Death Star Economics

Icon

ECONOMICS – FINANCE – WORLD NEWS – GREEK DEBT

Libor 2.0 and a £10bn UK-US trade agreement

Over the weekend…
we saw the first proposal for a Libor reform from Martin Wheatley of the FCA (Financial Conduct Authority and successor of the FSA), who told the FT about the Libor 2.0, which could look something like this:

[…] a dual-track system with survey-based lending rates running alongside transaction-linked indices as soon as next year.

In the US however, Gary Gensler of the CFTC calls for an immediate switch to transaction-linked rates. read Financial Times

Meanwhile, the G7 met just outside London to talk about monetary policy and how much liquidity is too much with the conclusion that money is something you can never have enough of: Go ahead Japan, ease some more. read Businessweek

In the US, WSJ correspondent Jon Hilsenrath published two articles on the future of the Fed, both in terms of staffing and monetary policy. Until yesterday, Friday’s article (read ZeroHedge annotations) was pretty much the most talked about news of the weekend, discussing how the central bank will unwind its QE program that is worth $85bn a month. It was followed it up with a piece on Janet Yellen, [probably] the next Ben Bernanke. read Friday’s Wall Street Journal read Sunday’s Wall Street Journal

This morning…

David Cameron is meeting with Barack Obama on future trade agreements, something that is being interpreted as a potential first step for the UK to leave the EU. A free trade agreement between the new and old world could be worth up to £10bn for the British economy. read Bloomberg

The Eurogroup is kicking of with both Cyprus and Greece on the agenda. Cyprus is seeking approval of the first chunk of its bailout program, worth €3bn, while Greece is set to receive €7.5bn in the latest bailout payment. read BBC read comment on Reuters MacroScope

As for the rest of the week, we’ll get all kinds of data from the US, including industrial production and inflation and housing. Same goes for the eurozone and Germany; the UK reports unemployment figures and Japan will give us preliminary Q1 GDP figures.

So long.

Filed under: news brief, , , , , , , , , , , , , , , ,

A new benchmark fixing scandal!!

Yesterday…

former British Prime Minister Margaret Thatcher died of a stroke at the age of 87. Despite her polarizing character, there seems to be a consensus of her importance to the role of the UK on the global stage, both economically and politically. Finally, she also remains Britain’s only female PM. Most used terms: ‘liberalization’, ‘relentless’, ‘unforgiving’, ‘open markets’. read article

In the US, we see the beginning of a new benchmark fixing scandal: interdealer broker ICAP and some unnamed banks have been subpoenaed by the CFTC yesterday for potentially fixing the interest rate swap benchmark ISDAFIX. read article

Asset manager BlackRock has hit back at the Fed’s QE program, saying it distorted the markets. This is quite a change in BlackRock’s stance, as the company was all over government debt before until it started to nudge investors into less interest rate-sensitive products. read article

Following the court ruling that restricted Portugal‘s austerity measures last week, the country could see delays for future funds and no revision of the repayment schedule. According to the FT:

The court ruling means Lisbon will not receive the next €2bn installment of its €78bn bailout until it has convinced international lenders that fresh cuts in spending on health, education and social security will be sufficient to compensate for the rejected measures.

This morning…

we got CPI data from China, showing lower inflation at 2.1%, with food price inflation down from 6% in February (i.e. the Lunar New Year is a ripoff) to 2.7%.

In the UK factory output rose by 0.8% in February, more than the median estimate of 0.4% as according to Bloomberg, while German exports slumped in February, just to see imports decline by more than double the rate at -3.8%. read article

So long.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , , ,

The next thing – gold price fixing

Things to know today: The new pope is Argentinian (or Argentine if you will) and the first non-European in 1,272 years; the US continues to fail at making the budget happen; Libor, Euribor, now gold and silver, ALL PRICES ARE FIXED.

The US is seeing Republican and Democratic budget proposals this week, with the former having been released on Tuesday. So far so good, surely a compromise can be found, right? No. In an interview with ABC Obama admitted that the two proposals may be too different to be combined in any shape or form, particularly if the Republican idea only relies on cutting social security and healthcare benefits. read article

The Commodity Futures Trading Commission (CFTC) has begun an inquiry in the gold and silver market in London. Though not a ‘real’ investigation yet, the Commission is looking into price fixing, much as they did with Libor. The banks involved in gold price setting in London are BarclaysDeutsche BankHSBCBank of Nova Scotia and Societe Generaleread article

The troika, composed of the EU, ECB and IMF, has decided to delay the latest bailout tranche for Greece, worth €2.8bn, due to “outstanding issues”. One of these could be firing public servants:

Identifying redundant positions and putting in place a system that will lead to mandatory exits for about 150,000 civil servants by 2015 is a so-called milestone that will determine whether the country gets a 2.8 billion-euro aid instalment due this month.

