10Y US Treasuries have now successfully eradicated all the post-summit losses and are well on their way to last week's low yields as the reality (that we unendingly slammed into people's heads) appears to be hitting managers minds. 2s10s30s has also retraced the entire post-summit shift and the EUR is also getting very close to unch (from pre-summit). This leaves only ES (and credit to a lesser degree) as the odd man out having retraced only 50% of the post-summit euphoria.
The first three CDS ban attempts have failed. So has the coordinated ISDA attempt to make sovereign CDS a product with absolutely no functionality. The fourth time will be the charm though. The EFSF guarantees it! On the other hand, think of the massive EPS profit that Italy will post this quarter as a result of today's CDS blow out courtesy of the DVA accounting gimmick. Surely Dick Bove will imminently upgrade it to Dodecatuple Turbo Buy.
And the winners are.... Moody's Ba2-; S&P: BBB-; Fitch: BB+; Congratulations to Egan-Jones for once again being the only rating agency worth their money and calling this collapse in advance.
Full MF Global Bankruptcy Petition... In Which We Find That Corzine's Bankrupt Firm Owes CNBC $845,397?Submitted by Tyler Durden on 10/31/2011 - 10:43
Full bankruptcy filing attached below, where we find that in addition to owing JPM and Deutsche Bank $1.2 billion and $1 billion respectively, as bond trustees, the 7th biggest unsecured creditor with $845,397, is... CNBC? Perhaps that explains the objective reporting the Comcast station has provided on the topic of MF over the past several weeks, considering the caliber and quality of guests invited to opine. It also should be a reminder to all advertising collections offices to never be more than 30 days late on collecting receivables. Of course, this is pure speculation on our behalf. We are confident CNBC will provide a far more rational explanation why it is owed nearly $1 million by MF Global, and just what is the nature of services rendered...
Three years after upgrading Lehman days ahead of its bankruptcy, here is Dick Bove on CNBC last week assuring anyone idiotic enough to listen to him that, you guessed is, MF Gloal is fine and a buyer will promptly materialize. How much longer will the Comcast financial comedy channel tolerate this individual?
Based on the MF Global Proxy statement filed in August 2011, there are rumors that the now defunct Primary Dealer will pay Jon Corzine a severance of $12.1 million. However, is that the full story?
Game Over. And in the meantime, we get the following report from a media source: "CME’s acting like the MF Global thing just happened. They’re haphazardly locking traders out who clear with MF, blocking access to the floor of not just MF Global employees but people who clear through them. As a result, nobody wants to leave the floor and nobody who still has access wants to trade just to get locked out."
Time to drag the recession talk back? After three months of the Chicago PMI (a key advance indicator for the ISM), bucking the trend of the other high frequency economic indicators and beating expectations consistently, it is the PMI itself that finally missed consensus, printing at 58.4 on expectations of 59.0, and down from a 60.4 in September. The strength in the report was in Employment, which was the highest in 6 months, while New Orders "erased half of Spetember's gains." Inventories dropped from 60.3 to 54.4, Production was down from 63.9 to 63.4, while inflation returns as Prices Paid rose from 62.3 to 66.0. Look for some cautious wording ahead of the Manfuacturing ISM now that everyone has hiked their Q4 GDP forecasts once again to accompany the S&P ramp, because the stock market is somehow representative of the economy.
Hidden among the detritus of last night's MF headlines and JPY Azumification, Moody's released their Weekly Credit Outlook. The report was rather unsurprisingly (given our perspective on the lack of real news last week) negative on the Euro Summit implications noting that while some positives remain, the negatives at a grossed-up level seem to outweigh the market's exuberance. In most scenarios they see the impact as neutral (for Ireland and Portugal, European banks and Insurers, and the EFSF itself) but they are most concerned at the impact the 'plan' will have on AAA-rated euro are countries and the considerably higher bank recap needs. We can only leave it to the market to decide how self-referencing CDS should be priced.
