Posts Tagged ‘ECB’

Finally, Trichet Show Some Fire Power

In Financial Engeneering, Financial Markets, International Econnomic Politics, National Economic Politics, Quantitative Finance, Views, commentaries and opinions on 03.12.10 at 03:49

As expected, the ECB had a pivotal role in determining spreads direction today. However, it didn’t turn out quite as smooth as the market was expecting. The  surprise followed soon after Jean-Claude Trichet‘s  press conference.

“It soon became clear that central banks were aggressively buying bonds, bringing to mind Trichet’s recent warning not to underestimate the ECB.”

Gavan Nolan

ECB president Jean-Claude Trichet did confirm that the ECB would delay its exit from its non-standard liquidity measures;  the three-month LTROs would remain in place until at least Q1 2011 and the other MROs until at least April 2011. This was welcomed by the markets, but it would have been a major surprise if wasn’t announced. The real surprise followed soon after the press conference.

The first reaction to Jean Claude Trichet‘s press conference was one of disappointment after the ECB president failed to provide a firm indication that the central bank was to step up bond purchases.

But soon it became clear that central banks were aggressively buying bonds, “bringing to mind Trichet’s recent warning not to underestimate the ECB,” credit analyst Gavan Nolan writes in Thursday’s Markit Intraday Alert.

“Portugal and Ireland government bonds were the main focus of the buying, with reports of some purchasing of Greek bonds also in circulation.” Nolan points out.

And the actions of the ECB caused the Markit iTraxx SovX Western Europe to whipsaw violently in a frenzy trading session.

The index was as tight as 182 basis points this morning, before widening sharply to 190 bp’s in the immediate aftermath of Trichet’s words.

Then rallied sharply to 180 bp’s when the scale of ECB bond buying became apparent.

“The rally in banks was even more emphatic, with the Markit iTraxx Senior Financials index reaching 145 bp’s, some 17 bp’s tighter than yesterday’s close,” Nolan reports.

Iberian banks, which have underperformance of late, were among the strongest tightening credits. This pulled the Markit iTraxx Europe tighter in a corporate market where only a few defensive names widened.

“The focus will now turn to tomorrow’s economic data, with non-farm payrolls, Markit PMIs and ISM Services,” Nolan concludes.

Adding: “But the ECB’s actions haven’t solved the sovereign debt problems, and some investors will already be wondering when the issue of solvency, rather than liquidity, will be addressed.”


  • Markit iTraxx Europe 106.5bp (-6.5), Markit iTraxx Crossover 473.5bp (-30)
  • Markit iTraxx SovX Western Europe 180bp (-11)
  • Markit iTraxx Senior Financials 145bp (-17)
  • Sovereigns – Greece 885bp (-43), Spain 290bp (-26), Portugal 450bp (-32), Italy 214bp (-16), Ireland 550bp (-20), Belgium 182bp (-10), France 92bp (-4)


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Cover Your Shorts, Baby!

In Financial Markets, High Frequency Trading, International Econnomic Politics, Law & Regulations, National Economic Politics, Quantitative Finance, Views, commentaries and opinions on 02.12.10 at 03:53

Credit spreads bounced back Wednesday, driven by a strong short covering rally in sovereigns. The strong tightening of spreads was triggered by comments from ECB president Jean-Claude Trichet at the European Parliament yesterday, where he hinted that the central bank’s bond purchase programme could be extended. The markets are aware that the EU’s policy levers are limited, and are looking for the ECB to do more.

“The expectation that it will do so at its governing council meeting tomorrow led to many investors scrambling to cover their short positions.”

Gavan Nolan

The Securities Markets Programme (SMP), launched in May, has been sterilised by extracting liquidity out of the system elsewhere, and it is highly unlikely that this policy would change. But a significant increase in the scope of the programme – along with a possible extension of unlimited 3-month ECB funding into next year – would be welcomed by investors.

