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Monday, August 22

22nd Aug LATE - all dressed up and nowhere to go

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.

Bond buybacks down to €14.3b from previous week’s €22b

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.

“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’

Macro overview by Edward Hugh


FINANCIAL CRISIS

Thoughts on UBS’s recent paper “The Convulsions of Political Economy” by George Magnus  

Morgan Stanley’s European equity analysts: consensus expectations unrealistic

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

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.


DIVERSION
Very interesting books on an interesting topic.

Fun blog on the Greek crisis