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)

BofA delays Countrywide bankruptcy

The word is that BofA did in fact consider declaring their Countrywide subsidiary bankrupt to ring fence the rest of the company from Countrywide. It got as far as a board vote this past summer.

This Wall Street Journal video discusses the issues of why it has postponed the bankruptcy filing

Australia: There goes the neighbourhood

The last two days have seen the latest monthly data on credit growth in Australia from the RBA, and the latest quarterly data on house prices from the ABS. Together they confirm trends that I’ve identified on numerous occasions between the acceleration of mortgage debt and the change in house prices

Deleveraging, Banks and Economic Recovery in Ireland

The challenge that the Irish economy faces can best be described in the context of flows and stocks of assets and liabilities. Under the Memorandum of Understanding (MoU) with the IMF/EU/ECB Troika, Ireland must implement a severe fiscal austerity programme and reduce the size of its banking system. These goals must be achieved in the context of a deleveraging process in the household sector brought about by the need to repair balance sheets following a collapse in the value of housing assets. The current policy mix, which aims to reduce these stocks simultaneously, is unlikely to be successful, a feature we term the domestic trilemma. An external trilemma arising from the constraints of EMU membership also limits the policy choices for high-debt economies attempting to engineer an export-led recovery. This paper argues that a sequencing of policies is required for Ireland to achieve its goals

Greece just got a debt jubilee. Who’s next?

I see this deal as a quid pro quo for the banks getting recaps in exchange for writedowns. Because it is a negotiated agreement of a sort of payment in kind, it isn’t really clear if the banks are being made whole (as compared to a CDS-triggering default) as a result. Marc Chandler is saying this was really debt forgiveness, meaning that the banks have done a debt jubilee for Greece in exchange for recapitalisation backstops. I like that angle

Secular decline in US housing equity

We stumbled upon this interesting chart from the Financial Stability Oversight Council’s 2011 Annual report which shows the share of owner equity in household real estate. It surprised us, not so much in that it is at record lows, but that owner equity showed only a blip upward during the housing bubble. The secular decline in owner equity is also an eye opener

It’s official: Spain following Japanese example of propping up zombie banks

Moody’s decision to place Popular’s ratings on review for possible downgrade is driven by our view that the combined entity emerging after the integration with Pastor is likely to have a weaker credit profile than Popular’s standalone credit strength

Why is a bank that failed the stress tests in Spain getting bought at a 31% premium?

I don’t follow the Spanish banking sector well enough to know what hidden value Banco Pastor has but I find it curious that it is the subject of a takeover bid at a 31% premium by Spain’s fifth largest bank, Banco Popular

Lenders now suing for mortgage debt after foreclosure

The statute of limitations is five years for default. That means banks still have until the beginning of 2012 to sue a strategic defaulter from early

Hungary: Controversial Swiss franc loan law goes into effect

Central European borrowers loaded up on cheap Swiss franc and euro loans (mainly from Austria and Switzerland) in the lead up to the credit crisis because of higher nominal rates in central Europe. When the crisis hit, these loans became expensive overnight. In Hungary, one of the hardest hit due to currency depreciation, the government has legislated a fix that goes into effect today

Why Nobody Went to Jail During the Credit Crisis

The following is a transcript of an interview with Financial Sense Newshour, a free financial/market broadcast hosted by money manager Jim Puplava on the week’s market action, interviews with financial experts, and Jim’s personal perspective on the markets/economy

The FHFA Complaints and Control Fraud

The FHFA complaints lose explanatory power and persuasiveness because they ignore compensation and accounting. It pays to understand accounting control fraud