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...)
Weekender: Weekly Support (just updated)
Special: ECB WATCH
(updated)
News – Between
The Hedges
Markets – Between
The Hedges
The Closer
– alphaville / FT
Tyler’s US Summary – ZH
Unchanged
Market On Collapsing Volume
Debt
crisis: live – The
Telegraph
The Euro
Crisis Blog – WSJ
FX Options
Analytics – Saxo
Bank
European
10yr Yields and Spreads – MTS indices
EUROPE
Ultravox populi, vox debita – alphaville
/ 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
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
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.
EUROPE: ECB
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?
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 bankers – Sober
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?
REPO
On the declining use of core collateral in repo
markets – alphaville
/ 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 repo – Felix
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.
OTHER
Stock Market Corporate Earnings Cycle Analysis – John Mauldin / Market
Oracle
Commodities Quarterly - Stronger in H2, weaker
in 2013 – Danske
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.