Like our own Fed governors in the run up to the FOMC meeting that produced a 50 basis point Fed funds rate cut, so too have European Central Bank been sending mixed signals on domestic versus international priorities in their interest rate policies. But their actions are the mirror image of ours. For them, member […]
Read more...By happenstance, Bloomberg has an interesting trio of prognostications for the financial markets. Admittedly, they have differing degrees of authority. Most would give the IMF considerably more credence than either Jim Rogers or Goldman. However, all three have a following with investors. Not surprisingly, Goldman’s report is upbeat, the IMF’s is cautious tending towards the […]
Read more...Some quick updates on what market prices reveal about investor expectations. First, Bloomberg tells us that Treasury note prices are trading sufficiently far below Fed funds as to predict another rate cut before year end ; Since the Fed last week lopped half a percentage point off the central bank’s target for overnight lending between […]
Read more...Despite the lift the Fed’s rate cut gave to the stock and corporate bond markets, the commercial paper market remains in distress. While CP outstandings are still falling, which is not good, particularly given this month’s maturing CP is much greater than last month’s, the level of decline is not as severe as during the […]
Read more...The Financial Times tells us that Standard & Poor’s forecasts that corporate defaults are due to rise thanks to tightening credit conditions. While S&P focused on 75 at-risk issuers with a total of $35 billion of debt outstanding, hardly an earth-shaking number, the report said more could be in store. Defaults on junk bonds could […]
Read more...The Financial Times’ John Gapper had an interesting piece today, “Patience on debt can ease distress.” I’ll give you the section that caught my eye to see if you react to it the same way I did: Last week, I went to a dinner in Manhattan that ostensibly had nothing to do with the credit […]
Read more...The rally in Treasuries, due primarily to a flight to quality by US investors, has masked a troubling trend: a retreat from Treasuries by foreign investors. Today’s Bloomberg story quotes investors openly discussing their disenchantment with the dollar. This is more significant than it might appear. First, this selling of Treasuries is almost certain to […]
Read more...Financial Times writer John Authers passed along an interesting observation from UBS’s George Magnus (the man who popularized “Minsky moment”) about the credit crisis: Issuance of commercial paper – short-term borrowing central to many financial institutions – is drying up, while Libor, reflecting the interest rates at which banks lend to each other, is spiking […]
Read more...In a speech in Hawaii this morning, Philadelphia Fed President Charles Plosser the Fed’s views on stability and monetary policy, and his words were cold cheer to anyone expecting a rate cut. Calculated Risk noted that it was unusual for for a Fed president to speak so directly about monetary policy. Plosser noted that monthly […]
Read more...Experts warn that the boom in commercial real estate prices, fueled by cheap credit, is going sharply into reverse. Fitch had noted as early as April, and again in July that commercial real estate lenders were engaging in the same lax practices that led to grief with subprimes: 0% down, overly optimistic projections, deal terms […]
Read more...John Authers of the Financial Times, in “Market vultures await more blood,” tells us that bottom fishers have been taking a wait-and-see attitude towards the recent market turmoil. While they’ve been able to make handsome profits on certain trades based on the (until a couple of months ago) underpricing of risk, the distressed merchandise pros […]
Read more...This credit contraction is still young, yet we already have the spectacle of a full blown seize up in the money markets which has central bankers flummoxed. Normally, you expect this sort of panic after a few major financial train wrecks and weakness in the real economy. One can cheerily assume that all is for […]
Read more...In an inspired bit of stagecraft, Senate Banking Committee Chairman Christopher Dodd reported today on a meeting with Fed chairman Ben Bernanke and Treasury secretary Henry Paulson that the Fed stood ready to use “all of the tools at his disposal” to address the current money market liquidity meltdown and general credit market distress. This […]
Read more...The Fed’s move on Friday to lower discount rates and its policy shift towards addressing risks to growth has not brought relief to the sector that was in the most distress, the money markets. Panicked action continued Monday, begging the question of what, if anything, the authorities can do. Institutional are fleeing from counterparty risk […]
Read more...Nouriel Roubini and Marc Faber are well known bears, but that fact has not prevented them from being largely right of late. And since the events of the last few weeks have been particularly nerve-wracking, the US media has taken to focusing on the more soothing aspects of news developments, to the extent they can […]
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