“The expectation that it will do so at its governing council meeting tomorrow led to many investors scrambling to cover their short positions,” credit analyst Gavan Nolan writes in Wednesday’s Markit Intraday Alert.

A “better-than-expected” Portuguese T-bill auction also helped support the rally.

The sovereign sold $500 million of 12-month bills and the bid-to-cover ratio of 2.5 could be seen as a relatively healthy, given the volatile conditions.

However, the sovereign had to pay a higher yield but that was to be expected.

Aside from the now ubiquitous sovereign turmoil, investors were also focused on several important economic releases.

European markets woke up to another strong HSBC/Markit Manufacturing PMI. The headline index was up to 55.3 in November, with new orders up to a seven-month high.

“On the negative side, input price inflation was the fastest since July 2008, stoking fears of further monetary tightening,” Gavan Nolan writes.

Leading indicators in Europe also pointed towards a strengthening in growth.

“The Markit Eurozone Manufacturing PMI rose to a four-month high of 55.3 in November, slightly below the earlier flash estimate but still well above the neutral 50 level. However, the data showed that this is a recovery led by the core of Germany and France, with the peripherals lagging well behind,” Nolan points out.

Adding: “The equivalent PMI for the UK was even more impressive. The index rose to 58 in November, its highest level since September 1994 and significantly above the 55.4 reading last month. The coalition government will have been pleased by the expansion in exports, though whether this can be maintained over next year is open to question.”

The US ISM Manufacturing index completed the picture. The November report showed the index rising to 56.6, down from last month but still firmly in expansion territory.

“Economic data is likely to take a back seat tomorrow as investors await the ECB’s announcement,” Gavan Nolan concludes.

Spreads tightened sharply in late trading on further short covering.


  • Markit iTraxx Europe 112.5bp (-5), Markit iTraxx Crossover 503.5bp (-22)
  • Markit iTraxx SovX Western Europe 190.5bp (-12)
  • Markit iTraxx Senior Financials 161.5bp (-10)
  • Sovereigns – Greece 925bp (-31), Spain 315bp (-52), Portugal 475bp (-71), Italy 228bp (-43), Ireland 570bp (-44), Belgium 190bp (-14), France 95bp (-10)



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Goldman Sachs On Europe: Nothing To Worry About!

In Financial Markets, International Econnomic Politics, National Economic Politics, Views, commentaries and opinions on 23.08.10 at 00:14

Goldman’s rather amusing Europe analyst, Erik Nielsen, is back from his summer vacation, and we can again enjoy his Sunday letters from his home in Chiswick. I’m not sure where he’s been, but he says; ” My part of the world is still ticking along beautifully.” And here’s how Europe looks to Mr. Nielsen right now.

“The latest published GDP number for the Euro-zone – Q2 – is at 4% annualized growth and available indicators point to only marginally lower growth in early Q3, so any easing is just a sign of some normality setting in. Nothing to worry about!”

Erik Nielsen

“We are heading into survey-week in the Euro-zone. On a sequential basis, we have long been forecasting a slowdown of GDP growth in the second half of this year (to about trend-growth; i.e. 2% annualized), and while the July indicators were a good deal stronger than that (pointing to annualized growth of almost 3.5% in early Q3), we still expect a slowdown and hence somewhat weaker survey data for August,” Mr. Nielsen writes.

Hello from a lovely, if slightly humid, August day in Chiswick; I’ve been back from vacation for a week and “my part of the world” is still ticking along beautifully.

