Bloomberg points out what some observers have already mentioned: putting Freddie and Fannie into conservatorship is a credit event as defined in credit default swaps (note defintions are sui generis, but this one was evidently close to universal in these agreements). Due to the Federal assurance that positive net worth will be maintained, this ought […]
Read more...In less than a month, NYMEX crude oil futures have dropped about 15% in value. Other commodities ranging from precious metals to agriculture have had significant drops as well. Even for the traditionally volatile commodity markets, this is somewhat unusual and has led many people to scratch their heads to figure out what’s happening. Is […]
Read more...Merrill’s surprising, mere ten days after its last investor combo writedown/fundraising announcement still has financial analysts toting up the collateral damage. Remarkably, the US stock market staged a peppy rally, clearly choosing to ignore the implications. The cause for pause was the sale of $30.6 billion in face amount of super senior CDOs at a […]
Read more...Many readers over the weekend commented on National Australia Bank’s stunning writedown of A$830 in “super senior” CDOs, which resulting in a valuation of ten cents on the dollar, and speculated that this move had implications for US banks. Then Merrill announces a surprise writedown, out of sync with its reporting cycle. Could the two […]
Read more...Gretchen Morgenson of the New York Times has a story on proposed new reporting rules for credit default swaps that in passing raises the question that if implemented on the envisioned schedule (becomes effective in fiscal year financial statements after November 15, 2008, so the impact could be soon in coming), it may lead banks […]
Read more...Um, hasn’t anyone heard of the saying, “The customer is always right”? Apparently not, at least if you are a fund manager. The Wall Street Journal in “Credit Woes Lead Investors to Simplicity,” reports on a KPMG/Economist Intelligence Unit survey of investors carried out in March and April. Having gone to read the report itself, […]
Read more...This week’s Institutional Risk Analytics has an alarming title: “Is Risk Management Even Possible in an OTC Marketplace?” By all indications, the article points to a strong “no”. As much as I am a harsh critic of so-called financial innovation, the headline goes further than the case the article makes. OTC markets covers a large […]
Read more...In a board meeting where it was believed that Martin Sullivan, AIG CEO, would resign, the expected took place. Robert Willmustad has been designated CEO of the insurer. From the Wall Street Journal: Robert Willumstad, a former Citigroup Inc. executive and chairman of the board of American International Group Inc., has been appointed chief executive […]
Read more...A piece by John Dizard in the Financial Times, “Get used to underwriting big lenders,” made me realize a bit of cognitive blindness. Central banks are committed to backstopping the credit default swaps market. Of course, that should be obvious. The Bank of England, ECB, Fed, and other central banks have intervened in various ways […]
Read more...In a nutshell, yes, but not in the way the industry hopes. In a Financial Times article. Gillian Tett files a somewhat dumbfounded report from the European Securitization Forum in Cannes. While the event has gone wildly downscale from last year’s bash, the participants were hopeful that the return of good times was just around […]
Read more...Gretchen Morgenson of the New York Times in “First Comes the Swap. Then It’s the Knives.” delves into a dispute between UBS an Paramax, a Connecticut-based hedge fund group over a credit default swap written by Paramax in 2007 on a subprime CDO (you can already guess how this movie ends). Morgenson-bashing is a popular […]
Read more...Satyajit Das has a very useful post, “The Credit Default Swap (“CDS”) Market – Will It Unravel?,” in which he describes some of the ways that CDS may fail to perform as expected in real world situations, ie, when companies start getting in trouble. While this work isn’t quite at the Tanta Uber-Nerd level of […]
Read more...Two UK columnists looked at the credit markets, and neither liked what he saw. And they wrote it up more colorfully than most of their American counterparts would have. The first, Nils Pratley of the Guardian, tells us that that the idea that the credit crisis is on the wane is more than a tad […]
Read more...There’s an odd little story on the home page of the Financial Times website, odd in three respects. First, it discusses a development, namely, the launch of a credit derivatives clearinghouse that is important enough that it ought to be reported more broadly, yet several searches on Google News came up empty-handed. Readers no doubt […]
Read more...A story on Bloomberg this morning uncharacteristically lacks a news hook but gives a good deal of color on counterparty risk in the credit default swaps market. The story argues that the other shoe may finally drop in the $62 trillion CDS market due to rising junk bond defaults. We’ve long seen that market as […]
Read more...