More as we get it.
Goldman's Erik Nielsen lands the bombshell that the Greek deficit mysteriously increased from €29.4 billion to a shopping €37.9 (keep in mind, this is not Bernanke notation where only quad- prefixes impress people at this point). This increases the (running) 2009 budget deficit from 12.2% to 16%! While certainly not the last time we hear of "prior revisions", the question of just how patient Germany will be, should this number approach, oh say, 50% once the artificial support of various Goldman swaps expires (and at 50% the BSDs like Goldman will surely round up to 100%), is very much open.
- China's exports jump 21% as imports gain 86% in January, Government says.
- Fed to reveal its strategy for raising interest rates.
- Germany along with EU plans to offer Greece, other members loan guarantees.
- Japanese core machinery orders increased 20.1% in Dec, much better than expected.
- Oil drops to near $73 in Asia after report shows US crude supplies jumped last week.
- Stocks, commodities, Korean Won rise on speculation of Greek aid, China's growth.
The Chinese dumping story is really catching on. After even Alphaville reprinted it, it seems that everyone in the blogospehere is aware of the imminent, and far greater than a Greece contagion, danger of Chinese dispositions. Here is David Goldman who originally broke the story for Asia Times' Inner Workings blog, discussing not only Chinese dumping and the implication for cost of capital (ca. 11 minutes into the clip), but shares color on the topic du jour, Greece, along with Rick Santelli and Larry Kudlow.
EURUSD is testing the channel support here. Various officials commenting that no bilateral agreement has been discussed or signed are putting risk under pressure. It's almost like watching Congress fumble the vote on the stimulus package. The good news is that if you thought US politicians are terrible, you can find comfort in that they are no better in Europe. We still expect a multi-lateral resolution in the end. - Nic Lenoir
RANsquawk 10th February Morning Briefing - Stocks, Bonds, FX etc.
The Dumping Begins: Chinese Reserve Managers Notified That Any Non-USG Guaranteed Securities Must Be DivestedSubmitted by Tyler Durden on 02/09/2010 - 23:00
It appears that this time China's posturing is for real. Following up on our earlier post that Chinese military officials want to "punish" America by selling Treasuries, Asia Times Online is reporting that an explicit directive by the Chinese government has notified reserve managers to sell all risky US assets, including asset backed and corporates, and just hold on to explicitly guaranteed Treasuries and Agency debt. And from following TIC data we know that China's enthusiasm for MBS/Agencies over the past year has been matched solely by that of one Bill Gross.
Not that there is too much to get excited about. The only possible positive outcome of a bailout other than immediate rescue for the shareholders of a bankrupt entity is a possible restructuration, change in management, etc.. If the bailee goes right back to his original business model (selling bad cars or making bad loans) then surely nobody gains in the long run. In the case of a sovereign entity like Greece the real question is: what will the bailout change other than temporary relief to capital markets? I am tempted to say nothing but that would not be constructive. Still though everyone knows it will be very difficult for Greece to deliver fiscal austerity, and unless the world economy picks up dramatically (China is peaking and due for a rough landing, demand still not back anywhere close to highs) Greece will have to find sources of growth internally while the government cuts its budget. This is also because as long as Greece is in the Eurozone, they are not competitive to export anything unless the EURUSD gets much weaker. A weak Euro down the road with a possible desintegration of the eurozone will be the end result no matter what further developments take place in the meantime. - Nic Lenoir
Deconstructing Europe: How A €20 Billion Liquidity Crisis Is Set To Become A €1.6 Trillion Funding CrisisSubmitted by Tyler Durden on 02/09/2010 - 18:03
Now that some sort of Greek bailout is imminent, most likely in asset guarantee form, it is high time to evaluate the full impact of Europe's decision to jettison monetary prudence at the expense of patching a crumbling fiscal dam holding back trillions in bad investment decision cockroaches, accumulated over the years. Relying on a presentation by ML's Jeffrey Rosenberg, we observe that by providing loan guarantees to the periphery, the core (Germany/France/Benelux) may have well destabilized the core problem for the Eurozone, namely a whopping €1.6 trillion (that's in euro) in total 2010 financing needs, a number which consists of €400 billion in 2010 bond maturities, €700 billion in rolling short term debt and €530 billion in combined 2010 fiscal deficits. Germany has just taken an acute liquidity crisis in the periphery, and courtesy of action we already saw earlier in Bund rates, has sown the seeds for a funding crisis of none other than the very heart of the Eurozone.
The Treasury has released the most recent UST Auction Allotment by Investment Class data for recent Treasury auctions. In January and February of a total $207 billion in Coupons auctioned, foreign and international investors acquired $58 billion (28% of total), dealers and brokers took down $104 billion (51%), depository institutions purchased just $3.2 billion, investment funds acquired $35 billion (16.8%) and individuals took down a mere $1 billion. In Bills, there was a total of $286 billion in Bills issued in January, of which foreigners purchased $47 billion (16.4%), dealers and brokers bought $145 billion (50.7%), investment funds bought another $43 billion (15.2%), and individuals were responsible for just $10 billion in Bills. Notable is the nearly double relative interest that foreigners have for Coupons than to Bills, as a result of persistently low interest rates.
Senior Chinese Military Officers Join Iran In Delivering "Punch" To U.S., Propose Selling Treasuries As Arms Sales PunishmentSubmitted by Tyler Durden on 02/09/2010 - 15:51
And you were worried about Iran. China's People Liberation Army has come out and openly said that the nuclear option, i.e., selling US Treasuries, is now on the table and should be exercised as "punishment" for U.S.' arms sales to Taiwan. China undoubtedly realizes that this is a prime example of sado-masochism as the resultant plunge in Treasuries that would follow would hurt the US certainly, but also have a "mild to quite mild" impact on China's $700 (and likely much greater) UST holdings. Game theory 101 just got interesting.
Welcome to 1984, where outright propaganda and lies bombard you from current and prior administration officials each and every day. Here is the latest insanity straight from the horse's mouth (no pun intended).
This latest on Greece, this time from Dow Jones. Why is Obama speaking about windmills as the future of global moral hazard, Larry Summers edition, is being decided in Berlin? From DJ: "Finance Ministry spokesman Michael Offer said EU members wanted to develop further recapitalization measures that calm the markets."
Crazy pill time. More disinformation as we get it. Is Germany merely probing to see the market reaction to leaks? If the Bund collapses can they just call the whole thing off?