Last Days Of Pompeii?

What is becoming clearer to almost everyone is that this is now no longer simply a Euro periphery sovereign debt crisis. It has become a full blown crisis of confidence in the Euro itself

Dollar Stronger As Euro Concerns Intensify

Euro continues to weaken as US markets reopen from holiday; consolidative price action Thursday is being replaced by a return to trend today, with dollar broadly stronger, EM and “risk” broadly lower. European equities are down, and futures market points to a down open for US equity markets

What the German bond auction disaster means

This morning the German government held an auction for 10-year money at just under 2 percent. The auction failed disastrously with a bid-to-cover ratio of just 1.1. The Germans wanted to issue 6 billion euros of 10-year bunds but managed to sell only 3.64 billion, with the central bank picking up 39 percent of the issue

Dollar Softer Amid Consolidation

The US dollar is trading with a softer bias in what largely appears to be a consolidation. The euro held support near $1.34, sterling near $1.56 and Aussie near $0.9800. The news stream is light and corrective forces are seen in equities, which are mostly higher, and bond markets, which are mostly lower. Emerging market currencies are also generally firmer

The Four Key Issues that are Dividing Europe

First, there is a disagreement about whether the ECB should be buying a significant amount of European bonds. Second, there is a disagreement over whether the ECB should declare that is it buying bonds for an extended period or unlimited amounts. Third, the ECB currently sterilizes its sovereign bond purchases. Some want the ECB to refrain from doing this. Fourth, there is a dispute over whether Greece is a unique event

National Solvency and the Special Case of the US Dollar

The US can run budget deficits that help to fuel current account deficits without worry about government or national insolvency precisely because the rest of the world wants Dollars. But surely that cannot be true of any other nation. Today, the US Dollar is the international reserve currency—making the US special. Isn’t the US special? Let us examine this argument

Sentiment Deteriorates Further After Tepid Spanish and French Auction Results

EuroStoxx 600 is down over 1%, EZ bond yields mostly higher after Spanish and French bond auctions. Financial market stress (banking and credit) continues to intensify amid lack of progress on debt crisis. UK October retail sales saw unexpected strength; Singapore’s Oct. non-oil domestic exports plunged

Spain Another Pain

Pressure is mounting on Spain. The 10-year yield today is essentially back to where it was when the ECB broadened its sovereign bond purchase scheme to include Spanish and Italian bonds. On Oct 27, the 10-year yield was near 5.33%. Today it is 100 bp higher. This is not a very conducive environment for tomorrow’s new benchmark offering (up to 4 bln euros of bonds that mature in 2022)

Meeting Bank Capital Requirements in Europe

There are a number of ways that European banks are moving to boost their Tier 1 capital and strengthen their balance sheets. Some are cutting dividends, diluting current share holders through new rights issues, laying off staff, and selling off assets

Running through Italian default scenarios

The most important debate of our lifetimes is now ongoing. The question: Should the ECB “write the check’ for the euro area national governments? In thinking about the answer to this all-important question, I prefer to shift the focus by changing the verb “should” to “will”.

Answering this slightly different question is much more important than answering the first question for you as an investor, a business person and as a worker. If the ECB writes the check, the economic and market outcomes are vastly different than if they do not. Your personal outlook as an investor, business person or worker will change dramatically based upon this one policy choice. The right question to ask then is: Will the ECB “write the check’ for the euro area national governments

What if foreigners dump government bonds?

when government deficit spends, some of the claims on government will end up in the hands of foreigners. Does this matter

Policy Theater Intermission; Economic Concerns Return

Risk aversion continues to weigh heavily on equity markets and EZ sovereigns; Dollar mostly firmer across the board. EZ policy developments remain in spotlight with growth expected to slow; UK inflation moderates. In the North American session US data comes into focus; Singapore retails sales likely bellwether for Asian growth