Here is how Europe looks to me:

  • Europe continues to enjoy a robust – and pretty broad-based – recovery, although things are moderating a bit as they should do.
  • The Bundesbank has revised its German 2010 forecast higher while the French government revised their 2011 forecast down (causing new tensions on fiscal policy next year).  We agree on both.  We continue to be happily above consensus for the Euro-zone for both 2010 and 2011.
  • Axel Weber “pre-announced” continued unlimited liquidity by the ECB through year-end, but also reiterated the intended exit strategy for Q1.  The Euro weakened on his statement; beautiful.
  • We are heading into survey week in the Euro-zone; we expect both the PMIs and the Ifo to moderate a bit, but its from very high levels, and nothing to worry about.
  • The UK will publish more details and (possible) revisions of Q2 GDP; we expect a small revision up to 1.2%qoq.
  • Switzerland publishes its August Kof this week; like in the Euro-zone we expect a small decline from the present high level.
  • The Polish MPC meets this week to decide on interest rates (we expect unchanged); maybe they’ll say something about the zloty strength.
  • The Hungarian MPC also meets on interest rates – also unchanged, we think, and also worth listening to their press conference to hear if they have views on the host of present issues facing Hungary.

Here’s a copy of the full European weekly outlook from Goldman Sachs.

(Source: Zero Hedge).



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Euro Drop To On ECB Statement, SNB Rumors

In Financial Markets, International Econnomic Politics, National Economic Politics, Views, commentaries and opinions on 20.08.10 at 14:35

The European common currency makes another drop Friday, after governing Council member Axel Weber was quoted saying that ECB should extend unlimited lending to banks past the end of the year and resume exit discussions in early 2011. In addition, there are rumors that the SNB is unwinding its hundreds of billions of EUR holding.

“Since inflation risks continue to be low over the policy- relevant medium term, this does not suggest a policy tightening yet.”

Axel Weber

The financial markets had been expecting the ECB would decide next month to keep in place its remaining emergency support for still-stressed bank-to-bank lending, eschewing any aggressive withdrawl of stimulus, Reuters reports.

Weber, however, is regarded as one of the ECB’s most outspoken inflation fighters and his comments in favour of maintaining loose policy sent the euro EUR down 1 percent to a five-week low against the dollar.

It fell to a seven-week low against the yen EUR/JPY.

Axel Weber


News agency Bloomberg reported that Weber said it would be “wise” to keep full allotment in weekly, monthly and three-month refinancing operations until after the end of the year. “Most of these discussions about the continuation of the exit I think will be focused on the first quarter,” Weber said in an interview conducted on Thursday.

The comments bring the Bundesbank chief in line with fellow policymakers such as Athanasios Orphanides and Patrick Honohan, who have also signaled the ECB’s liquidity largess will continue.

The ECB is due to make a decision about whether to extend unlimited lending at the weekly, monthly and three-monthly operations at its next meeting on Sept. 2 and Weber’s comments bolster expectations it will be renewed until January.

“Since Mr Weber has historically positioned himself at the hawkish end of the Governing Council spectrum, his comments strongly signal that the ECB is likely to decide to continue with its current operations till at least early 2011,” Barclays Capital economists Julian Callow and Laurent Fransolet says.

The ECB has said that unlimited liquidity will be on offer in the shorter term, one week and one month operations until at least mid-October, and until the end of September for three-month money.

The end of the year was “usually surrounded by some uncertainty regarding the liquidity situation,” Weber says.

Weber stressed though that the improving economic outlook meant generous liquidity supplies could not be kept in place indefinitely and said he saw no need to offer more very long-term funds, such as over six months.

“It’s clear that we need to re-embark on a normalization procedure,” he says.

Dumping Euro?

Additionally, there are rumors that the Swiss National Bank (SNB) is unwinding its hundreds of billions of EUR holding.

“The indirect evidence: a surging CHF, which however could merely be a return to the flught to safety of the old regime, as Europe once again realizes just how bad things truly are beneath the surface,” Zero Hedge writes.

According to the Forex Blog there are a handful of Central Banks who are making their presence known on this front.

“On several occasions over the last few weeks, the Central Bank of Switzerland (SNB) has unloaded massive quantities of Euros. If you recall, the SNB amassed nearly €200 Billion over the previous year, as part of a massive buying spree aimed at holding down the value of the Franc. Given that the Franc has appreciated by more than 15% against the Franc this year, it’s perhaps unsurprising that the SNB is throwing in the towel,” the Forex Blog wrote last week.

