Goldman….
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Latvia help: In a stunning move, the European Commission announced last Friday that it'll disburse a EUR1.2bn loan tranche to Latvia in the next few weeks as the revised memorandum of understanding between the EC and Latvian government is finalised. This should be positive for CDS spreads for the Baltic states and Sweden, and also (at least temporarily) dampen a potential source of volatility in the CEE region.
Thanks Goldman….
Wednesday, 24 June 2009
Free money for all (banks)....
Is it possible for the Russians to stop the slide from rouble and equity markets?
Since the top on June 1 the rouble-based Micex went down with 24%.
All right then, it’s not the only sector losing height.
As we mentioned yesterday.
Since the top on June 1 the rouble-based Micex went down with 24%.
All right then, it’s not the only sector losing height.
As we mentioned yesterday.
But help is coming. From the ECB auctioning 442.2 bln euro’s today for one year at 1%. Euro rates fell to record lows.
As is illustrated by the overnight rates.
A success in terms of driving down rates. In terms of excess reserves this bargain opportunity gave banks the opportunity to stock up euro cash to an excess of some 270 bln euro.
Thank you ECB.
Last week the ECB said that eurozone banks could face 283 bln EUR losses before 2011.
Well, this makes pretty up for it, not?
No wonder European banks are going higher.
Don’t forget: there is still a FOMC meeting going on.
Tuesday, 16 June 2009
Europe's own shadow bank: the ECB
The ECB loves working in the shadow. While voices raise to audit the FED, nobody ever mentions the ECB. Well let’s tell you a story. Repo auctions with somewhat longer maturity dates than what is common (two weeks) are coming.
As there are: 1 year.
And one of such auctions is coming up the coming weeks.
We know already the rate 1%.
Meaning: banks can offload eligible paper and in exchange you receive money for one year at a fixed rate of 1%.
Nice.
We hear in the market that there is a huge interest from the banks. Amounts of 500/600 bln EUR are whispered.
Did you also mention that prices of long term govvies in Europe are holding up much better last couple of weeks than their American equivalent?
And did you also mention that the swap rates where lower than the yields on those government bonds?
So, what are banks doing? They go out to by government bonds, swap them to a shorter time frame and will finance them at 1% during one year. This is called: easy money in the bank.
Thank you ECB.
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As there are: 1 year.
And one of such auctions is coming up the coming weeks.
We know already the rate 1%.
Meaning: banks can offload eligible paper and in exchange you receive money for one year at a fixed rate of 1%.
Nice.
We hear in the market that there is a huge interest from the banks. Amounts of 500/600 bln EUR are whispered.
Did you also mention that prices of long term govvies in Europe are holding up much better last couple of weeks than their American equivalent?
And did you also mention that the swap rates where lower than the yields on those government bonds?
So, what are banks doing? They go out to by government bonds, swap them to a shorter time frame and will finance them at 1% during one year. This is called: easy money in the bank.
Thank you ECB.
Thursday, 7 May 2009
The ECB is on the move
The ECB cut rates with an unsurprisingly 25 bp. But Jean-Claude T launced afterwards some very remarkable proposals: additional repo operations, Repo ops with 12 month maturity, quantitative easing, purchase of covered bonds, EIB is becoming a counterparty.
Unconventional measures for the ECB? Remarkable.
Apparently, things are not that rosy as (European) exchanges think.
Gold is soaring.
Na why should that be…
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Unconventional measures for the ECB? Remarkable.
Apparently, things are not that rosy as (European) exchanges think.
Gold is soaring.
Na why should that be…
Tuesday, 14 April 2009
Budget of Hell
In the Telegraph we read an article of Ambrose Evans-Pritchard titled: Ireland is ECB’s sacrifical lamb to satisfy German inflation demands.
Of course, it’s Easter.
What’s happening on the Emerald shores?
We can bring it down to the Budget of Hell which was released last week.
The core of everything is the following
It (Ireland) was betrayed again by the European Central Bank, which opened the monetary floodgates early this decade to nurse Germany through a slump, holding rates at 2pc until late 2005, despite flagrant breach of the ECB's own M3 money targets. Fast-growing Ireland and the Club Med over-heaters were sacrificed to help Germany. They were left to cope with credit bubbles as best they could.
Ireland struggled. Construction reached 21pc of GDP – a world record? – compared with 11pc in the US at the peak
Ireland risks a deflationary slide into bankruptcy. Especially in the effort to swallow 90 bln euro of toxic bank debts – or 50% of their GDP.
Ok, this is only one view.
We’ll enjoy the springtime here at the sea side and hope that everything will work out fine. The Celtic tiger is only wounded. Not death.
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Of course, it’s Easter.
What’s happening on the Emerald shores?
We can bring it down to the Budget of Hell which was released last week.
The core of everything is the following
It (Ireland) was betrayed again by the European Central Bank, which opened the monetary floodgates early this decade to nurse Germany through a slump, holding rates at 2pc until late 2005, despite flagrant breach of the ECB's own M3 money targets. Fast-growing Ireland and the Club Med over-heaters were sacrificed to help Germany. They were left to cope with credit bubbles as best they could.
Ireland struggled. Construction reached 21pc of GDP – a world record? – compared with 11pc in the US at the peak
Ireland risks a deflationary slide into bankruptcy. Especially in the effort to swallow 90 bln euro of toxic bank debts – or 50% of their GDP.
Ok, this is only one view.
We’ll enjoy the springtime here at the sea side and hope that everything will work out fine. The Celtic tiger is only wounded. Not death.
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