Archive - Sep 14, 2011

"Look at what I say, not at what I do! We have no liquidity problem." Listen, if you have to sell $96 billion of mismarked assets when you DON'T need liquidity, imagine what needs to be done if you have a liquidity problem!

• Moody's downgraded long-term debt and deposit ratings for Societe Generale and Credit Agricole by one notch each, whereas extended its review for a downgrade on BNP Paribas ratings. However a French government spokeswoman said that French banks' ratings are still very good despite Moody’s downgrade
• EU's Barroso said that the European Commission will soon present options for the introduction of Eurobonds
• An unexpected decline in the jobless claims data from the UK provided support to GBP

Retail sales, producer prices and business inventories. Also get the final of this week's bond auctions in the form of a $13 billion 30 Year

No, Greece will not be allowed to default. Pinky swear.

Europe must be hoping that the Dutch aren't sensitive people.  We are all waiting for the outcome of a conference call between Germany, France and Greece.  Holland isn't on the call, yet they are the 3rd largest AAA country in Europe and are responsible for 10% of EFSF's AAA rating.  Germany has taken the time to mention Finland's demand for collateral.  Finland is only 3% of the AAA portion of EFSF, but everyone is paying attention to them, yet Holland seems to be taken for granted.  Holland has their own problem bank, ING, and came out yesterday with a statement that the Dutch government considers a Greek default as unavoidable. Today the Ministry is saying they are making all possible efforts, but didn't say that they still think the efforts will fail and a default is inevitable.  Look for the next snag in the bailout to come from growing opposition in Holland.  If I was them, I would be annoyed that their invaluable contribution seems to be taken for granted and that no one is reaching out to them in spite of their importance.

Volatility and wild gyrations in all financial markets continues due to a confluence of negative data, news and fundamentals. French banks have been downgraded and Chinese Premier Wen’s call that Europe get its own house in order quashed the unsubstantiated and unsourced rumors regarding massive Chinese intervention to solve the Eurozone debt crisis. European banks are hemorrhaging deposits as savers and money funds pile into other perceived havens such sterling, dollar and Swiss franc deposit accounts. Retail and institutional deposits at Greek banks fell 19 percent in the past year and almost 40 percent at Irish lenders in 18 months.  A tiny fraction of these European deposits has gone into gold with the majority going into other fiat currency deposits. It is not just the saver of periphery nations who are opening non euro deposit accounts - many German savers are opening up deposit accounts in Switzerland. Greece’s inevitable default is being prepared for despite the usual denials. A conference call among Greek Prime Minister George Papandreou, French President Nicolas Sarkozy and German Chancellor Angela Merkel is set for 16:00 GMT.

The CEO of SocGen is selling. I'm not buying.

About a month ago, European USD funding concerns came to the fore with a bang after one bank had borrowed $500 million dollars from the ECB in a 7 day operation, indicating that, as had been documented before and after courtesy of a rise in Libor that has yet to see a down day in the last 40, dollar funding is becoming a threshold factor (for at least one bank). Well, today we learn that 3M USD Libor, which just rose yet again to 0.349% from 0.347% (full breakdown of who is getting locked out shortly) has become a prohibitive funding mechanism yet again, after the ECB just announced that following 3 weeks of quiet, not one but two banks were "forced" to borrow $575 million from the ECB  (the most since June 2010) which in turn had to resort to using the Fed's swap line - expect to see the appropriate number in the FRBNY's swap line ledger with the ECB and the Fed's H.4.1 next Thursday when this data is updated on the US side. Basically despite the market rallying on news that the Moody's downgrade of French banks was "better than expected" the truth is that the situation continues to get step wise worse.

All you need to read.

It seems at the first whiff of downgrades from Moody's, BNP were forced into action announcing a series of asset disposals as Moody's announces no downgrade but maintains review for downgrade...

...as expected from the previous post. Now, BNP downgrade a matter of seconds.

Ladies and gents, it starts. Credit Agricole and BNP downgrades imminent.