The agonies of Jefferson County, Alabama, which got itself into a too-clever-by-half funding arrangement that put the county on the verge of bankruptcy, have faded from the public eye. However, the type of transaction that caused so much woe, a swaption to supposedly lower financing costs, has been the subject of SEC and Justice Department […]
Read more...Bloomberg gives today’s sighting on money market conditions. Rates continue to improve but remain at elevated levels: Money-market rates in London dropped as cash injections by central banks and the prospect of deeper reductions in borrowing costs worldwide showed signs of revitalizing confidence in lending. The London interbank offered rate, or Libor, that banks charge […]
Read more...This informative discussion that sheds further light on the stresses created by credit default swap settlements comes in the current issue of the Institutional Risk Analytics weekly, “In the Fog of Volatility, the Notional Becomes Payable“: Another example of the ongoing discontinuity in the markets comes in the linkage between the unwind of credit default […]
Read more...This Bloomberg article treats as a news item the fact that the Treasury is focusing its equity infusion efforts on strong banks, leaving the rest to find their own exit strategy. But this approach is not surprise; in fact, it is exactly what Treasury said it would do in a conference call to analysts exactly […]
Read more...Consumers are in a newly austere mood, and those who have lived beyond or at the edge of their means may be forced to retrench whether they want to or not. The New York Times reports that credit card issuers are cutting back on their lines of credit and special offers. Since debt-fueled consumer spending […]
Read more...US equity markers were already having a very good day, even by the standards of recent high market volatility, where big snapbacks have become normal after sharps declines. But the very good day turned into a stunner after the announcement today of record commercial paper sales yesterday. The Dow rose 890 points, with a near […]
Read more...I’ve kept seeing mention of a possible 75 basis point cut by the Fed. As much as some traders seem to be lobbying for it, your humble blogger would regard Fed setting its policy rate at that level as entering the famed ZIRP (zero interest rate policy) land that has played a big part in […]
Read more...In a bit of synchronicity, it seems that some mainstream commentators are starting to to take interest in a topic we’ve commented on in recent weeks, namely, how the difficulty in getting letters of credit is playing a significant role in the contraction in international trade (see our related post earlier today). John Dizard in […]
Read more...While none of the changes in interest rates were dramatic, and both interbank rates and stress levels remain elevated, improvement continues and all the metrics moved in the right direction. From Bloomberg: Money-market rates in London declined as cash injections by European central banks showed signs of easing the paralysis among lenders. The London interbank […]
Read more...We have written before how many of the various government interventions to try to produce specific outcomes in financial markets have either not proven very successful or produced adverse outcomes elsehwhere. The latest example is the Fed’s new program by which it is buying commercial paper, a form of short-term corporate debt, directly from companies […]
Read more...Morgan Stanley’s money market funds were hit by major redemptions in September, and the firm stepped in to fund half of the withdrawals itself, presumably out of a view that selling the underlying fund assets into a deteriorating market would only lead to distressed prices. But one has to wonder whether the positions that Morgan […]
Read more...We have noted before that the officialdom in the US has been remarkably less than candid (one might say outright dishonest) in discussing the likely trajectory of the financial crisis and economic growth. No one is willing to state the obvious, for instance, that banking crises lead to reductions in living standards, even though consumers […]
Read more...Hyperbole has become a mainstay of discourse in the US. The upcoming financial summit set for November 15 in Washington DC is being wrapped in the Bretton Woods brand, when it appears to be a different sort of beast. As a Wall Street Journal story reminds us, Bretton Woods was a three week session among […]
Read more...Ah, when you thought the news from equity markets was bad enough, we get a second helping on the interbank front. From Bloomberg: The cost of borrowing in dollars overnight in London rose as the increased likelihood of a global recession spurred banks to hoard cash even after policy makers pumped record amounts of the […]
Read more...I had warned readers against assuming that because we had a bounce in the equity markets, that life would soon return to normalcy (“It Isn’t Over Until the Fat Lady Sings“). But I didn’t expect a rout like this, particularly with no looming news trigger. The yen has gone to 91. The Nikkei was down […]
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