Thursday, September 17, 2009

Houses to put in order

No indications yet of Obama administration proposals for reforms at GSE's Fannie Mae and Freddie Mac, to be presented along with the 2011 federal budget.

Before the government takeover of the 2 GSE's in 2008, they had been the silent partner in 50% of home loans, buying loans from banks and lenders and selling them on to investors in packaged securities.

The Congressional Budget Office will now report in these agencies as federal operations. Fannie and Fred have received $100 billion of a $400 billion Treasury lifeline, senior preferred stock purchases with 1 10 % dividend. The Fed has committed to purchasing $1250 billion of their mortgages and $200 billion of their debt

At the end of July, the two companies had $5,500bn of outstanding debt and guarantees on securities, approaching the $7,200bn US public debt. The two also hold a combined $1,500bn of mortgages and mortgage-backed securities on their balance sheets..

Wednesday, September 16, 2009

Central banks revive gold bulls

Agreement among central banks part of the Central Bank Gold Agreement to lower floor for sales to have only modest boost to gold market.

How to become a heartless oil trader

How to spend it! I love these little how to stories

CMBS delinquencies add $2bn per month

"Fitch Ratings yesterday said that delinquencies for loans in US commercial mortgage backed securities (CMBS) rose by nearly half a percentage point in July to 3.04 per cent, the highest level since the rating agency began tracking this index of loans in 2001. The loans in the index represent about $480bn in CMBS, or two-thirds of the market.

At the current rate of increase of more than $2bn a month, delinquencies could top 5 per cent by the end of the year and surpass 6 per cent by the first quarter of 2010, Fitch said."

How Markit turned from a camera to an engine

Markit collates data from banks on trade flows and prices in the over-the-counter credit world, and sells it back to the market, mostly for valuation purposes.

Markit’s appearance triggered an evolutionary leap, creating a more structured tribe. As it started gathering trade data from different banks and calculating average prices, it enabled the creation of communal benchmarks, which turned into indices, such as iTraxx, CDX or ABX.

Worries over systemic risk in CMBS

Time to refinance for some of the $3,400bn of loans made to property developers for anything from urban office tower blocks to shopping malls across the US due for payment.

... near-impossible for developers to refinance these maturing commercial mortgages though the commercial mortgage-backed securities (CMBS) sector, which makes up 25 per cent of the real estate financing sector.

Costs set to rise amid shake-up in derivatives trading

"The plans for regulatory reform unveiled by the Obama administration this week are seeking one of two things. Either users of derivatives have to put aside capital themselves if the contracts are traded privately, or margins have to be paid to clearing houses to cover potential losses.

Investment banks required collateral of hedge funds but funded themselves -- over half their assets, according to the BIS, short term through the repo market.

More cash and collateral are required..across privately traded markets from OTC derivatives to repo to securities lending.
Pricing has become more conservative

Celent said that collateral had become heavily weighted in favour of cash, and this trend would continue. “The coming years will bring tougher collateral agreements with reduced thresholds and more restrictions on eligible collateral, by excluding exotic, less liquid assets,” the report said. “Aside from tightening credit terms, OTC participants are examining the creditworthiness of their counterparties more closely.”

Struggle between dealers and investors for control

US seeks to marry dynamism and safety

Krishna Guha reviews Obama administration's financial system regulatory reform