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The European debt crisis has raised concerns regarding the use of credit default swaps (CDSs). CDSs are a derivative financial product used to hedge against the default risk of any entity.
From the outset, it has been suspected that the crisis has been exacerbated by a few investors driving up the prices in the CDS market. This issue has attracted much interest in policy circles and has led to the adoption [...] kingworldnews
With so much fear and uncertainty in markets around the world, today King World News reached out to Ben Davies, CEO of Hinde Capital. Davies told KWN that “Bank capital is scarce” and “the ECB will react with a 3rd LTRO as their is no alternative for them.” He also said, “the FED will power up the US dollar Swap lines.” Davies also discussed gold, but first, here is what [...] (Reuters) – Greece’s commitment to an EU/IMF rescue deal has become null after voters rejected pro-bailout parties in a general election on Sunday, the leader of the Left Coalition party said on Tuesday. Greek Default Risk Returns as Bond Maturity Nears by ZH It would appear that the recent renewed excitement down in the Falklands was indeed the writing on the wall for a nation that is now desperate enough to nationalize foreign entities. Argentina, still unable to access capital markets years after its restructuring appears to be hitting an irrational wall again as its CDS has exploded wider recently, and even more so today with the YPF news, to near 1000bps - its widest in 4 [...] Various austerity programs have been a disaster for the European recovery, shrinking the economy, reducing government revenues and tipping precarious borrowers from performing to nonperforming. If Europe’s banks collapse, U.S. banks will — at best — take a hard body blow from their exposure: LONDON–European banks are bracing for a wave of ratings downgrades in coming weeks that could intensify pressure on the fragile industry and further undercut recent efforts to [...] As Spanish CDS surge and bonds shrug off the very recent gloss of a ‘successful’ Italian debt auction, the sad reality we pointed out this morning is the increasing dependence between Spanish banks, the sovereign’s ability to borrow, and the ECB. As ING rates strategist Padhraic Garvey notes this morning, the bulk of the LTRO2 proceeds were taken down by Italian (26%) and Spanish (36% of the total) and the latter is even more [...] by WSJ By Stephen Fidler Paul de Grauwe, now at the London School of Economics, wrote a short and influential paper in May last year on the frailties of the euro zone–and the reason that financial markets attached a much greater default risk to Spain that they did to the U.K, despite the latter’s higher debt burden. The British government, he explained, could always be sure of funds to roll over its debt [...] Paul de Grauwe, now at the London School of Economics, wrote a short and influential paper in May last year on the frailties of the euro zone–and the reason that financial markets attached a much greater default risk to Spain than they did to the U.K, despite the latter’s higher debt burden. The U.K. government, he explained, could always be sure of funds to roll over its debt in important part [...] SYDNEY (MarketWatch) — Like the rest of the world, China’s recovery from the global financial crisis was the result of “Botox economics.” Taking advantage of a centrally controlled, command economy, Beijing boosted output through government spending and directed bank lending to maintain growth. Unfortunately, China now faces significant problems. The weakness of its two major trading partners (the U.S. and Europe) means export demand is likely to remain subdued. Domestically, [...] As the deadline for participation in a writedown of Greek debt approaches, six of Greece’s largest banks have reportedly lined up to take part in the deal. Several pension funds, however, say they will refuse. Six of Greece’s largest banks and eight insurance funds have confirmed they will accept the massive devaluation of their government bonds, Finance Minister Evangelos Venizelos said on Wednesday. The six banks – National Bank of Greece, Eurobank, Alpha, Pireaus, [...] LONDON—Greece is optimistic that it will achieve a 75% to 80% participation in a bond swap this week that aims to write off more than half of €177 billion ($234 billion) in debt issued under Greek law, people with direct knowledge of the matter said Tuesday. That participation rate falls short of the 90% needed to avoid the activation of collective-action clauses that will pull in unwilling investors. The bond swap is [...] by Jim Wang It’s a little scary how important your credit score is these days. Between all the warnings to check your credit reports regularly and how you can’t do this or that without fear of credit score reprisal, it’s easy to get discouraged and just say, “Forget credit scores, I’m going to do whatever I want.” [See 50 Ways to Improve Your Finances in 2012.] While that emotional outburst might feel good, paying higher interest rates on [...] Just headlines: Greece Cut to Cusp of Default as Fitch Takes First Ratings Step PIMCO CEO and co-CIO Mohamed El-Erian spoke with Bloomberg Television’s Betty Liu, Dominic Chu and Michael McKee about Europe’s crisis, the U.S. economy and where to invest safely in this environment.
