EuroStat just caused more work for RBS "strategists." The European statistics office, still busy going through Chi square brain teasers, has announced it has to determine the increase in Greek government debt due to the 2001 Goldman-underwritten swap transaction. Per Bloomberg: "The Greek authorities have informed Eurostat that repayment of the debt began in 2004,” Eurostat said in an e- mailed statement today. “In consequence, Eurostat will have to determine, in cooperation with the Greek authorities, what will be the increase in government debt due to this specific swap operation from 2004 onwards.”
As the report clearly explains, the sluggish global recovery (if any) still has a great impact on the banking sector and especially the small- and mid-sized institutions that still seem to operate in a tail-spin environment. With refinancing periods approaching in both the private residential and commercial real estate market anticipate further banking failures, maybe even at an increased pace than seen over the last year. - Saxo Bank
$42 Billion 5 Year Auction Closes At 2.395%, 32.83% Allotted At High - Large Tail, Large Direct Take Down, Just 40% IndirectsSubmitted by Tyler Durden on 02/24/2010 - 14:12
- Yields 2.395% vs. Exp. 2.389%
- Bid To Cover 2.75 vs. Avg. 2.65 (Prev. 2.80)
- Indirects 40.30% vs. Avg. 51.47% (Prev. 52.98%)
- Indirect hit ratio 76.8%
- Allotted at high 32.83%
- Direct take down 12.85%
- 1 PM WI bid was 2.380%
We were pleasantly surprised earlier today when we discovered that the "head of European rates" at RBS, or as it is better known in the US as CRT LLC (see here, here and here), Harvinder Sian, not only sends out mollifying notes to clients with extended references to "excitable" blogs such as Zero Hedge, but that apparently cost-cutting measures have forced RBS to cancel their over-budget Dow Jones wire service.
S&P: "A Further Greek Downgrade Of One To Two Notches Is Possible Within A Month" (Currently BBB+/A-2)Submitted by Tyler Durden on 02/24/2010 - 12:44
- Downside risks for Greece's real and nominal growth are likely to increase the size of needed fiscal consolidation, raising questions about the feasibility of the country's ambitious budgetary goals.
- Political risks for the timely implementation of the entirety of fiscal reforms continue to be material.
- We are maintaining our 'BBB+/A-2' ratings on the Hellenic Republic on CreditWatch negative.
- The negative CreditWatch implications reflect the possibility of a further downgrade of one to two notches within a month.
By the thinnest of margins, the SEC just voted 3-2 to institute the short-selling rule which will put curbs on shorting individual securities that fall over 10% in any one day. Dow Jones points out that even market decisions are now split according to party lines: "Republican Commissioners Kathleen Casey and Troy Paredes said Wednesday they would vote against the proposal. Democratic Commissioners Luis Aguilar and Elisse Walter signaled their support for it, along with SEC Chairman Mary Schapiro, who was appointed last year by President Barack Obama." Paredes was further quotes as saying that the rule is "rooted in conjecture and too speculative." Not surprisingly, Aguilar and Walter, both likely reading from the party lines said that this would "help bolster market confidence."
The almighty dollar just reminded everyone that it is in the hands of the Geithner/Bernanke puppetmasters. Overtures to reform GSEs announced earlier helped everyone forget that Greek rioting does not fill a budget deficit and instead that we have a hole worth several trillion in the mortgage sector, courtesy of 25-50% artificially higher home prices, that is currently unaccounted for. So as the dollar plunged, the JPYEUR currency pair formerly known as the market, surged. Is regime 2 (weak euro) about to revert to regime 1 (weak dollar) all over again? The race to the bottom is about to enter the second lap.
Juts headlines for now, paraphrasing Geithner's comments in the House Budget Q&A. We are confident the package will be offered only if perpetuation of the Ponzi scheme is safe and sound. Should the incremental 50% in debt hit the books at the current run-rate, America will likely become a B2/B rated junk credit.
