Over Here, the jobs number came in bang on at 178,000 and every one went back to bed. The Donald is a Rock Star; it's great fun to watch the NY Times, MSNBC and CNN go slowly, collectively insane and everybody is buying equities and selling bonds and getting rich while doing it. So far so good. Even what was supposed to be the greatest foreign policy flap in history, the taking of a phone call from the President of Taiwan (OMG!!!!) fizzled. The guy is either really lucky or a hell of a lot better than anyone expected. Then again, he isn't in the job yet. Then there's Over There...
The Union dodged one bullet this weekend but took another one in about the eight-ring. Austria rejected a far right challenge but Italy soundly rejected PM Renzi, who promptly resigned, and with him it is thought the continuing concept of Italy remaining in the Union under Brussels. That remains to be seen but in the effort to form a new government things are going to get very messy indeed with predictions already emerging that Beppy Grillo and the Five Star movement just might pull it off and be in the driver's seat in the formation of a new coalition. How long it will take is another issue, the time line not only affecting the much-needed resolution of the Italian banking situation (nothing can be done without a government on an EU level) and the soon-to-come election in France which could be affected by either a government in place or NO government depending upon the trending politics in the latter situation. The Italians could very well drag this thing out through the French elections looking for emotional and political support--for either or any party! If the more populist Monsieur Filon comes out a clear winner, that is one thing, but if Mdm. Le Pen attracts enough support to become a force with whom one must reckon...well, that's a very different situation indeed. The certainty is that France will be governed far more to the right than under the past years with Frankie Holland in charge...as will Italy. Just how far right is the question. The survival of the Euro is no better than 50/50 at this point and of course we must keep in mind that in the Fall it's Angie's turn. Would she sacrifice the Euro in order to salvage what would remain of the Union and herself? There's too much space between now and then to answer that but we should keep in mind that the Union came before the Euro and that there is a growing body of opinion that holds the view that it (the Euro) wasn't a very good idea in the first place.
With all this going on, the markets were surprisingly quiet with the Euro holding firm after an early trading dip and that is a good thing. Of course the Italian result was widely expected but a positive none-the-less. Another good thing is that all of Europe has about 10 days left in the working year so if the lid stays on for that period we are looking at mid-January as the start of the Great Political Dance. I think the Italian banking system can stay above water for that long but what I'd like to talk about tomorrow is the problem all of this causes for the ECB and Sr. Draghi. The Grinch showed up early for him this year.
Showing posts with label Austria. Show all posts
Showing posts with label Austria. Show all posts
Monday, December 5, 2016
Wednesday, October 26, 2016
THE SOVEREIGN'S BALL
Seems as though the hottest thing around these days is sovereign debt or at least the easiest to sell. I neglected to mention yesterday that Austria had successfully completed an offering of five billion Euros in two tranches, one of 3 billion for eight years priced to yield -.091% and a 2 billion tranche for 70 years at 1.53%. What's that you ask? SEVENTY Years!? Yep, you read it right, seventy (70) years.
Now I suppose that there are a lot of good reasons to lock ones self into a 70 year obligation at 1.53% when every central bank in the world is telling you they want inflation above 2.00% but I can't think of many. A pension fund perhaps wants the certainty of liquidity in the future but what else? Insurance Companies? Yeah, maybe. But demand was supposed to be over 7 billion which means that there must be a hell of a lot of pension funds and Insurers with the same financial profile, so I guess there was real investor demand. Oh well, it's Austria...waltzes and schlage and the continued belief among a substantial body of the Volk that Beethoven was Austrian and Hitler was German. Lovely bunch. Then again, I wonder if anyone even considers the fact that in 70 years (or less) there may not be a Euro? Guys buying this stuff don't...it's not going to be their problem. And there is always a secondary market, right?
But not to be outdone Mexico waltzes into Europe today and peddles 1.9 billion of Euros in eight year and 15 year tranches at 1.49 and 2.27 per cent respectively. No problema, senor. Way over subscribed.
