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Wednesday, January 29

29th Jan - More EM Mayhem

Previously on MoreLiver’s:

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ECB Bond Sterilization Fails Again WSJ
ECB failed for the second time this year to fully drain the market of the more than €170 billion in government bonds it still holds under its previous bond-buying program.

Draghi Throwing Light on Banks Spurs Fundraising FlurryBB
Draghi’s plan to shine a light on the balance sheets of euro-area banks is forcing lenders that are short of capital out of the shadows.

The ECB is much too stodgyBruegel
The euro fuelled a leveraged bet that went bad. The ECB is best positioned to orchestrate the painful sharing of losses. If the ECB does not reinvent itself for the times, it will be hobbled by its obsolescence and by increasingly acrimonious politics. And the flawed euro project will be further damaged.

Rehabilitation could still hurt, AQR watchalphaville / FT
Financials: What I learned at DavosMorgan Stanley

Euro area deflation monitorDanske Bank
The lower inflation is not contradicting stronger growth in the euro area, in our view. Lower commodity prices have increased purchasing power and the most recent decline in core inflation is due to methodological changes and not a result of a drop in wage growth. Real wage growth has shown a clear improvement from its previous decline.

German GfK consumer confidence indicator highest since 2007 – TradingFloor
Euro area monetary developments Dec 2013 – ECB
Slump in euro zone money supply growth highlights deflation risk – Reuters
Euro zone M3 growth slows sharply, private loans contract – Reuters

What to Watch for From Fed MeetingWSJ
The Fed’s policy committee on Wednesday wraps up its latest meeting, Ben Bernanke’s last as chairman. Expect full taper ahead and watch for changes to its economic outlook and guidance about interest rates.

Fed Likely to Consider Continuing, Expanding Reverse Repo Policy ToolWSJ
Fed officials are likely to consider at their meeting this week whether to press forward with an experimental program run by the New York Fed which is designed to give the central bank with better control over short-term interest rates.

Your New 2014 FOMC!The Big Picture

A new call for rev-repo to become the new policy ratealphaville / FT
To those who have been watching the developments in the Fed’s fixed-rate full-allotment repo facility, it won’t come as a bracing shock that the facility’s interest rate might eventually be synced with the interest rate paid on reserves and supplant the federal funds rate as the Fed’s new policy rate.

Yellen Faces Test Bernanke Failed: Ease BubblesBB

EM relief sets up Fed taper with no regretsTradingFloor
Any market speculation that the recent emerging-market turmoil would be sufficient to change the FOMC’s mind on continuing to taper were thoroughly quashed by the lira’s massive rally in the wake of a huge rate hike by the CBT.

FOMC previewDanske Bank
On autopilot for now – tapering USD10bn per meeting with strong forward guidance

Suddenly Thrust into a Bind, Fed Might Well Opt to Halt the TaperWSJ

December Manufacturing ISM Revised Lower, From Beat To Miss – ZH

GEM Currencies OversoldShort Side of The Long
GEM currencies have been in a downtrend for almost 3 years * Weakness in GEM currencies can usually mark a crisis low *

The EM line in the sandHumble Student
It seems that the problems currently faced by selected EM currencies are due to local conditions, e.g. the problems in Argentina are unrelated to the problems in Turkey, and the risk of a global EM currency crisis sparked by Fed tapering is well under control.

‘Fragile Five’ Is the Latest Club of Emerging Nations in TurmoilNYT
The long-running boom in emerging markets came to be identified, if not propped up, by wide acceptance of the term BRICs, shorthand for the fast-growing countries Brazil, Russia, India and China. Recent turmoil in these and similar markets has produced a rival expression: the Fragile Five.

Four Quick Points on Emerging Markets TurmoilWSJ
The bounce in the Turkish lira was very short lived * real rates are just too low in emerging markets * in Latam, Argentina and Brazil at most danger * higher real rates and weaker currencies needed

Carry Trade Doesn’t Shine in Emerging CurrenciesWSJ

China’s Rescue of Troubled Trust May Stoke Risk-TakingBusinessweek
China’s eleventh-hour rescue of wealthy investors in a high-yield trust threatens to drive more money into the nation’s $6 trillion shadow-banking industry, undermining regulators’ efforts to deter excessive risk-taking.

Biggest Money Fund Shuns Companies on Default Risk – BB
Chinese Homebuyers Thronging Sydney Make Mini-Bubble Frenzy – BB

Turkey - helping the lira, killing the economy?Danske Bank

Turkey Gets Aggressive on RatesWSJ
Significant Tightening Follows Extraordinary Meeting Called to Combat Lira's Slide

Turkey - Das BootMacroMan
What the Analysts Think of Turkey’s Midnight Moves – WSJ
Will Turkey’s Rate Hike Stick? – WSJ
Turkey Central Bank Intervention Halflife 12 Hours As USDTRY Roundtrips – ZH
Turkey Raises Rates to End Lira Fall as Basci Defies Erdogan – BB
Turkey raises rates aggressively – FT
Turkey tightens: implications of its aggressive rate rise – FT
Turkey and India lead EM central bank fightback – FT
Asian markets rally on EM banks’ moves – FT
EM bonds: lifting weights – FT
Intervention Now Fully Faded As Lira Collapse Returns – ZH
Turkey’s Lira Reverses Course as Rate-Hike Effect Wears Off – WSJ
Turkey’s central bank: orthodox, really? – beyondbrics / FT

South Africa raises rates to 5.5% - beyondbrics / FT
South Africa Did What? – WSJ
SA rate hike: more than just inflation concerns? – beyondbrics / FT
South Africa hikes rates but rand weakens – beyondbrics / FT

“Currency collapses and output dynamics: a long-run perspective”alphaville / FT

Central Station: What Do Turkey and the Fed Have in Common?WSJ

Bond update: trouble ahead for EM currenciesTradingFloor
In spite of recent EM turmoil, markets are confident the US Federal Reserve will continue the tapering of its monthly bond purchases tonight.

The IMF is Courting New Risks with a Change in Policy on Debt Restructuring PIIE

2014: The year of emerging emergencyTradingFloor
Emerging markets got into trouble when the Fed first mentioned the taper. But now that the turmoil has become widespread and is beginning to affect developed economies' asset prices, a peep behind the curtain does not reveal a pretty sight.

Demarit hermoilevat, syystäVesa Varhee / TalSa
Sosiaalidemokraattisen puolueen johto alkaa olla hermona. Ylen joulukuisessa mielipidemittauksessa Sdp oli puolueista neljänneksi suurin. Hallituskauden saavutukset ovat vähissä. Eduskuntavaalien kampanjointi alkaa noin puolen vuoden kuluttua ja se kaipaa kannatusta nostavia ideoita. Kahden Sdp:n ministerin tuoreet avaukset eivät anna kovin rohkaisevaa kuvaa puolueen todellisuuden tajusta.

Turkki korotti keskuspankkikorkoa – mutta miksiTyhmyri

Yrityssaneerauksien määrä kasvoi 13,2 prosenttia vuonna 2013 – Tilastokeskus 
Konkurssien määrä kasvoi 5,7 prosenttia vuonna 2013 – Tilastokeskus