Analysts from Morgan Stanley foresees a similar trend: “Central banks are likely to let their euro holdings slide as a percentage of the total, reflecting lingering concerns about the euro zone’s fiscal outlook…’We do not expect that central banks will provide as much support for euros as in the past. They have prevented the euro from depreciating more rapidly… but they are unlikely to stop its depreciation.’ ”

The implication is clear: the Euro is facing (passive) pressure on multiple fronts.

Here’s today’s market snapshots:






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EU To Release Greek Debt Test Results Thursday

In Financial Markets, International Econnomic Politics, National Economic Politics on 05.08.10 at 11:20

The European Commission, International Monetary Fund and European Central Bank will Thursday  outline the results of an inspection that will determine whether debt-ridden Greece will receive the second installment of rescue loans to keep it from bankruptcy, AP reports.

“The government welcomes the conclusions made by our partners.”

Giorgos Petalotis

Greece is set to receive euro9 billion ($11.8 billion) in loans by Sept. 13 under a three-year program worth euro110 billion set up by the IMF and by other EU countries using the euro currency. In return, the country has been implementing a strict austerity program that has seen it cut civil service pay, trim pensions and increase taxes, and has been under quarterly review by the IMF, ECB and the EU Commission.

Greek officials said on Wednesday that they expected to pass the inspection, which lasted two weeks, AP reports.

“The government welcomes the conclusions made by our partners … but there is still much work ahead,” government spokesman Giorgos Petalotis said as the inspectors concluded consultations in Athens, holding a six-hour meeting with Finance Ministry officials.

In an interim report in June, the delegation, known as the “troika,” said Greece was on track with its reforms.

Press reports indicate that the delegation will set a deadline for improvement on slipping revenue targets and ask for a speeding up of public utility privatizations.

Related by the Econotwist:

Fitch: Banks Need More Capital Than Stress Test Shows

Jim Rogers Says CNBC Is A PR Agency

Wolfgang Münchau: A Cynically Calibrated Test To Fix The Result

EU Bank Stress Test: Commentaries & Market Reactions

Financial Authorities See No Point In Stress Testing Norwegian Banks

The EU Stress Test: Working The Media


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EU Bank Stress Test: Commentaries & Market Reactions

In Financial Markets, International Econnomic Politics, National Economic Politics, Views, commentaries and opinions on 24.07.10 at 01:46

Here’s the first commentaries, analysis and market reactions on results of the European Bank Stress Test, revealed by the CEBS, ECB and the EU Commission Friday afternoon. 7 of the 91 banks failed the test. but most of them passed with flying colors.  As expected, wouldn’t you say?

“5 Spanish cajas, 1 German and 1 Greek banks are eliminated on their quest to marry the US taxpayer. 84 other banks will soon be the recipients of far more US taxpayer generosity. And with that the season finale of the farce comes to a close.”

Tyler Durden

The first reactions to the spectacular revealing of the Great European Stress Test are out. Bloggers and certain independent analysts are furious, calling the whole thing a farce and a fake, while politicians and bankers are nodding their heads in a more dimmed recognition of what they’ve known all the time: there’s nothing to worry about. And the euro is strengthening.

For all available details details on the stress test results, click here.

