XAU/EUR Exchange Rate Daily – (Bloomberg)
Gold at €1,355/oz, just 2.5% from the record high of €1,390/oz, is a sign of a continuing lack of trust in the euro and in Draghi’s stewardship at the ECB.
Investment and diversification demand for gold remains robust as seen in the gold holdings in exchange-traded products or trusts rose to a record for a second straight day. The amount increased 2.85 metric tons, or 0.1 [...]
This assumption is currently far from being satisfied. The euro area financial market, in all segments and maturities – including the very short term money markets – does not function properly, as banks deposit their excess liquidity with the central bank instead of lending to other banks. Cross-border banking flows have dried up. Households and firms across the union borrow at rates which depend more on the respective sovereign [...]
June 27, 2012
The shadow-banking component that adds to the risk of non-regulatory oversight just deepens the mystery behind the most powerful banking institution that runs roughshod over global finance. In order to gain an insight into the complexity of deception, examine the function of the BIS. The granddaddy of all central banks, the Bank for International Settlement, latest BIS Annual Report 2011/2012, foretells future financial consolidation.
Watch the Banker to the World’s [...]
Spain’s sovereign risk premium shot to a euro-era record Tuesday as Madrid announced new bonds to finance debt-struck regions and as banks scrambled to clean up bad loans.
The debt premium — the extra return investors demand to hold Spanish bonds over their safer German counterparts — leapt to a euro-era record of 5.16 percentage points.
Markets buckled on concerns over the debt load in powerful regional governments and on signs of [...]
As US weak hands keep piling out of gold whether to make space for the Facebook IPO tomorrow, or just to load up on paper currencies in advance of central banks printing much more, two things have happened: China is now on its way to becoming the biggest source of gold demand, surpassing India, but more importantly as of hours ago, in a truly historic move, “Okayama Metal & Machinery has [...]
In what S&P calls a ‘Perfect Storm’, the next four years will see a minimum of $30 trillion in companies’ refinancing needs related to maturing bonds and loans and further they expect $13-$16 trillion more debt will be required to finance growth. With bond portfolios over-stuffed with corporate debt (since angst over sovereign risk has skewed asset allocation away from that cohort) the rating agency is concerned that ongoing bank deleveraging, these [...]
As we noted this morning, the perfect ‘reality-check’ storm hit Europe this morning and with Draghi dismissing hope for more printing and nationalism raising its ugly specter, broad European equity markets made nearly their largest drop in five months. With the BE500 (Europe’s S&P 500 equivalent) at three-month lows and Spain’s IBEX within a few points of the March 2009 lows, things are becoming critical once again. Spanish yields jumped back [...]
The sad reality of an austerity induced slowdown in Europe and an ESFS/ESM as useful as a chocolate fire-guard seems to be creeping into risk asset premia across Europe (and implicitly the US). GGB2s are all trading back under EUR20 (that is 20% of par), Sovereign yields and spreads are leaking wider despite the best efforts of their respective banks to back-up-the-truck in the ‘ultimate all-in trade’ and the LTRO Stigma has reached [...]
BUY THE DIP.
That’s the advice of Macquarie Private Wealth in respect to gold.
Gold has certainly come off quite a bit, form a high of around $1900/oz. late last summer, to around $1650/oz. now. And the improving economy and the rise in real interest rates has made a lot of people turn negative on the metal.
Macquarie advises getting in now for 5 reasons:
Sentiment towards gold has no reached “extreme pessimism” levels.
March is seasonally [...]
As forecasts for peripheral macro data continue to deteriorate and core to strengthen modestly, there is little real comfort available from the European situation aside from the 800lb gorilla that all headlines are focused on today. Credit Suisse describes it as “a case of the outlook being less bad than expected, rather that it being better” and notes that post the Greek situation, despite the ongoing rally in the ever-thinning [...]
The euro zone banking system starts the new year awash with record levels of liquidity but few signs that institutions are prepared to lend to each other, leaving money markets frozen.
Most of the near half trillion euros of three-year funds borrowed from the European Central Bank in the last week of 2011 have made their way back to the ECB’s overnight deposit account.
Use of the facility was close to 450 billion [...]
The market’s reaction to Draghi’s comments over the last week have been visceral in its schizophrenia. While his ‘temporary’ provisions, three-year LTROs specifically, provide a life-line of liquidity (a la TLGP – and how is that working out for the US banks having to roll now?), they hardly address the real underlying problem of the vicious circle between sovereign debt’s now-risky nature and financial balance sheets bloated with zero-risk-weighted re-hypothecated peripheral bonds. The [...]
There are now 25 European sovereigns and 42 European banks on S&P’s “potential bond downgrades list.”
Standard & Poor’s on Tuesday said there is a greater number of sovereign and banking bonds at risk of ratings downgrades as a result of its recent warning that it might cut the credit ratings on 15 euro zone nations.
“Sovereigns and banks continue to show the greatest downgrade risk. The entities in these two sectors are [...]
(ZH) What Mario Draghi did today is the worst of all possible worlds: on one hand he is allowing more financial risk-taking on the ECB’s dime courtesy of increased liquidity and relaxed collateral requirements as well as longer LTROs, on the other he essentially killed any provisional bailout rumors, saying that the ECB will not monetize, nor lend to the IMF. The result: sovereign risk is soaring, as seen by [...]
