Archive - Mar 10, 2011

The great tightening wave in Europe is coming any minute now.... Just not yet. Below is Goldman's take on today's unsurprising move by the BOE to keep rates unchanged (although judging by the GBP some actually were surprised).

As expected, after hitting a simply ridiculous level of over 1.40, the EURUSD has started to materially roll over, and is now down to 1.383, with a first interim target in the mid 1.20s. The reason, in addition the billions in debt rollover this month (see Portugal's very weak auction yesterday), is the realization that the banking system in a Europe which is allegedly poised on the edge of tightening, is as weak as ever, and will have to take another dose of stress test placebos which will do nothing to assuage skepticism as spreads hit another day of record levels. Today, Moody's added insult to injury after downgrading Spain for the second time in 3 months, from Aa1 to Aa2, with a second level of insult arising from Moody's assessment that Spain may also suffer due to the recent surge in oil and see further downgrades as the oil rise would have Spain credit implications, adding that Spanish government has little control over region's spending.

RANsquawk European Morning Briefing - Stocks, Bonds, FX etc. – 10/03/11

We're sitting pretty neutral across most pairs at the moment, the pair most likely to see a shift in retail positioning today is GBPUSD with Manufacturing Production released at 4:30 EST and the BOE interest rate decision coming out at 7am EST.

Why you shouldn't trade when you are really tired ...

RealtyTrac has released a whopper of a foreclosure update. While total foreclosure activity had dropped in November when the first hint of fraudclosure was made evident, it subsequently stabilized and even increased slightly in January. Well, in February it took another step function lower, declining by a whopping 14% sequentially, and 27% Year over Year: the biggest decline in history. “Foreclosure activity dropped to a 36-month low in February as allegations of improper foreclosure processing continued to dog the mortgage servicing industry and disrupt court dockets,” said James J. Saccacio, chief executive officer of RealtyTrac. “While a small part of February’s decrease can be attributed to it being a short month and bad weather, the bottom line is that the industry is in the midst of a major overhaul that has severely restricted its capacity to process foreclosures. We expect to see the numbers bounce back, but that will likely take several months. And monthly volume may never return to its peak in March 2010 of more than 367,000 properties receiving foreclosure filings.” What is even more disturbing is the following: "Scheduled judicial foreclosure auctions (NFS) decreased 7 percent from
January and were down 49 percent from February 2010. Scheduled
non-judicial foreclosure auctions (NTS) decreased 11 percent from the
previous month and were down 7 percent from February 2010." This means that banks are now actively halting process in that most critical of non-judicial states - California, which means the bottom is about to fall off the market. And with the monthly cost of associated litigation in the  tens of millions for the big mortgage lenders, it is now a certainty that the banks are massively underreserved for the litigation tsunami that is coming their way, especially with MERS now out of the picture and on the verge of seeing its entire business model unwind, rendering tens of millions of mortgages potentially null and void.