Otherwise, Eurostat released a handful of data including rising Greek youth unemployment (record) and low overall European employment (lowest since 2006). In Brussels, the European leader summit has begun. Rumor has it that France, Spain and Portugal will get more time to shrink their deficitsread article

So long.

Filed under: news brief, , , , , , , , , , , , , , , , , ,

Dell brings buyouts back; Obama fails to strike deal

It’s a very AmUrica-centric news day, so let’s start with…

TWENTY-FOUR point four billion dollars. That’s what it will cost founder Michael Dell (who currently holds 14% of the firm) and Silver Lake Partners to buy the computer business. That makes Dell the largest leveraged buyout since 2007. read article 

Microsoft, which counts Dell as one of its largest clients, provided a $2bn loanBut according to WSJ:

Despite its participation, Microsoft isn’t getting board seats or operational control. What it is getting, apparently, is a wink and a nod that Dell won’t start shipping equipment running Android, for instance… The danger there is that, by limiting its technology options, Microsoft’s involvement ultimately damages Dell’s long-term prospects.

In other deal news, US media company Liberty Global is going to buy Virgin Media for £10bnread article

Also in the US, we’re more or less back to the old spiel: after Obama proposed a teeny-tiny cuts/tax package to delay the sequester (automatic spending cuts on 1 March), Republicans rejected the idea out of tradition. The whole thing just looked too much like additional tax increases to them. If all else fails, the sequester will slash $85bn from federal spending until February 2014 – not exactly a health fix for the US economy. read article

The US Department of Justice has added a price tag to the S&P mis-rating case: the mortgage securities in question, which received inappropriate ratings between 2004 and 2007, caused losses of more than $5bn. The awkward side to it: the lawsuit has brought to light that S&P analysts danced around to “Burning Down the House” and said they would “rate every deal. It could be structured by cows and we would rate it.” So far, it is unknown whether S&P employees are just really big fans of the Talking Heads. read article

Otherwise, Europe is waiting for Godot the ECB‘s and Bank of England’s meetings tomorrow and RBS was fined $325m by the CFTC in relation to the Libor scandal, while Silvio Berlusconi is winning ground against Italy’s Democratic Party in the polls. read article

So long.

Filed under: news brief, , , , , , , , , , , , , , , , , , ,

Go team Draghi

So we got ourselves a banking union. That is surprising for a number of reasons. First of all, the Eurogroup struck a deal. Secondly, the Eurogroup struck said deal before the deadline. Finally, Germany managed to add a clause that protects its Mittelstand. Oh no wait, the last one isn’t the least bit surprising.

A summary a la WSJ:

Ministers said the European Central Bank would start policing the most important and vulnerable banks in the euro zone and other countries that choose to join the new supervisory regime next year. Once it takes over, the ECB will be able to force banks to raise their capital buffers and even shut down unsafe lenders.

Once approved by the European Parliament, the show could kick off as early as March [let’s be realistic and say July]. The threshold for banks under supervision is €30bn of assets held, leaving Germany’s retail banking sector more or less untouched.

Unfortunately, the EU delegates involved were just as impressed with their own efficiency, so they decided to leave all other decisions be for now… until June. According to the FT, both budget negotiations and economic reform contracts, were completely taken off the agenda. The remaining time spent together will be used to play Secret Santa (guess who got Greece).

Moreover, Mario Draghi, soon to be puppeteer of Europe’s financial institutions was named the FT’s person of the year. Good for you, Mario. We know it hasn’t been easy. read article

In legal/regulatory/scandal news, the FSA, CFTC (US Commodities Futures Trading Commission) and the US Department of Justice are about to fine UBS more than $1bn for fixing libor ratesDealbreaker explains how such a humongous number (double of what Barlcays had to pay) comes together:

The fine-setters seem to have about four things to think about: 1) how much bad stuff did the bank do, 2) how much money did they make doing it, 3) how caught are they, and 4) how sorry are they now.

It calls for an investigation.

Co-head of Deutsche BankJuergen Fitschen, is under investigation for tax fraud committed in 2009. In his opinion, the reaction of German authorities, sending officers with machine guns to the Deutsche Bank headquarters in Frankfurt on Wednesday, was a bit much and he doesn’t intend to resign any time soon.

For the weekend, Japanese elections are on, with the opposition (the Liberal Democratic Party) led by Shinzo Abe expected to winread article

Weekend reading

– North Korea: playing with rockets, read article

– Felix Salmon on NYT Dealbook’s first conference this week and whether it was a success, read article

– Joris Luyendijk’s banking blog returns to blame fund managers, read article

– Alphaville is selling shirts (or ECB collateral) for charityread article

Have a good one.

Filed under: news brief, , , , , , , , , , , , , , , , , , , , ,

Enter your email address to follow this blog and receive notifications of new posts by email.

Join 214 other followers

%d bloggers like this: