The Spanish situation is now reaching the “ridiculous” phase, where we will be getting conflicting messages on a daily basis it seems. Spain is telling the world it doesn’t need a bail out, but would love to see the ECB step up the bond buying. The “positive” effects from the mighty LTRO has only accomplished one thing, an arbitrage where the Spanish banks have loaded up on Spanish sovereign debt, all financed by the ECB. Despite this fact, some want the ECB to restart buying Spanish bonds. As we wrote earlier this week, we are getting that funny feeling regarding Spain. Maybe after all it is time to bring out those pesetas? From Bloomberg.
A Spanish minister called on the European Central Bank to do more to stem the sovereign debt crisis as the cost of insuring the country’s bonds against default surged to a record.
“They should step up purchases of bonds,” Jaime Garcia- Legaz, a deputy minister in Luis de Guindos’s Economy Ministry, said yesterday in an interview.
His comments came as ECB officials split over the steps to tame the crisis amid growing expectations that Spain will be the next euro member to seek a European bailout. Spanish banks’ borrowings from the ECB surged almost 50 percent in March, data showed yesterday, as they took almost a third of the longer-term lending offered to euro-region institutions.
Interesting aspects of finance, law and the European situation. By Golem.
A horrid thought has been incubating for the last few days.
I don’t know how many of you know much about Vulture Funds, what they do and how they do it, but it forms the basis of my horrid thought.
Nations issue debt. After it is bought, it often gets re-sold on what is called the secondary market. The price of debt on the secondary market changes much as stock prices change. The market is big.
When a nation looks like it might default the price of its debt begins to sink. What was bought for full price is offered for sale at a reduced price – say 60 cents on the dollar. Buyers and sellers have to decide if they think the nation will proceed to default or avoid it. The decision is, sell now and accept a loss but avoid a potentially larger loss later, or buy now at a discount and if the nation avoids default, profit as the value of that cheaply bought debt recovers its original value.
Wall Street’s concern over the latest public outcry at Goldman Sachs was underscored when the head of one of its biggest rivals warned his senior staff not to exploit the “alleged issues” surrounding the investment bank. In response to a stinging article on Goldman Sachs’s business practices written by a departing derivatives salesman at the bank, Jamie Dimon, chief executive of JPMorgan, emailed his colleagues on the bank’s operating committee. “Today’s New York Times op-ed by a Goldman Sachs executive is generating a lot of discussion around the street. I want to be clear that I don’t want anyone here to seek advantage from a competitor’s alleged issues or hearsay – ever,” he wrote. “It’s not the way we do business … We respect our competitors, and our focus should be on doing the best we can to continually strengthen our own standards.” http://www.ft.com/intl/cms/s/0/e1aa813a-6eb1-11e1-acf0-00144feab49a.html#axzz1pA65f3WX
Asian stock markets were mixed in choppy trading Friday, as many investors took to the sidelines ahead of the weekend, mulling conflicting implications of stronger U.S. economic data and slowing growth signals from China. Japan’s Nikkei Stock Average fell 0.1%, Australia’s S&P/ASX 200 fell 0.1% and South Korea’s Kospi Composite gave up 0.3%. Hong Kong’s Hang Seng Index was off 0.2%, China’s Shanghai Composite Index rose 0.4%, while India’s Sensex tacked on 0.4%. Dow Jones Industrial Average futures were down two points in screen trade. http://online.wsj.com/article/SB10001424052702304459804577284401909180604.html?mod=WSJASIA_hpp_LEFTTopWhatNews
Adverse factors will weigh on economic activity in the euro zone in the first half of this year, but real gross-domestic-product growth is expected to pick up modestly in the second half, the European Central Bank said Thursday. GDP growth should improve further next year, assuming the financial crisis doesn’t escalate again, the ECB said. “Overall, the recovery is expected to be slow,” ECB staff projected in the central bank’s monthly bulletin.http://online.wsj.com/article/SB10001424052702304692804577282890732437240.html?mod=WSJEUROPE_hpp_LEFTTopWhatNews
Big US banks are set to return money to shareholders after the Federal Reserve released the results of “stress tests” on 19 financial groups showing that all but four – including Citigroup – had passed the exercise. Results of the test, which were rushed out two days early after the Fed said it was concerned about information leaking, sparked a rally in US bank stocks. The S&P financials index rose 3.9 per cent and is now more than 18 per cent higher for the year, withJPMorgan Chase, Wells Fargo and Bank of America leading the way. Citigroup rose 6.3 per cent before the market close, but fell close to 4 per cent after hours as it became clear the bank had failed. http://www.ft.com/intl/cms/s/0/c3496718-6d41-11e1-b6ff-00144feab49a.html#axzz1osZsMnZW
The US Federal Reserve kept policy on hold and gave a more optimistic outlook for the economy, in a statement that gave no hint further monetary easing is on its way. In the crucial line of its regular post-meeting statement released on Tuesday, the rate-setting Federal Open Market Committee upgraded its expectation for the pace of growth in coming quarters to “moderate”, stronger than the “modest” speed it expected in January. http://www.ft.com/intl/cms/s/0/fc009ad6-6d32-11e1-ab1a-00144feab49a.html#axzz1osZsMnZW
The UK chancellor aims to launch an “Osborne bond” – a 100-year debt issue or even a perpetual gilt that never matures – to take advantage of the country’shistorically low interest rates. The plan echoes similar bonds issued to finance debts after the 18th century South Sea Bubble and the first world war. George Osborne will say in next week’s Budget that he wants to “lock in” the benefits of Britain’s low borrowing costs, which he says reflect market confidence in his fiscal plans http://www.ft.com/intl/cms/s/0/8300b436-6d3c-11e1-b6ff-00144feab49a.html#axzz1osZsMnZW
China cut its annual growth target for the first time in eight years on Monday, recognising that its double-digit growth rates are past and the world’s second largest economy will slow as it matures, http://ftalphaville.ft.com/thecut/2012/03/06/909791/china-ditches-double-digit-growth/
The FT reports that a large group of private creditors agreed on Monday to take part in the multibillion-euro Greek debt swap in a step forward for Athens as the country struggled to avert a sovereign http://ftalphaville.ft.com/thecut/2012/03/06/909771/athens-enjoys-bond-swap%e2%80%89boost/
Companies lined up to sell dollar-denominated debt in what was the busiest day for issuance so far this year after yields in the corporate bond market fell to record lows, reports the FT. Corporate bonds have rallied in recent months as investors search for investments that offer a higher yield than US Treasuries. http://ftalphaville.ft.com/thecut/2012/03/06/909751/scramble-to-sell-us-debt-as-yields-hit-record-lows/
The FT reports that Angela Merkel, the German chancellor, is facing growing pressure to accelerate the introduction of a financial transaction tax in Europe, in order to win approval for the eurozone’s http://ftalphaville.ft.com/thecut/2012/03/06/909731/opposition-presses-merkel-on-transactions-tax/