First stop is France, and country economics analyst Caroline Newhouse-Cohen at BNP Paribas. In BNP’s latest edition of their weekly analysis, “EcoWeek”, Newhouse-Cohen writes:

“In the euro zone, the Committee of European Banking Supervisors (CEBS1) released its report on stress tests on Friday 23 July. The tests are designed to measure the solidity and solvency of 91 European Union banks (75% of the banks in twenty EU countries2) in case of a new financial market shock. In an adverse scenario, it was assumed that GDP would contract 3% over two years relative to the European Commission’s baseline scenario for the EU (1% in 2010 and 1.7% in 2011). An additional sovereign shock on top of the adverse scenario was also considered (excluding those held in investment portfolios; not including restructuring or defaulting). Under the adverse scenario, aggregate losses would total €556bn in 2010 and 2011. Tier-1 capital would decline from 10.3% at end 2009 to 9.2% at end 2011, compared with a regulatory minimum of 4% and a stress-test threshold of 6%,” BNP Paribas points out.

And concludes: “As expected, the majority of euro zone banks passed the tests successfully. Only seven establishments would see their tier-1 capital ratios drop below 6% under the adverse scenario. These banks3 have already raised doubts for several weeks, and the respective regulatory authorities are likely to push them to make capital increases to pass above the minimum requirement. The rather positive outcome of this European initiative should help improve the fluidity of interbank transactions. It should also reassure the markets concerning the capacity of banks to finance the economy and to fund the economic recovery.”

Here’s a copy of the newly relished “EcoWeek” from BNP Paribas.

And the reassure us that everything’s fine, she adds an oversight of the market interest rates and foreign exchange rates over the last week:

Interest rates:



EU Calculates Cost Of Nuclear Holocaust At €0.69

Among the financial bloggers are the tone a quite different one.

“Instead of listening to the idiots on TV, we will instead keep a close eye out on LIBOR, Euribor and EONIA: these will present a far better picture of true state of affairs in Europe than any farce of a test ever could,” Tyler Durden at Zero Hedge wrote yesterday.

Today the popular blogger concludes:

“5 Spanish cajas, 1 German and 1 Greek banks are eliminated on their quest to marry the US taxpayer. 84 other banks will soon be the recipients of far more US taxpayer generosity. And with that the season finale of the farce comes to a close.”

And points out the following:

Also Europe finds that :

* Full GoM clean up will be around 2 bucks

* The cost of the Large Hadron Collider was reduced to a couple of dimes

* The US budget “deficit” is estimated to actually be a $100 quadrillion budget surplus

* Merrill’s expense tab at Hustler Club is only $19.95

* etc.

European Bank Investors Have Been Hoodwinked

Reggie Middleton at the BoomBustBlog writes in a comprehensive analysis of the European banking sector that European Bank Investors Have Been Hoodwinked and BamBoozled.

Reggie Middleton

Personally, I consider the European bank stress tests to be a farce; an attempt to Bamboozle, Hoodwink and Dis-inform any who would be naive enough to drink the Kool-Aid – not to dissimilar from the US bank stress tests (see You’ve Been Bamboozled, Hoodwinked and Lied To! Here’s the Proof). CNBC reports that “NO” default scenarios will be played out, which I find to be rather unrealistic since the reasons why the banks are enjoying restricted access to the capital markets is the fear of default! Think long and hard about this…

You are showing signs of HIV, and nobody wants to come near you, make love to you or lend long term to you due to the symptoms of this most unpleasant and deadly disease despite the many proclamations you have made to the contrary. You decide to set the record straight by visiting a prominent doctor to diagnose your issues and placate your associates. The doctor comes up with a prognosis, but simultaneously declares that:

* AIDS (the syndrome), and death have not and will not be considered because the doctor will not let any of his patients catch AIDS or die! Whaaatt!!!??? Does the doctor really have that much control over who catches diseases and who dies? [Analogous to refusing to even consider the potential for default on sovereign debt, as if no European country has ever defaulted before – many have, and many probably will in the future as well). This analogy actually serves us quite well for the ECB has very limited control over who gets sick and how the contagions (both financial and economic) are transmitted (see below).

* The patient will be assumed to operate between 96% and 57.8% efficiency. This is, of course, a problem if the patient truly is terminally ill, for his health should receive significantly more of a…. Well, a haircut.

