“The new normal for the Chinese economy and banking sector includes sluggish growth and persistent credit deterioration,” one analyst tells Bloomberg. China's largest banks are seeing loans tied to manufacturing and other sectors sour which is cutting into profitability just as rate cuts squeeze NIM margins.
"A relatively low-profile entity in Austria – Pfandbriefbank Oesterreich AG (Pfandbriefbank) – is becoming the next critical chapter in the Austrian banking system story." - Daiwa
Just days after Greek FinMin Yanis Varoufakis' comments about hoping the Greek people will continue to back the government "after the rift," were played down by Syriza; ekathimerini reports that Alternate Finance Minister Euclid Tsakalotos on Friday made waves by seeming to confirm that the Greek government was "always prepared for a rift" with its European creditors - "If you don't entertain the possibility of a rift in the back of your mind then obviously the creditors will pass the same measures as they did with the previous [government]," (which perhaps explains why default risks are soaring back to post-crisis highs).
While the euro itself has recovered a bit from its worst levels in recent sessions, euro basis swaps have fallen deeper into negative territory on par with the epic nosedive of 2011. We are not quite sure what the move means this time around, since there is no obvious crisis situation – not yet, anyway. A negative FX basis usually indicates some sort of concern over the banking system’s creditworthiness and has historically been associated with euro area banks experiencing problems in obtaining dollar funding. This time, the move in basis swaps is happening “quietly”, as there are no reports in the media indicating that anything might be amiss. Still, something is apparently amiss...
Default Risk Soars After Ukraine's 'American' FinMin Suggests Severe Haircuts For Creditors (Including Russia)Submitted by Tyler Durden on 03/27/2015 08:18 -0400
Ukraine’s American Finance Minister has announced a broad restructuring plan with a wide range of severe haircuts for creditors, and she – well, obviously – wishes to include Russia in the group of creditors who are about to get their heads shaved. Russia sees the world as one in which multiple major powers can govern together. The US sees Russia as a power that must be defeated by any means necessary, and subdued. One of these worldviews must prevail in the end. Perhaps we won’t know which one that will be until the third power, China, raises its voice. What we do know is that Russia will back down only so far, and then it will no more.
- Google's new CFO to make $70 million (WSJ)
- Senate passes Republican budget with deep safety net cuts (Reuters)
- With Yemen strikes, Saudis show growing independence from U.S. (Reuters)
- Banks Slash Dividends as Loans Sour From Beijing To Pearl River (BBG)
- North American Railroads Caught by Speed of Crude-Oil Collapse (BBG)
- Japan’s Zero Inflation a Setback for Abenomics (WSJ)
- Cooperman Says U.S. Seeks Information About Omega Trades (BBG)
What would happen, for example, if a large number of holders decided to sell a high yield bond ETF all at once? In theory, the ETF can always be sold. Buyers may be scarce, but there should be some price at which one will materialize. But we can’t get away from depending on the liquidity of the underlying high yield bonds. The ETF can’t be more liquid than the underlying, and we know the underlying can become highly illiquid.... no investment vehicle should promise more liquidity than is afforded by its underlying assets. Do these recent promises represent real improvements, or merely the seeds for subsequent disappointment?
With Washington throwing its full faith and credit behind a new Ukrainian bond issue, it appears it’s time for Moscow to play spoiler to current debt restructuring talks between Kiev and its creditors. Russia holds some $3 billion of Ukraine's debt and doesn't think it should have to incur losses as part of any deal because Vladimir Putin is no average joe private creditor.
The German hyperinflation episode in the early 1920s is often quoted as an example of the dire consequences of excessive money printing – a leading industrial economy succumbing to the dangers of currency debasement promoted by incompetent central bankers. Alas, the reality is more complex than that, particularly when certain geopolitical and economic constraints of that time are taken into consideration. And as we shall see, we can draw some important lessons from that episode that can help us gauge the effectiveness of our very own currency debasement in the 21st century.
Either Greece will stop trying to save the failed past and look into the future, treating the crisis and the adjustment program as opportunities to finally implement urgently needed reforms, or the country will be eventually forced to exit the euro, in our view. Economics 101 teaches us that an economy can survive within a monetary union only if it has fiscal policy room and structural flexibility to respond to asymmetric shocks. In our view, Greece had none and has none. We see no solution for Greece within the Eurozone without reforms.
With The ECB banning Greek banks from continuing the GGB-buying ponzi scheme, the banking system in deposit outflow panic, cash running extremely dry, food shortages building, and bond/loan payments looming, Greek celebrations of Independence Day today are likely tempered by European officials coin-tossing over the nation's future (in or out of the EU). 196 years after winning their sovereignty from The Ottoman Empire, one wonders if The Greeks have the ability to fight their sovereignty back from "The Institutions." Perhaps, in the future, The Greeks will mourn "In Dependence" Day as opposed to celebrating "Independence" Day...
After three days of unexpected market weakness without an apparent cause, especially since after 7 years of conditioning, the algos have been habituated to buy on both good and bad news, overnight futures are getting weary, and futures are barely up, at least before this morning's transitory FX-driven stop hunt higher. Whether this is due to the previously noted "blackout period" for stock buybacks which started a few days ago and continues until the first week of May is unclear, but should the recent "dramatic" stock weakness persist, expect Bullard to once again flip flop and suggesting it is clearly time to hike rates, as long as the S&P does not drop more than 5%. In that case, QE4 is clearly warranted.
After almost two centuries of political and economic meddling in Latin America under the Monroe Doctrine (1823) banner, much of it involving regime change, the US is finally coming to terms with the reality that its influence has not just waned but disappeared. To Washington’s despair, similar results, if for other reasons, are happening throughout North Africa and the extended Middle East; certainly not the results the US had hoped for or anticipated from the revolutionary wave in the Arab Spring, now entering its fifth year. The era of using regime change as a weapon of mass deception may have already ended for the United States of America… and hopefully for the entire world.
"Leverage is risky. Purchasing assets with borrowed money can amplify small movements in prices into extraordinary gains or crippling losses, even default."
- San Fran Fed
The $665 Million Evolution in a Space Nobody Respected a Year Ago - Already Outpacing the Internet Circa 1994