El-Erian said that the Fed “doesn’t have enough policy instruments to deal with the challenges facing the economy” and that QE3 will not work. On investing opportunities, he said that “In the short term, the U.S. dollar is the best [...] The gold price took a hit yesterday, falling close to $1,700 before once again rebounding to $1,732 per troy ounce. Despite a Large Increase In Central Bank Demand And Investment Demand, both in Europe and in Asia, turbulence in precious metals does not come unexpectedly. MF Global’s bankruptcy has the potential to affect a large number of positions in commodities markets, once morehighlighting The Important Difference Between Paper Gold And Physical [...] 1. PRIVATE LENDERS. The 1990′s Banks wanted to sell more risky mortgages, but Fannie/Freddie refused to back them. Without F/F backing, the banks couldn’t get rid of the loans by selling them to investors, so they came up with “Collateralized Debt Obligations” (CDOs) to trick investors into buying them. Here is an analysis from the Dallas Federal Bank: “Fannie Mae and Freddie Mac are the largest GSEs, with Ginnie Mae being [...] By now everyone has had a chance to play with the US debt clock. But what about its global cousin? Courtesy of The Economist, we now have a convenient way to track the hundreds of millions in dollars added each and every hour by the global governments who see to spur global deleveraging by, you guessed it, adding more debt. Yes, in the process the world’s [...] Chinese bonds and equities are flashing warning signs that suggest the booming mainland property sector is heading for a bust – a development that would send shockwaves through financial markets worldwide. A sector that was until last year the darling of international investors is turning into a horror show as traders have started to digest evidence that real estate prices are fallin Just a few headlines: European Central Banks Are Net Buyers of Gold in 2011, FT Says With Europe set to open in a little over 12 hours, and with rumors of Greek default once again flying around in their private taxpayer funded jets (only to turn back to their point of origin shortly after takeoff), we wish to remind readers that a chart is worth a thousand words. In this case several charts, courtesy of Reuters, which has created the ultimate in interactive [...] From Washington Post: A White House official fretted privately that the Obama administration could suffer serious political damage if it gave additional taxpayer support to the beleaguered solar-panel company Solyndra, according to newly released e-mails. The firm had burned through millions of dollars and in January still tottered near collapse. The official wanted the government’s top budget official to warn Obama’s energy secretary about the risk, [...] Just headlines: China to ‘liquidate’ US Treasuries, not dollars (Ambrose Evans-Pritchard) By Ambrose Evans-Pritchard Economics Last updated: July 26th, 2011 Calm down. The US will not miss a coupon payment on its $14.3tn debt next Wednesday. A genuine default would be “Lehman on Steroids” in the words of Ex-Treasury secretary Larry Summers. Precisely for that reason President Obama will not pull the trigger, EVEN IF the debt ceiling talks break down in acrimony. Obama still has a clutch of cards to play, [...] By Ambrose Evans-Pritchard Economics Last updated: July 26th, 2011 Calm down. The US will not miss a coupon payment on its $14.3tn debt next Wednesday. A genuine default would be “Lehman on Steroids” in the words of Ex-Treasury secretary Larry Summers. Precisely for that reason President Obama will not pull the trigger, EVEN IF the debt ceiling talks break down in acrimony. Obama still has a clutch of cards to play, [...] by ZH US CDS: The S&P priced in dollars: Here is one attempt at an explanation from the media, always so eager to assign plotlines to an otherwise irrational market: Vigorous bidding for this week’s entire $66 billion worth of government debt supply was expected to rekindle a bond market rally that had sent benchmark yields to their lowest more than seven months on Tuesday. Instead the afternoon market sell-off left traders [...] From Citi’s Englander: It looks increasingly likely that the Greek austerity vote will pass and this has very much been priced into asset markets over the last two days. What is surprising to us is: 1) the degree to which the EUR has swung on these news and 2) the degree to which the sentiment on the vote has carried global asset markets. We are surprised [...] 1) Illinois Stiffs Vendors From Mortuary to IBM as $4 Billion Debt Piles Up “In Illinois, you’re never too big or too small to get stiffed by the state, which is $4 billion behind in its bills. International Business Machines Inc. is owed $1.1 million. Office Depot Inc. (ODP) is waiting for a $660,955 check. And the 17th Street Bar & Grill in Sparta is due $340.52. They are among [...] From Reuters: Moody’s sovereign head says more likely than not that Greek debt roll-over would be a credit event Warm and Contented in a Cocoon of Untruth (McAlvany audio.. listen at 20 minutes. Inflation at 10.7% using 1980 methodology? Explains how this gets us from here to a loss in confidence and hyperinflation. Talks also on gold ) News and headlines: World Bank sees end to dollar’s hegemony ECB Rejects Greek Restructuring in Clash With EU Policymakers Greece Default Risk Rising With IMF Turmoil, El-Erian Says Dubai steps in to take over cash-strapped bank Sovereign [...] by Nick Ricciardi On Japan’s Bond Market and Its Economy Over the past few weeks there has been a new round of articles and commentaries predicting doom for Japan’s economy. Yet, as usual, Japan’s bond markets have shrugged off these fears. Japan’s capital markets and its macro-economy are replete with confounding puzzles. But they are all rooted in two basic misconceptions that Japanese hold concerning their debt. [...] |
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Dell’s CDS widen 42%; Hewlett Packard out 95% ahead of earnings
Reuters
May 22 – Credit default swap (CDS) spreads on two technology giants are indicating significantly bearish market sentiment, according to Fitch Solutions in its latest earnings commentary.
CDS on Dell, Inc. (reporting after market close today) have widened 42% over the past quarter, notably underperforming North American technology firms overall (12.5% wider CDS). ‘Markets are currently pricing Dell’s default risk on the precipice of high yield territory now,’ said Author and Director Diana [...]