* Only the patient’s mucous membranes and other very short-lived tissue will be considered for examination, for the patience plans on keeping other body parts for the long term, hence they should not be affected by fluctuations by any potential illness. Yes, I know this statement doesn’t make any damn sense, but then again neither does the ECB excluding hold to maturity and portfolio inventory from the stress tests either. It really doesn’t matter how long you plan on holding said items, if they are permanently impaired in value, then they are permanently impaired, Right???!!! I know, we won’t even consider a default scenario, but since countries do default.. If a default occurs, or more realistically a restructuring, then wouldn’t longer term inventory be impaired – Permanently???!!! In the post A Comparison of Our Greek Bond Restructuring Analysis to that of Argentina I demonstrated how much damage was done to the Argentinian bond holders after their restructuring. Too bad the Argentinian investors didn’t have the all-powerful ECB there to declare that restructuring and default are not part of the rules, hence not allowed. The following is the price of the bond that went under restructuring and was exchanged for the Par bond in 2005.

The BoomBustBlog adds the charts below:

“Price of the bond that went under restructuring and was exchanged for the Discount bond.”


“With this quick historical primer still fresh in our heads, let’s revisit our Greek, Spanish, and Italian banking analyses (the green sidebar to the right), many of which are trying to push the 400% mark in terms of returns if one purchased OTM options at the time of the research release. It may be worthwhile to review the Sovereign debt exposure of Insurers and Reinsurers as well. A quick glimpse at our calculated restructurings are in order as well…”

Read the full analysis here.

Faked, And Not Very Well

“The European stress test results are coming out as you read this – and they were not as good as Meg Ryan’s performance in the deli in “When Harry Met Sally,” Michael Shulman, editor of Michael Shulman’s Short Side Trader, writes:

Michael Shulman


“What will investors think? Right now, nothing — markets are wandering, A good many will think this through over the weekend and return to my thought — if you fake them, it means you cannot do real tests. Why? The banks are in such bad shape that many of them cannot let investors take a look at the books of too many banks, it will cause a run on all the banks. Another group will look more at the math and say wait a minute, any real problems with sovereign debt and that four billion is looking kind of small.”


“What do I think? I am using Occam’s Razor — I had to read the guy in my Medieval Philosophy course at Georgetown, part of my major – and that is, according to Wikipedia, “is the principle that “entities must not be multiplied beyond necessity” (entia non sunt multiplicanda praeter necessitatem). The popular interpretation of this principle is that the simplest explanation is usually the correct one.”

Read the article at Seeking Alpha.

Euro Gains On Test Results

The euro has gained nicely against most major currencies after the test results was published at 18:00pm (CET), as you can see in the charts below:





Remember the guy in the popular TV show from the 80’s – “The A-Team”?

The one who at the end of every episode fired up a big cigar and said: “I love it when a plan comes through!”

Related by the Econotwist:

EU Bank Stress Test: Here’s The Full Package

To Europe From Goldman Sachs On The Stress Test Eve

Financial Authorities See No Point In Stress Testing Norwegian Banks

All Nordic Banks Will Pass Stress Test, Nordea Says

European Bank Stress Tests Are Loosing Credibility

The EU Stress Test: Working The Media


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EU Bank Stress Test: Here's The Full Package

In Financial Markets, International Econnomic Politics, National Economic Politics, Views, commentaries and opinions on 23.07.10 at 20:53

7 out of 91 European banks have failed the much debated stress test performed by the The Committee of European Banking Supervisors (CEBS), the EU administration says. Here’s all the published material, so far.

The Committee of European Banking Supervisors, or CEBS, a group of European Union regulators which advises the European Commission on regulatory issues, has released results of the stress tests on 91 banks representing 65% of the region’s banking assets. The CEBS says seven of the 91 banks reviewed “failed” the E.U. stress tests.

The tests are designed to see how a bank’s assets and liabilities perform during a simulated period of economic turmoil and whether they hold enough capital to absorb losses and large enough liquidity buffers for them to remain solvent.

