Thursday, May 20, 2010
Politi on Fed mortgage asset sales
The Federal Reserve is leaning towards a plan to sell more than $1,000bn worth of mortgage assets gradually over five years, according to minutes from last month’s meeting of US monetary policymakers.
Although no final decision has been made, notes from the April 27-28 meeting revealed that most of the Federal Open Market Committee has concluded that mortgage asset sales should be a part of the US central bank’s efforts to tighten monetary policy.
But a majority of FOMC members also indicated that asset sales should be “deferred for some time” while the economy gathers strength and should not precede a rise in interest rates.
Although no final decision has been made, notes from the April 27-28 meeting revealed that most of the Federal Open Market Committee has concluded that mortgage asset sales should be a part of the US central bank’s efforts to tighten monetary policy.
But a majority of FOMC members also indicated that asset sales should be “deferred for some time” while the economy gathers strength and should not precede a rise in interest rates.
Guha: A NYbor?
A push is under way in New York to create a new benchmark for dollar-denominated loans to rival the London interbank offered rate, better known as Libor.
The New York benchmark - dubbed "NYbor" - would put more weight on borrowing costs for US banks and less weight on borrowing costs for European banks.
This follows mounting criticism of Libor in the US. The British Bankers' Association, which compiles the benchmark rate, is reviewing claims that some banks might have misreported their borrowing costs, thus distorting Libor...
The Fed is unhappy about the fact that elevated Libor rates result in high rates for US loans benchmarked against dollar Libor, regardless of the source of the strain on Libor. It thinks the people behind the "NYbor" concept are doing valuable work exploring alternative ways to construct a borrowing benchmark.
But the US central bank leans towards reforming the way Libor is constructed rather than abandoning it in favour of a New York-based measure dominated by the borrowing rates paid by US banks.
The New York benchmark - dubbed "NYbor" - would put more weight on borrowing costs for US banks and less weight on borrowing costs for European banks.
This follows mounting criticism of Libor in the US. The British Bankers' Association, which compiles the benchmark rate, is reviewing claims that some banks might have misreported their borrowing costs, thus distorting Libor...
The Fed is unhappy about the fact that elevated Libor rates result in high rates for US loans benchmarked against dollar Libor, regardless of the source of the strain on Libor. It thinks the people behind the "NYbor" concept are doing valuable work exploring alternative ways to construct a borrowing benchmark.
But the US central bank leans towards reforming the way Libor is constructed rather than abandoning it in favour of a New York-based measure dominated by the borrowing rates paid by US banks.
Wednesday, May 19, 2010
Blas, Meyer. Cargill finds demand for processed food in emeerging markets stable
The appetite of emerging markets for processed food, meat and dairy products had confounded fears of a big drop in demand in the wake of the financial crisis, said Cargill, the big US agribusiness...
In previous episodes of economic turmoil, people in emerging markets had returned to traditional staple grains.
Cargill is at the centre of global agricultural flows and its business relationships with leading food companies, ranging from Nestlé to Kraft, allow it to anticipate changes in consumption.
"If you just looked across the shopping basket in those countries where their gross domestic product is $3,000 to $10,000 a year . . . the diet was remarkably resilient this time, so we start from a better base than we did before," he said.
In previous episodes of economic turmoil, people in emerging markets had returned to traditional staple grains.
Cargill is at the centre of global agricultural flows and its business relationships with leading food companies, ranging from Nestlé to Kraft, allow it to anticipate changes in consumption.
"If you just looked across the shopping basket in those countries where their gross domestic product is $3,000 to $10,000 a year . . . the diet was remarkably resilient this time, so we start from a better base than we did before," he said.
Blas, Meyer
Cargill is one of the hidden companies of the global economy. As the world’s agribusiness leader, it sits at the nexus of one of the world’s biggest and most critical industries – a force of great importance to millions of farmers as well as to large food multinationals from Nestlé to Coca-Cola and Kraft, though it is much less well-known as a name. Its significance – as the equivalent of ExxonMobil for the agriculture markets – is set to increase further as food demand rises in China, India and in parts of the developing world, and the use of biofuels grows in the west...
...the past three years are shaping up to be the best in Cargill’s 145-year history. Helped by the new “farm to fork” approach, the group is set to earn almost $10bn in the 2008-10 period, up from $1.5bn in 1998-2000 when the shake-up, called “strategic intent 2010”, was launched.
With nearly $117bn in revenues last year and 138,000 employees based in 67 countries, Cargill also ranks as America’s biggest privately owned company...
...the past three years are shaping up to be the best in Cargill’s 145-year history. Helped by the new “farm to fork” approach, the group is set to earn almost $10bn in the 2008-10 period, up from $1.5bn in 1998-2000 when the shake-up, called “strategic intent 2010”, was launched.
With nearly $117bn in revenues last year and 138,000 employees based in 67 countries, Cargill also ranks as America’s biggest privately owned company...
Tett: Ero banks' dollar funding gap and Libor
Last week, European leaders unveiled a €750bn (£642bn, $927bn) aid package designed to remove market fears about weak eurozone countries such as Greece, Portugal and Spain, and by extension calm any funding pressures for eurozone banks.
But something curious has been under way in the dollar funding markets. This week, the average cost banks in Europe need to pay to borrow dollars for three months has gone on rising: it was running at 46 basis points yesterday, up from 30bp earlier this month.
Meanwhile, the closely watched spread between the three-month dollar Libor and the "risk-free" Overnight Indexed Swap rate has risen to about 24bp. That does not signal as much stress as during the Lehman Brothers panic.
However, it is worse than anything seen for almost a year, and that is worrying central bankers.
The issue appears to relate to an estimated $500bn-odd funding gap haunting European banks...
But something curious has been under way in the dollar funding markets. This week, the average cost banks in Europe need to pay to borrow dollars for three months has gone on rising: it was running at 46 basis points yesterday, up from 30bp earlier this month.
Meanwhile, the closely watched spread between the three-month dollar Libor and the "risk-free" Overnight Indexed Swap rate has risen to about 24bp. That does not signal as much stress as during the Lehman Brothers panic.
However, it is worse than anything seen for almost a year, and that is worrying central bankers.
The issue appears to relate to an estimated $500bn-odd funding gap haunting European banks...
Friday, May 14, 2010
Webber: Argentina's debt swap
The first phase of Argentina’s debt swap, designed to close the chapter on its catastrophic 2001 default, closes today but Italian creditors owed more than a quarter of the unpaid debt may yet prove hard to sway.
The swap closes on June 7 but institutional investors have until today – a deadline which Argentina extended by two days this week – to sign up early without incurring penalties. The results of this first tranche will be announced in a week
reference: Argentina announces terms of new debt swap April 16
http://www.ft.com/cms/s/0/7d2a6d6a-48f7-11df-8af4-00144feab49a.html
The swap closes on June 7 but institutional investors have until today – a deadline which Argentina extended by two days this week – to sign up early without incurring penalties. The results of this first tranche will be announced in a week
reference: Argentina announces terms of new debt swap April 16
http://www.ft.com/cms/s/0/7d2a6d6a-48f7-11df-8af4-00144feab49a.html
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