Summary: Nomura had a nice Fixed Income Research paper “The growing USD funding problem”, published on 19th Aug. Recommended reading, given that bank funding is one of the key drivers currently. Available from Long Room / FT. As usual, feel free to leave a comment or write an email.
Views: Nice two charts from the FRED web service. Money supply is increasing at an exponential rate, but the velocity of money...is not increasing, and definitely not increasing at an exponential rate. Actually, it is back to levels last seen in the seventies. That's why inflation is not an issue at the moment. Today, check at least the third link.
EURO CRISIS
Bundesbank’s monthly report: unless and until a surrender of fiscal sovereignty, the no bail-out rule and disciplining function of the capital markets must be strengthened, not weakened.
Bundesbank: "Mein Entschluss: Anschluss-Plus" - Germany Reveals The European Annexation Blueprints – Zero Hedge
Bond buybacks down to €14.3b from previous week’s €22b
ECB Monetizes €14.3 Billion In Insolvent Peripheral Debt Last Week; €111 Billion In Total – Zero Hedge
Few slides from Morgan Stanley proving the sorry state of eurobanks’ funding
Money market funds have lowered their exposure to Italian and Spanish banks to zero. In “better” markets like France the trend is towards shorter maturities.
MMFs end exposure to Italian and Spanish banks – alphaville FT
“Shrink membership or tighten integration at Germany's expense. That is the crossroads at which the euro-zone politicians find themselves scratching their heads.”
Nobel laureate Mundell explains what is needed to save Europe’s single currency and calls for greater global coordination of monetary policies
Interview: Robert Mundell – centralbanking.com
Compares the economic performances of the UK and Spain during the crisis to see if being ‘out’ is better than being ‘in’
Would Spain be better off out of the euro? – centralbanking.com
Macro overview by Edward Hugh
Eastern European Growth – Coming Rapidly Off The Boil? – A Fistful of Euros
FINANCIAL CRISIS
Thoughts on UBS’s recent paper “The Convulsions of Political Economy” by George Magnus
Finance, more progressive than policy? – alphaville FT
Morgan Stanley’s European equity analysts: consensus expectations unrealistic
“Dangerously close to recession” — earnings edition – alphaville FT
Ten years?
FED paper: “global saving glut” inflows into Treasuries and Agencies, as well as European acquisitions of ABS, played a role in contributing to downward pressures on U.S. interest rates.
German finance minister: Euro is stable, look at the Swiss who think pegging CHF to euro
Euro Vision: Schaeuble Awarded Nul Points – The Source WSJ
Nick Carver: central banks are not independent.
Goodbye to independence – centralbanking.com
BIS general manager talks about the institutions role in responding to crisis
Interview: Jaime Caruana – centralbanking.com
Lyxor’s Lyxor iBoxx $Treasuries 1-3Y USD ETF collaterals are full of euro names. Article includes a response from Lyxor.
When US Treasuries diverge from Italian bonds… – alphaville FT
DIVERSION
Very interesting books on an interesting topic.
Understanding Urbanity: 7 Must-Read Books About Cities – brain pickings
Fun blog on the Greek crisis