Don't Tell The Italian Banks They Got Bailed Out: 3 Out Of Top 4 Banks Trading Below "Bailout" PriceSubmitted by Tyler Durden on 10/31/2011 - 09:16
Remember the European summit that was supposed to not so much bail out Europe, as stop the contagion from spreading to Italy (but mostly to send the ES highest by 40 points intraday at one point)? Well, in the credit markets the summit has failed miserably as already noted previously. Now, we see that it has also spread to the equity of those all important Italian financial companies. As the chart below shows, 3 of the top 4 Italian banks (Intesa, UniCredit, Monte Pasci, And MedioBanca) are now trading below their levels at the time of the bailout. So: rescue half life is what - 48 hours? About in line with our expectations.
Greeks Set To Scream Bloody Murder As Pension Fund Threatens To Recoup €8 Billion In "Illegally" Paid Out ProceedsSubmitted by Tyler Durden on 10/31/2011 - 09:04
Just in case Greece needed one more reason to piss off the angry mob, just waiting to resume its Syntagma square festival, Ekathimerini reports that very soon Greeks will discover that not only are their pension funds about 50% underfunded funded courtesy of the first of many European 'bailouts', but that they will actually have to repay pension proceeds back. Granted, pensions paid out under illegal pretenses, but still, this is money that will have to make its way out of insolvent Greek families that, just like in America, never felt an urge to save, but merely to spend, spend, spend, with hopes of endless crony communism in perpetuity. "Up to eight billion euros have been paid in bogus pensions in the past decade, director of the Social Security Foundation (IKA), Rovertos Spyropoulos said on Monday. Under immense pressure to cut spending and replenish empty state coffers, the Greek government has found out that millions of euros have been paid to deceased claimants. The money is often claimed by fraudulent relatives or, in some cases, it remains idle in banks." What happens when all the other socialist countries in Europe discover the same has been happening there repeatedly and to far greater extents?
As the EUR trades at its lows of the day (having retraced over 60% of the Euro-Summit rally, we wonder how long before the broad European equity markets will take to fill the gap from that wondrous liquidating day. Equities are underperforming credit so far this morning but it is very clear that hedgers/shorts are back in lower cost credit positions as European sovereigns leak wider in yield (cash and CDS). We also note that EFSF is underperforming Bunds (by around 7bps so far this morning) making us wait for the Barroso-Van-Rompuy 'We're gonna need a bigger boat' speech.
Non-hedged Eurosov CDS may be banned, hedged Eurosov CDS may be irrelevant, but courtesy of tens of billions in capital caught up in basis trades which are all about to be Boaz Weinstein'ed very soon, moves wider in cash will drag CDS along with them.
Once again, Bill Gross proves he can think outside of the box better than most, with the following paragraph from his latest letter to clients: "the investment question du jour should be “can you solve a debt crisis with more debt?” Penny or no penny. Policymakers have been striving to answer it in the affirmative ever since Lehman 2008 with an assorted array of bazookas and popguns: 0% interest rates, sequential QEs with a twist, and of course now the EU grand plan with its various initiatives involving debt write-offs for Greece, bank recapitalizations for Euroland depositories and the leveraging of their rather unique “EFSF” which requires 17 separate votes each and every time an amendment is required. What a way to run a railroad. Still, investors hold to the premise that once a grand plan is in place in Euroland and for as long as the U.S., U.K. and Japan can play scrabble with the 10-point “Q” letter, then the markets are their oyster. Not being one to cast pearls before swine or little Euroland PIGS for that matter, I would tentatively agree with one huge qualifier: As long as these policies generate growth."..."My original question – “Can you solve a debt crisis by creating more debt?” – must continue to be answered in the negative, because that debt – low yielding as it is – is not creating growth. Instead, we are seeing: minimal job creation, historically low investment, consumption turning into savings and GDP growth at less than New Normal levels. The Rogoff/Reinhart biblical parallel of seven years of fat followed by seven years of lean is not likely to be disproven in this cycle. The only missing input to the equation would seem to be how many years of fat did we actually experience? More than seven, I would suggest." And that, dear readers, is the bottom line: put otherwise, we have experienced 30 years of deviation from the mean courtesy of the biggest, and most artificial in history, cheap debt-inspired period of global "growth." And we are due for the mother of all mean reversions when the central planners finally realize their methods to defeat this simplest of methemaical concepts, have failed.