The US cabal justs wants ongoing can kicking, in a financial world they have created and to which Euro banks, sucked in since 10 years, are surrogate. Now the EUro governments are surrogate too due to sovereign risk; Merkel being the only one who has the “cojones” to resist. Will the global debt tsunami pull her into the vortex? I think she prefers the system go to BREAK rather than [...]
The latest survey showed that 54pc of respondents believe the probability of a short-term high-impact event was very high or high. Photo: AFP
11:39AM GMT 22 Nov 2011
The Bank’s twice-yearly systemic risk survey of 68 firms showed that the perceived probability of a future “high impact” event was at its highest level since July 2008.
The latest survey, covering the second half of 2011, showed that 54pc of respondents believe the probability of [...]
We discussed the sudden and scary drop in the EUR-USD cross-currency basis swap last week and how it is perhaps a cleaner view of the funding crisis in Europe than the delinquent Libor market. Since our first discussion, the 3 Month EUR-USD basis swap has widened even further – only worse in the heart of the crisis in Q4 2008. As if that was not enough, GDP-weighted European Sovereign risk is [...]
Via Peter Tchir of TF Market Advisors
Well, we are now into the second day of the new Era. We continue to wait for details on the exact IIF plan. We wait for details on what the EFSF will look like, particularly the leveraged guarantee portion. We are also waiting to fully understand who will be doing the secondary market activity – the ECB, the EFSF, or both?
The jury is still out on how [...]
From Peter Tchir of TF Market Advisors
Naked in Europe
So Europe is getting closer to announcing some form of ban on naked CDS. What they hope it will accomplish and what it will actually accomplish are two very different things.
First, let’s look at the mindset. It about a ban targeted at entities that buy CDS (go short the credit). It doesn’t target those who are selling protection. [...]
WASHINGTON (Dow Jones)–Sovereign debt woes rocking world financial markets are a global phenomenon and not just a European one, even though tensions are the most acute in the euro area now, European Central Bank President Jean-Claude Trichet said Friday.
“What we are seeing now is the illustration of a global phenomenon, the global crisis of sovereign risk,” Trichet told a conference in Washington on the sidelines of the annual meetings of [...]
Spain’s CAM Says More Than Half of Developer Loans in Default
Harrisburg controller pushes for bankruptcy
L.A. schools brace for wave of layoffs
German, French Sovereign Risk Surges to Record on Fed Outlook
Cash-starved Brooklyn hospitals face more cuts
Greeks strike amid pain and anger over austerity
Greece to cut pensions, up taxes and fire state staff for bailout
House rejects government funding bill as shutdown looms
Republican Defections Kill Measure Needed to Avoid Shutdown
Fitch downgrades Cook [...]
Gold may extend its record to as high as $2,500 an ounce in the next year if sovereign debt concerns escalate, Citigroup Inc. said.
The metal climbed to a record $1,921.15 an ounce on Sept. 6 as concerns about debt crises and slowing economic growth boosted demand for a protection of wealth. The metal could “briefly spike” to between $2,000 and $2,500 in the next 12 months and will likely stay [...]
1) Gold May Climb to $2,500 in the Next Year, Citigroup Says
“This insurance role will likely continue to assist demand while concerns remain about sovereign risk and the longer-term issue of whether the dollar will still be the world’s reserve-currency in 5-10 years time.”
2) Italy’s borrowing costs rise as demand falls
“Italy sold 3.9 billion euros ($5.3 billion) of five-year bonds Tuesday as borrowing [...]
New IMF Chief Christine Lagarde pissed off a lot of people recently at Jackson Hole when she said European banks urgently needed to raise capital.She repeats this claim in a speech today in London. This time notably she admits that the capital may be needed to settle the markets more than it is needed objectively:
As this process unfolds, we should see a decline in sovereign risk—which should go [...]
And we thought we were harsh on the EBA’s second farce of so-called ‘stress tests’. Enter SocGen’s Hank Calenti and team: “The test does not reflect current reality, in our view; even if GIIPS sovereign are further stressed within this test, a €22bn shortfall and a relatively healthy average 6.2% core Tier 1 appear. The European banking sector is captive to politics at the [...]
1) Italian Yields Reach 9-Year High as Crisis Spreads; Bunds Gain
“Italian bonds slid for a fifth straight day, pushing yields to a nine-year high, as contagion from Greece’s fiscal crisis intensified in the region’s biggest government-debt market.
Spanish, Irish and Greek bonds also fell. The additional yield investors demand to hold 10-year Italian securities instead of German bunds widened to a euro-era record as data showed the Mediterranean [...]
As expected, China is the new IMF. No surprise there.
CHINESE PREMIER WEN TELLS BBC WILL LEND TO EUROPEAN COUNTRIES HAVING TROUBLE BORROWING
All this means is that China will do everything in its power to prevent the ECB from launching an outright unsterilized monetization episode, which will double the amount of importable inflation (plunging EUR) to hit the Chinese domestic economy, and destabilize the already shaky [...]
Moody’s sovereign head says more likely than not that Greek debt roll-over would be a credit event
Moody’s sovereign head says hard to see how any Greek roll-over would be truly voluntary, would therefore be a default
Moody’s sovereign head says any Greek restructuring would to big to be effective therefore disruptive for ECB, Banks
Moody’s sovereign head says impossible to have orderly and effective Greek debt restructuring
Moody’s head of sovereign [...]