The IMF stated earlier this week that the tests should provide further stability moving forward, Caroline Atkinson, Director of External Relations for the IMF commented.

This is the joint press release from CEBS, ECB and the EU Commission:

The Committee of European Banking Supervisors (CEBS), the European Central Bank (ECB) and the European Commission welcome the publication of the results of the EU-wide stress-testing exercise, which was prepared and conducted by the CEBS and national supervisory authorities, in close cooperation with the ECB.

We support, in particular, the transparency of this exercise, given the specific market circumstances under which banks currently operate. We therefore welcome the publication of banks’ individual results, particularly their respective capital positions and loss estimates under an adverse scenario, as well as detailed information on banks’ exposures to EU/EEA central and local government debt. Such disclosures ensure transparency regarding conditions in the EU banking sector.

The adverse scenarios used in the stress test are designed as “what-if” scenarios reflecting severe assumptions which are therefore not very likely to materialize in practice. Accordingly, the results of the test confirm the overall resilience of the EU banking system to negative macroeconomic and financial shocks, and are an important step forward in restoring market confidence.

Where the results of the exercise indicate that individual banks require additional capital, these banks should take the necessary steps to reinforce their capital positions through private-sector means and by resorting, if necessary, to facilities set up by Member State governments, in full compliance with EU state-aid rules.

Here’s the latest news report from TradeTheTrend:


Here’s the excecutive summary of the CEBS report.

Here’s the full press release from CEBS.

And here’s the details of the test.

The three EU institutions have worked out a comprehensive “Questions&Answers” document.

Nor exactly “all you ever wanted to know, but were afraid to ask”……

Here it is.

I will update you on further on what these stress tests mean for the broader economy, as well as how the markets are reacting.

Related by the Econotwist:

To Europe From Goldman Sachs On The Stress Test Eve

Financial Authorities See No Point In Stress Testing Norwegian Banks

All Nordic Banks Will Pass Stress Test, Nordea Says

European Bank Stress Tests Are Loosing Credibility

The EU Stress Test: Working The Media

Bundesbank: Ireland Will Destroy The Euro Zone

EU Stress Test May Trigger Capital Injection Of EUR 85 Billion


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Investors Are Dumping Covered Bonds

In Financial Markets, International Econnomic Politics, National Economic Politics on 28.06.10 at 16:06

European institutional investors are now dumping their covered bonds, as the European Central Bank is about to close its purchasing program.

“Investor demand has been wilting given the record €126 billion issuance over the first half of 2010.”

Societe Generale

Investors now rush to sell covered bonds as the European Central Bank prepares  to pull the plug on program, according to Structured Finance

Covered bond issuance has been strong over the past five trading days on the back of banks looking to take advantage of the final days of the European Central Bank’s (ECB) purchase program.

The program ends in the middle of this week.

Companies in Europe have so far sold €34.9 billion euros ($43 billion) of covered bonds in June, already more than double May’s sales of 11.1 billion euros, according to data compiled by Bloomberg.

Sales totaled 169 billion euros in the last six months compared with €233.4 billion in 2009, Bloomberg data showed.

Societe Generale analysts said that investor demand has been wilting given the record €126bn issuance over the first half of 2010.

It’s likely that as a result issuance activity will slow down, as the markets are traditionally closed from mid-July to end-August.

But market economists, including Barclays Capital, Nomura International and Citigroup , have called for the ECB to extend the life of its program given the developing sovereign debt crisis.

Related by the Econotwist:

Why Optimists Are Wrong About The Euro Zone

U.S. Covered Bond Legislation: Same Shit – New Wrapping?

EU Wants To Tax Bonds Of Deficit Countries (And Old People)

Warning: Investing In Europe Can Make You Crazy

European Banks: “Leman Times Ten”

ECB Announces Bailout Program


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