This downgrade by Fitch of the junior debt on the Citi SIV Senda affects only $867 million of debt. But what makes this announcement noteworthy is it is yet more bad news about Citi, and it again illustrates how rapidly newer financial instruments, which have either high embedded leverage or high explicit leverage (SIVs rated […]
Read more...As much as I would like to leave the matter of Hank Paulson and his dubious subprime rescue plan alone, the latest developments demand comment, first my own, followed by a roundup of other views. One tidbit later on to induce you to read the entire and admittedly long post: successful implementation of the program […]
Read more...Hoisted from comments by a helpful anonymous reader was a revealing post yesterday at FT Alphaville that we somehow missed. It’s a important addition to the discussion over the stress in the US housing and mortgage-backed securities markets. CreditSights, an award-winning provider of credit research, disputes the commonly held view that the sharp falloff in […]
Read more...The US isn’t the only country facing a nasty inflation/deflation policy dilemma. The Financial Times gives us further detail on the worrisome conditions in the UK money markets, and a story in the Telegraph describes how the UK’s Shadow Monetary Policy Committee is troubled by the unprecedented drop in loans outstanding from August to the […]
Read more...This story, reported in the Economic Times of India (hat tip Elaine Meinel Supkis), that Indian banks are unable to draw on their dollar denominated lines of credit, isn’t as dramatic as the news that major banks are asking UK clients not to borrow. However, it serves to illustrate the disruptive effects the credit crunch […]
Read more...The credit market mess is affecting the finances of an increasing number of government bodies. A weekend story in the New York Times described how small towns in Norway had taken steep losses on complex US debt instruments (why were they even taking the currency risk?). Today, Bloomberg reports that the further SIV downgrades are […]
Read more...Wolfgang Munchau of the Financial Times provides an excellent and from what I can tell, overlooked argument against central banks’ eagerness to cut interest rates to shore up wobbly financial markets. His point is simple, and I am annoyed that I didn’t think of it. The reason that monetary authorities are so quick to lower […]
Read more...Bloomberg carries a story today, “Treasuries, Oil May Foreshadow Bear Market After Yields Tumble,” that warns that the Treasury rally, driven by a flight to quality, may not simply be short-lived but a precursor to a nasty reversal, particularly on the longer end of the market. It suggests that those that see the recent decline […]
Read more...It was bad enough when trading in the super-safe covered bond market was effectively halted a few weeks ago. Yes, covered bonds are technically mortgage related, but they are subject to very stringent rules as to the quality of collateral, plus investors can make claims on other assets on the issuers’ balance sheets. As the […]
Read more...Many commentators on the bailout of E*Trade by hedge fund Citadel focused on either the terms of the deal (costly to E*Trade) or the fact that Citadel, like some other risk-minded investors, are starting to pick and choose among distressed mortgage assets, a sign they believe that the bottom is nigh. But a Reuters story, […]
Read more...If you had any doubts that the credit contraction was having real-world consequences (beyond, say, the ease of getting a mortgage in the US), consider this DowJones Newswire story (hat tip Michael Panzner). Banks are not only not willing to lend to each other, but because liquidity is scarce, they are trying to dissuade UK […]
Read more...Yesterday, we posted some thoughts about the subprime rescue plan under development among the Treasury, some leading servicers, other regulators, and some investors (most notably Freddie and Fannie). A few additional items: We had commented that the plan would be limited to only borrowers who were current on payments. That appears to be incorrect, or […]
Read more...Below we have some charts that depict in various ways how fraught the debt markets and sentiment are. Some indicate that conditions are worse than in August, others are less grim. The graphics come courtesy Jim Hamilton at Econbrowser (“Risk Premia Creeping Higher“) and Michael Panzner at Financial Armageddon (“Off the Charts“). 30-Day Asset-Backed Commercial […]
Read more...The Wall Street Journal’s page one story, “Rate Plan Has Skeptics, Fans,” offers little new information about the substance of the program (not surprising) but gives mainly positive reviews. In case readers somehow haven’t figured it out, I believe this program to be a Bad Idea in any form, although some variants could be worse […]
Read more...Willem Buiter, the London School of Economics political economy professor who blogs at the Financial Times, asks the provocative question in the headline above, and after a very length discussion, that they probably shouldn’t yet, but they most assuredly should not cut rates. But what is more interesting about this post, and I’ve excerpted those […]
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