Chairman Frank, Ranking Member Bachus, and other members of the Committee, I am pleased to present the Federal Reserve's semiannual Monetary Policy Report to the Congress.
Although the recession officially began more than two years ago, U.S. economic activity contracted particularly sharply following the intensification of the global financial crisis in the fall of 2008. Concerted efforts by the Federal Reserve, the Treasury Department, and other U.S. authorities to stabilize the financial system, together with highly stimulative monetary and fiscal policies, helped arrest the decline and are supporting a nascent economic recovery. Indeed, the U.S. economy expanded at about a 4 percent annual rate during the second half of last year... Etc
New Home Sales Plunge To All Time Record Low, 309K SAAR Is Huge 11.2% Sequential Drop, On 355K EstimatesSubmitted by Tyler Durden on 02/24/2010 - 11:13
The housing sector just went back from critical to comatose - U.S. new-home sales plunged in January, setting a record low and erasing all gains made in the market during the past year. Well, if new homes can't sell now with all the current bells and whistles, they pretty much never will. One idea - lower prices. Oh wait, that would go against the first directive of the Federal Reserve. Equities still a little shell shocked, and unable to fathom that the double dip is now official.
I think I’d shoot myself. [Laughing] I don’t think I’d go to work in the morning. If I were Chairman of the Federal Reserve I would let free market forces unfold. I would let rates rise to where they should rise. These are not normal rates that we have now. I would have to raise rates. I’d have to do it over time. - Fred Hickey
Tuesday’s selloff took the S&P down through the initial support of 1098/1102. The intra-day low of 1092 rested on the top of the next support 1088/1092. Several top technicians note that the bounce from the February low has had trouble with the 50 day moving averages. The S&P needs to stay above 1082 to keep the rebound alive. For today, we’ll start with support at 1088/1092 with a backup at 1080/1083. Resistance looks like 1102/1106 and then 1113/1118. - Art Cashin
Mortgage Zombie Freddie Mac Reports Q4 Loss; Another $5 Billion In Taxpayer Money Out The Window To Support Fake Home PricesSubmitted by Tyler Durden on 02/24/2010 - 10:22
Freddie Mac had positive net worth of $4.4 billion at December 31, 2009, compared to positive net worth of $9.4 billion at September 30, 2009. As a result of the positive net worth, no additional funding was required from Treasury under the terms of the Purchase Agreement for the fourth quarter. The decline in positive net worth for the fourth quarter of 2009 resulted from the fourth quarter 2009 net loss of $6.5 billion and the dividend payment of $1.3 billion to Treasury on the senior preferred stock, partially offset by a $2.7 billion decrease in unrealized losses recorded in accumulated other comprehensive income (loss) (AOCI) primarily driven by improved values on the company's available-for-sale (AFS) securities. Freddie Mac had a net worth deficit of $30.6 billion at December 31, 2008.
- Nationwide strike paralyzes Greece, clashes between rioters and Police begin (WSJ, Bloomberg)
- Protests have spread to Spain (El Pais, h/t Paul)
- Dutch snap elections scheduled for June 9 (FT)
- Geithner may give regulator leeway in applying volcker rule (Bloomberg) - Note: Vince Reinhart is co-author of the seminal "Conducting Monetary Policy at Very Low Short-Term Interest Rates" in which the Fed considered buying equities and foreign sovereing bonds
- Reinhart: Bernanke's confidence game (The American)
- Home purchase loan demand at lowest since 1997 (Reuters)
- Asian shares fall for first time in three days on US consumer confidence.
- Dollar weakens versus Euro on speculation Fed to hold rates.
- German business confidence unexpectedly drops as snow hampers retail sales.
- Hong Kong raises tax on luxury homes to cool market after 29% price gain.
- Japan January export growth accelerates to 40.9% as overseas demand drives recovery.
- Oil hovers below $79 in Asia after US crude supplies drop, suggesting demand up.
- Treasury said it will borrow $200B and leave money on deposit with the Fed.