Thursday, February 11, 2010
Blas: end of nino implies lower agric and higher energy prices
"...Meteorologists said the recurring phenomenon - caused by a rise in the water temperature in the tropical Pacific that affects weather patterns - hit its peak last month and showed signs of cooling down.
The effect could be to cut the costs of agricultural commodities as regular rain patterns returned and to raise the price of natural gas and oil because of the higher likelihood of an active hurricane season in the Gulf of Mexico, analysts said..."
The effect could be to cut the costs of agricultural commodities as regular rain patterns returned and to raise the price of natural gas and oil because of the higher likelihood of an active hurricane season in the Gulf of Mexico, analysts said..."
van Duyn: securitization wobbles
"..This is why policymakers are secretly so worried about this market – what will happen to borrowing costs if these markets remain dysfunctional?
So far, this issue has been patched over by the fact that the US government – through the government-guaranteed mortgage agencies Fannie Mae and Freddie Mac – has been financing the US mortgage market.
But this cannot go on for ever – not least because at some point the US government’s debts and liabilities might come under more scrutiny than now. When they do, a nasty question needs answering: how will US economic growth and the recovery in housing be affected if securitisation financing is no longer available..."
So far, this issue has been patched over by the fact that the US government – through the government-guaranteed mortgage agencies Fannie Mae and Freddie Mac – has been financing the US mortgage market.
But this cannot go on for ever – not least because at some point the US government’s debts and liabilities might come under more scrutiny than now. When they do, a nasty question needs answering: how will US economic growth and the recovery in housing be affected if securitisation financing is no longer available..."
Tett: in future, Greek Bonds may no longer be used in money market operations
"But that tells only part of the tale: another factor that has also been hurting the Greek bond price is a subtle - albeit geeky - discussion that is quietly underway now at the European Central Bank in relation to its collateral policy, and exit strategies.
Back in the autumn of 2008, after the collapse of Lehman Brothers, the ECB loosened the rules that govern how banks can get central bank funds. In particular, it let banks use government bonds rated BBB or above in ECB money market operations, instead of accepting bonds rated A-, or better.
This was initially presented as a "temporary" policy, slated to last until late 2009. But last year the ECB extended the policy until the end of 2010. Thus, during 2009, banks which were holding Greek bonds have been merrily exchanging these for other assets via the ECB - which, in turn, has helped support Greek bond price (and, by extension, Greek banks that hold a large chunk of outstanding Greek bonds).
Until recently, many observers thought - or hoped - that this policy would be extended again, perhaps until 2011 or beyond. For although Greek debt currently has a credit rating that meets the old ECB rules, there is a good chance the debt will be downgraded this year - which creates the risk that Greek bonds will be excluded from any newly tightened ECB regime.
However, earlier this year, senior ECB officials indicated that they intended to "normalise" the policy, as planned, at the end of 2010, as part of a package of exit policies. Thus, a potential source of support for Greek debt now looks threatened. This, has spooked investors, such as German insurance companies, which also hold large chunks of Greek bonds..."
Back in the autumn of 2008, after the collapse of Lehman Brothers, the ECB loosened the rules that govern how banks can get central bank funds. In particular, it let banks use government bonds rated BBB or above in ECB money market operations, instead of accepting bonds rated A-, or better.
This was initially presented as a "temporary" policy, slated to last until late 2009. But last year the ECB extended the policy until the end of 2010. Thus, during 2009, banks which were holding Greek bonds have been merrily exchanging these for other assets via the ECB - which, in turn, has helped support Greek bond price (and, by extension, Greek banks that hold a large chunk of outstanding Greek bonds).
Until recently, many observers thought - or hoped - that this policy would be extended again, perhaps until 2011 or beyond. For although Greek debt currently has a credit rating that meets the old ECB rules, there is a good chance the debt will be downgraded this year - which creates the risk that Greek bonds will be excluded from any newly tightened ECB regime.
However, earlier this year, senior ECB officials indicated that they intended to "normalise" the policy, as planned, at the end of 2010, as part of a package of exit policies. Thus, a potential source of support for Greek debt now looks threatened. This, has spooked investors, such as German insurance companies, which also hold large chunks of Greek bonds..."
Tuesday, February 9, 2010
Bullock, Sakoui: Leveraged loan market revives
"..."The loan market is going to be a central theme of 2010 because it was still largely shut in 2009," says Tim Donahue, head of leveraged capital markets at JPMorgan. "People are starting to look at it again as a source of financing for a variety of things."
Leveraged loans played a role in the run-up to the financial crisis, topping $500bn during the leveraged buy-out (LBO) peak in 2007. As sponsors needed financing, the growth in popularity of structured products buying loans, called collateralised loan obligations (CLOs), provided the demand. However, when the credit markets seized up, the creation of CLOs stopped and average trading prices on loans dropped to a low of 64 cents on the dollar in December 2008.
Prices have since re-bounded to 93 cents
as lower-than-expected defaults and a flood of cash to CLOs and other investors from refinancing prompted buyers. Investors also have been directing cash to mutual funds that buy loans, according to Lipper FMI Americas. Bank loan funds have seen nine consecutive weeks of inflows for a total of more than $1.3bn for the period..."
Leveraged loans played a role in the run-up to the financial crisis, topping $500bn during the leveraged buy-out (LBO) peak in 2007. As sponsors needed financing, the growth in popularity of structured products buying loans, called collateralised loan obligations (CLOs), provided the demand. However, when the credit markets seized up, the creation of CLOs stopped and average trading prices on loans dropped to a low of 64 cents on the dollar in December 2008.
Prices have since re-bounded to 93 cents
as lower-than-expected defaults and a flood of cash to CLOs and other investors from refinancing prompted buyers. Investors also have been directing cash to mutual funds that buy loans, according to Lipper FMI Americas. Bank loan funds have seen nine consecutive weeks of inflows for a total of more than $1.3bn for the period..."
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