Archive - Dec 3, 2012 - Story

There was a time when Swiss bank secrecy was the passion of every tax-challenged oligarch in the world. Then things changed, Obama made it s badge of honor to rat out anyone you know who has a bank account in Zurich or Geneva, lists of previously ultra-secret account holders started "leaking" and from an asset, Swiss bank accounts promptly became a liability to everyone involved. Such as the matriarch of the legendary Papandreou family, former Pasok Greek PM G-Pap's mother, Margaret, also wife of former PM Andreas, who according to The Telegraph has been revealed as having a €550 million ($700 million) Swiss bank account (she will hardly be happy to learn that Credit Suisse just instituted a negative interest on CHF deposits) in the Geneva branch of HSBC. Obviously lots of hard work by M-Pap went into building up that particular nest egg.

In a world that already makes little sense to most, Credit Suisse just pushed the envelope a little further. The bank has just announced that going forward it will be charging for firms to hold a CHF cash balance - i.e. the bank, given the already-negative Swiss government bond yields, has moved to its own NIRP for its clients. The need to do this suggests an overwhelming desire for short-term safety that flies in the face of the seeming level of complacency that exists in the European bond (and stock markets). As we have warned before, it seems that the currency wars that appear to have escalated have now started the 'capital control' wars as CS (and implicitly the SNB) adds this negative interest rate 'charge' to its already pegged currency in the vain hope that of managing the unmanageable flow of safe-haven-seeking cash.

• *CREDIT SUISSE INFORMS BANK CLIENTS OF NEGATIVE RATES ON CHF FROM DEC. 10
• *CREDIT SUISSE INFORMS CLIENTS IN SWIFT NOTICE, CONFIRMED BY BNK

• Union solidarity rubs up against slow economy in LA port strike (Reuters)
• Geithner predicts Republicans will allow higher tax rates (Reuters). And "no risk" of a US downgrade, "no risk"
• Geithner takes hard line on fiscal cliff (FT)
• Narrowing LDP lead points to Japan post-election confusion (Reuters) - not to mention, USDJPY plunges if LDP loses
• Vietnam Says China Must Avoid Trade Weapon in Maritime Spat (Bloomberg)...  and real one, one hopes
• Greece unveils bond buyback plan (FT)
• ECB Can’t Deliver Spain Spread Rajoy Wants, Wellink Says (Bloomberg)
• UK’s euro trade supremacy under attack (FT)
• Merkel Signals Debt Write-Off Possible as Buyback Begins (Bloomberg)
• ECB's Noyer Says Bond-Buying Plan 'Is Bearing Fruit' (WSJ) - as long as just plan, and not execution.

Today's "trading", in a repeat of what has become a daily routine, can be summarized as follows: flashing red headline about Fiscal Cliff hope/optimism/constructiveness out of a member of Congress who bought SPY calls in advance of statement: market soars; flashing red headlines about the inverse of Fiscal Cliff hope/optimism/constructiveness out a member of Congress who bought SPY puts in advance of statement: market plunges. Everything else is noise, as is said hope/expectations/constructiveness too since it is increasingly likely nothing will happen until the debt ceiling hike deadline in March, but stop hunts must take place in a market which nobody even pretends is driven by fundamental newsflow. Such as the bevy of PMIs released last night, the key of which was the China HSBC PMI as reported previously, which beat expectations by the smallest of possible increments, at 50.5, but rising to expansion territory and the highest in 13 months, which sent the EURUSD spiking and has kept it in the 1.3030 range for the duration of the overnight session. Sadly, those on the ground in China hardly felt the number was a bullish as EURUSD trading algos around the world, sending the Shanghai Composite to a fresh post-2008 low, closing down over 1% at 1,960. But let's just ignore this inconvenient datapoint shall we?

It may still be unclear just where Greece will get the ~€10 billion in cash needed to buyback up to 20 various tranches of the post-restructuring GGB2 bonds (full CUSIP list below), but what the Greek Public Debt Management Agency announced today was the sound of money in the ears of the hedge funds that had bought up Greek bonds in the low teens several months ago, if not so much Greek banks many of whom may still have this debt market at up to par, as no matter which particular group of taxpayers ends up funding this "buyback" - a process that will have zero benefit to the Greek population who will see not one penny of the buyback proceeds (as described before) - it is the hedgies that benefit, who also have clearly controlled the process from the beginning as the announced tender prices were well above the levels Greek bonds eligible under the buyback closed at on Nov. 23, even though Greece's lenders last week said they did not expect the bonds to be purchased for more than the closing price on that date. In other words, the Greek government lied to its people again for the benefit of wealthy financial interests yet again.