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Friday, August 19

19th Aug LATE: Interbank trouble in clear daylight


Summary: Interbank liquidity the big issue. European banks are facing a short-tenor dollar shortage and interbank markets are wary, as can be seen on the swap graph – short-term prices all negative. Some heavy-duty austerity in Greece: “GREEK JAN-JULY STATE BUDGET DEFICIT EU15.6 BLN VS EU12.5 BLN”. Not working.

View: Why Swiss National Bank did an FX swap for USD 200 mio with the Federal Reserve? Credit Suisse, UBS and other Swiss banks have already denied that they needed, received or used the dollars. Could it be that the SNB was funding a Eurozone-bank, as a favor to ECB?


EURO CRISIS (first three are best)

Short-term dollar funding costs high as trust is low in interbank markets. Even though ECB is offering unlimited funding.
Basis swaps and beer alphaville FT

Nomura’s piece: banks’ funding will get worse

Summary articles

Euro zone bonds a "false solution", bond buys are temporary operation to buy time

Will the Germans do what they have to do, or wait until taxpayers again have to save banks
Europe’s Financial Wasteland – Project Syndicate

UBS and Credit Suisse have denied using or needing the swap.

“whether the Finland deal could be an event of default for Greek bonds,”

Very expensive and technically difficult to leave, bank run highly likely
Can you ever leave the Euro? – Ezra Klein / WP


FINANCIAL CRISIS
Weekly macro views – Morgan Stanley

End the credit ratings monopoly: “Neither the government nor the SEC has any business handing a monopoly business to anyone. End immediately the requirement that all debt be rated. The market will sort this out in a flash.”


Implied and realized correlation of stocks is high and rising.

Guide, in simple language, from (rest in peace) Lehman Brothers


DIVERSION