Google Analytics

Monday, August 6

6th Aug - US Close

What are we waiting for, Christmas? At least the Spanish yield curve is taking Draghi very seriously indeed (or was it SMP?), see the 10year and 2 year bond yields - the short end has had an amazing move.

Previously on MoreLiver’s:
Exit Special (collection of euro breakup/exit research)
EU Open: Curiosity (very nice euro-articles!)
Weekender (Europe, markets...)

Follow ‘MoreLiver’ on Twitter or Facebook 

Markets – Between The Hedges
The Closer – alphaville / FT
Tyler’s US Summary – ZH
  Unchanged Market On Collapsing Volume

TV: Bloomberg, BBC
Debt crisis: live – The Telegraph
The Euro Crisis Blog – WSJ
Tracking Europe’s Debt Crisis – NYT
FX Options Analytics – Saxo Bank
European 10yr Yields and Spreads – MTS indices

Ultravox populi, vox debitaalphaville / FT
Discontent and distrust in
Europe is rising. Citi analysts reckon it means another eurozone political season of NEAPs (New, extreme or alternative parties) rising to the fore, starting this autumn

Europe’s Crisis of TonguesProject Syndicate
The EU’s founders believed that a lingua franca would emerge through economic and social interaction. But they were wrong: to strengthen the euro and establish the foundations for a political union, European leaders should undertake a rapid and explicit process of linguistic integration.

Mario Draghi Cannot Save the Euro View / BB
 A broader question is what, if anything, Draghi might achieve with a looser monetary policy. The euro area has many problems, including a lack of competitiveness in the periphery, chronically poor growth in countries such as Portugal and Italy, deeply damaged public finances in Greece and Spain, and a labor force that’s not mobile enough to go where the jobs are. Which of these could be resolved by reducing interest rates across the board?

Is ECB’s Refusal to Go Beyond its Mandate a Policy Failure?EconoMonitor
In our opinion, unconditional debt monetization cannot be a “third way” or “middle of the road” scenario for the Eurozone as it would certainly result in disintegration and chaos. ECB’s refusal to embrace this option is not a policy failure.

Analysis of the recent ECB press conference Kiron Sarkar / The Big Picture
The above measures if implemented (likely), as proposed by Draghi, are bullish. Yes, there are risks, but…Indeed, I could argue that Draghi’s plan is even more important that his previous LTRO programme on behalf of European banks.

Weidmann, the last major independent voice among Eurozone's central bankersSober Look
Weidmann must be asking how much more will be needed. How much periphery exposure is to be transferred from private hands to the ECB? And more importantly, should it even be a central bank's responsibility to rescue its government? Weidmann continues to argue that it should not. As an independent central banker he clearly wants no part of this. But as Handelsblatt asked, "how much longer" before Weidmann, as a member of the ECB's Governing Council, succumbs to the pressure?

On the declining use of core collateral in repo marketsalphaville / FT
If you’re lucky enough to own German or core European debt — whether government or covered bonds, especially Pfandbrief — it’s unlikely that you currently feel comfortable using them for financing purposes in traditional repo markets because there’s a growing risk that the bonds might not come back at all.

The danger of repoFelix Salmon / Reuters
Once upon a time, banks had equity, they had debt, and then they had deposits. If a bank failed, the bank’s equity would be wiped out first, and then its debt. The depositors were senior, which meant there was relatively little chance that the FDIC would have to bail them out. Now, however, bank debts are shrinking, replaced with repo operations. As a result, when a bank fails, the equity gets wiped out first — and then there’s no cushion any more before the depositors start losing money and need to be bailed out.

Stock Market Corporate Earnings Cycle AnalysisJohn Mauldin / Market Oracle

Business Cycle Monitor: Europe continues to depress global sentimentDanske Bank (pdf)

Commodities Quarterly - Stronger in H2, weaker in 2013Danske Bank (pdf)
(41 pages)The global cyclical downturn has led to widespread sell-offs in commodities since mid-spring. However, grain prices have surged lately on adverse weather and oil prices have recovered on geopolitical concerns. In the near term, commodities will be in the hands of the Fed and China. We look for both to support prices in H2 as QE3 is announced and China avoids a hard landing. Looking into 2013 however, market surpluses will emerge for some products.

Follow ‘MoreLiver’ on Twitter or Facebook