Archive - Mar 8, 2010 - Story

Over the weekend we posted a very critical paper by the Minneapolis Fed discussing the potential weakness with the various liquidity extraction mechanisms (in the absence of a Fed Funds rate hike). Today, the Fed goes one step further, after noting increasing pressure by its own members to commence a tightening policy, and has announced the expansion of its reverse repo program with Primary Dealers, by adding additional counterparties.And guess who the first expansion wave focuses on - why Money Market mutual funds of course. Let's just do all we can to drain the money market system asap, shall we.

Some amusing headlines appearing elsewhere today, proclaiming the Greek crisis is over. Hardly: Uri Dadush of the Carnegie Endowment, and formerly of the World Bank says that "it is virtually inevitable that Greece will either default or need a bailout of some sort." Dadush, who a week ago wrote a provocative op-ed in the FT titled "End this inflation fundamentalism", in which he noted that "what happens in Greece will not stay in Greece" also says that "over and beyond the Greek bailout we have to do some thinking about our approach to overall fiscal and monetary approach in Europe." What? Visiting Ben Bernanke every 6 months is no longer sufficient? Oh wait, when everyone is undergoing austerity measures (now coming to Portugal, soon Italy, UK, Germany, Japan, and, lastly the, US), just who is it that will importeveryone else's exports? Why China of course. But hold on, isn't China a net exporter? Oh who cares about facts...The market's mind is already made up. Uri's conclusion will make Hugh Hendry proud: "I think under any circumstance we are going to see a significantly lower euro. I think we are going to see slower growth in Europe over several years, and I think there is a serious risk that the eurozone will implode unless there is a sea-change in the way fiscal and monetary policies are conducted."

The announcement by Fitch that CMBS delinquencies rose by another 29 bps to a new high of 6.29% is no surprise to anyone who has been following RealPoint's remittance/CMBS reports. Yet it is good to get independent confirmation that there is no respite in CMBS land. And with TALF for existing and new loans expiring on March 31 and June 31 respectively, without ever really taking of, this sector of the market is sure to face increasing pressure, especially when coupled with the certain increase in MBS rates once the last $30 billion or so in QE is purchased. The most recent culprit for deterioration: maturities of 5 year loans from the 2005 vintage as the refi market is still practically dead: "Approximately 30% of the newly delinquent loans were from 2005 transactions. In fact, the four largest newly delinquent loans (ranging in size from $65 million to $112 million) are from this vintage. Three of these four loans are past their 2010 maturity dates and are, therefore, categorized as non-performing matured loans."

"At some point the bubble will burst. Hopefully for ALL our sakes its sooner rather than later. The longer we are forced to wait, the bigger the bubble will be and the more horribly damaging the bursting process will be. And if we are forced to wait and the bubble gets anywhere like the one that went pop in late 2007 I have ZERO idea who will credibly be able to bail us all out the next time round. Certainly not OUR governments." - Bob Janjuah

• Here comes the EMF (Telegraph)
• "On the edge" banks facing writedowns after FDIC loan auctions (Bloomberg)
• From Greece back to Dubai - Dubai World to seek loan delay in talks, banker says (Bloomberg)
• Eurozone faces two-class future after Greece (Reuters)
• Finding FINRA's failures (Barron's)
• Why a restructuring of the PIIGS will require a restructuring of Germany (Brown Brothers)

• Asian share markets were higher Monday with the Nikkei up 1.4% as exporters gained.
• China pledged to keep prices stable this year, to rein in lending and manage consequences.
• China to nullify local governments' loan guarantees as credit risk grows.
• Fed is battling to keep Congress from cutting its supervisory power.
• India plans to accelerate sales of state assets to about one a month.
• Sarkozy says Europe ready to help Greece fund debt, fend off speculators.
• Oil prices rose to near $82 a barrel Monday in Asia.

RANsquawk 8th March Morning Briefing - Stocks, Bonds, FX etc.

RANsquawk 8th March Morning Briefing - Stocks, Bonds, FX etc.