The ECB’s offer to lend to all takers who could post collateral for two weeks at 4.21% or higher led to an unprecedented $500 billion worth of advances. The New York Times and the Financial Times offer some insights as to what this portends. First, from the New York Times, which focused on the comments […]
Read more...A Bloomberg story reveals that municipal bonds have lagged other fixed income investments, mainly because important investors, namely hedge funds and banks, are directing capital to other uses (as in saving their hides). Due to their tax-deductible status, munis trade at a lower yield than Treasuries, but that differential has narrowed markedly. Are munis a […]
Read more...Despite the widely-held view that the SIV bailout plan engineered by the Treasury Department and sponsored by Citigroup, JP Morgan, and Banks of America will be largely irrelevant, the program keeps moving forward. We have the latest press release, um, update, courtesy Bloomberg: The “SuperSIV” fund, set up to provide cash to structured investment vehicles […]
Read more...On Monday, the European Central Bank announced an even more aggressive version of a liquidity facility it had used last August in its efforts to lower interbank lending rates that are stubbornly higher than policy rates. This move is an admission that the coordinated efforts of five central banks last week, including the Fed and […]
Read more...The Financial Times’ Paul Davies, citing Dresdner Kleinwort research, tells us that many structured investment vehicles face acute financial demands beginning in January when their medium term notes, the subordinated layer of their funding, come due. Note that this demand is a new source of stress. SIVs were already on the ropes due to their […]
Read more...John Dizard of the Financial Times has learned that Goldman is trying to find a counterparty for a bearish position on banking industry risk. Is this a house bet, a hedge, an attractive product, or is the firm merely trying to find a taker for a punt a client wants to make? Regardless, the actions […]
Read more...It’s rare that I find fault with the the Financial Times, and even more uncommon with Gillian Tett and Paul Davies, who are two of their most seasoned and insightful journalists. Nevertheless, they have bitten off more than they can chew in “Out of the shadows: How banking’s secret system broke down.” The piece isn’t […]
Read more...Wolfgang Munchau provides a sober comment at the Financial Times. He agrees with our view (shared by other) that the central bank actions of last week to try to stimulate more interbank lending (which will show up as a fall in the spread between Libor and risk-free rates) are likely to be ineffective and that […]
Read more...Steve Cecchetti, Professor of Global Finance at Brandeis, has a nice post at Vox EU, “The Art of Crisis Management: Auctions and Swaps.” The title’s misleading; Cecchetti describes it as a FAQ on the central bank actions of last week to try to close the unusually high and troubling spread between interbank rates like Libor […]
Read more...Moody’s gave its latest take on the financial health of bond guarantors. Interestingly, Moody’s did not find the pending investment of $1 billion into MBIA to be sufficient for the rating agency to reaffirm MBIA’s AAA rating. Was that because they want to see the deal completed, or because, as some commentators have noted, MBIA […]
Read more...Willem Buiter ought to annoy me, and yet he doesn’t. While it is no doubt unconscious, he seems overly intent on impressing his readers with his intelligence, which is considerable; he wears his erudition on his sleeve. Yet he manages not to come off as an intellectual snob. While I’m not about to do an […]
Read more...The Wall Street Journal has officially sounded taps for the SIV bailout plan that once garnered front-page business news coverage: This week’s decision by Citigroup Inc. to bail out seven investment entities and bring $49 billion in assets onto its balance sheet effectively killed one of the centerpieces of the Bush administration’s approach. The balance […]
Read more...The actions announced by five central banks two days ago continue to leave the money markets unpersuaded. From Bloomberg: The biggest concerted effort by central banks in six years to restore confidence in global money markets is showing little sign of success. The rates banks charge each other for three-month loans held at seven-year highs […]
Read more...An odd sign of the times, or perhaps specifically, of financial stress; reversals of position. Today we have Citigroup, which previously stated it wouldn’t take SIV assets on to their balance sheet, relenting and doing just that. The Fed makes a few hawkish noises but still delivers a rate cut. Henry Paulson, a believer in […]
Read more...Despite its previous statements that it would not take its SIVs on to its balance sheet, Citigroup has reversed itself, announcing that it will assume $49 billion of SIV assets. The move was prompted by the Moody’s’ announcement that it was reviewing virtually all of Citi’s SIVs for a possible downgrade. A side effect is […]
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