I suppose to the yield-starved, this looks like a heck of a deal. To Mexico it must look fantastic. Kudos all around. Other than 40-odd thousand Narco killings a year what's the worry? For 15 years, Mexico will be more or less Mexico and 15 years at 2.19%? Sure beats Bunds. And of course there is always a secondary market. Good planning, good results. Just like the Cubbies. Oh, they lost 6-0 last night.
Now I suppose that there are a lot of good reasons to lock ones self into a 70 year obligation at 1.53% when every central bank in the world is telling you they want inflation above 2.00% but I can't think of many. A pension fund perhaps wants the certainty of liquidity in the future but what else? Insurance Companies? Yeah, maybe. But demand was supposed to be over 7 billion which means that there must be a hell of a lot of pension funds and Insurers with the same financial profile, so I guess there was real investor demand. Oh well, it's Austria...waltzes and schlage and the continued belief among a substantial body of the Volk that Beethoven was Austrian and Hitler was German. Lovely bunch. Then again, I wonder if anyone even considers the fact that in 70 years (or less) there may not be a Euro? Guys buying this stuff don't...it's not going to be their problem. And there is always a secondary market, right?
But not to be outdone Mexico waltzes into Europe today and peddles 1.9 billion of Euros in eight year and 15 year tranches at 1.49 and 2.27 per cent respectively. No problema, senor. Way over subscribed.
I suppose to the yield-starved, this looks like a heck of a deal. To Mexico it must look fantastic. Kudos all around. Other than 40-odd thousand Narco killings a year what's the worry? For 15 years, Mexico will be more or less Mexico and 15 years at 2.19%? Sure beats Bunds. And of course there is always a secondary market. Good planning, good results. Just like the Cubbies. Oh, they lost 6-0 last night.
Tuesday, March 3, 2015
DON'T ASK ME
We're off on the grandparent road tomorrow to cover for some traveling parents. Probably be gone for a week but I'll be able to check in as the little ones are in school.
One of the questions that has been floating around is how is it that with things so confused in Euroland everyone in sight is prepared to accept below zero interest rates on sovereign debt? Don't ask me, I don't know, but the overall attitude is that in these times it's probably safer to pay a government to look after your money than a bank, or an investment advisor, or in a stock market anywhere as they are all driven by this massive ocean of liquidity that has been created in the past 6 years. Austria is the latest "below zero" borrower even in the face of a Fitch downgrade which puts them in the same class as...as...the United States. Go figure.
Then again, our ten year yields remains remarkably constant at somewhere between 1.80% and 2.10 per cent which I can't figure out either. The spread against Bunds continues to widen. Go figure.
In the face of all of this, next week marks the start of QE on the part of the ECB leaving open for the time being just what it is that they are going to buy because the governments have been issuing like crazy which may be a good thing or not depending on one's view. I mean, think about a bidding war for Bunds between the market and the ECB? Forgive me, but I simply don't understand the purpose behind all this when it is obvious that there is a ton of liquidity out there that perhaps is not being put to use in the manner like Little Paulie Krugman and politicians of various shapes and sizes may like, but it's there so why try to pretend that it isn't? Go figure.
And speaking of the ECB, that little bunch is off to Cyprus this week for a bit of a chin wag, out of which will probably emerge some turgid statement relating to how all governments in these time must practice constraint and sound fiscal practices, blah, blah, blah. Now I know that Cyprus is a hell of a lot cheaper than Frankfurt given that it's economy has been...ah...refocused in the past few years, but it does take a bob or two to get there in order to same exactly the same thing that you could say where you live. Go figure.
Last but not least in a return to Austria, a little item that has been missed by everybody Over Here including me was the impending bankruptcy of region known as Carinthia which seems to have issued guarantees a number of years ago to a financial institution know as Hypo Alpe Adria which promptly set up a fund to invest in Eastern Europe, in particular, Hungary, Russia and Ukraine. Well, Hypo is long gone but the debts--and the guarantees--survive. Apparently, Wein has said "no more" or the Teutonic equivalent thereof. Now this isn't a little thing: Creditors are all over the lot including our latest geniuses The Blackstone Group, and while we are not talking Lehman by any means, the Austrian banks have been notorious for their coziness with Eastern Europe and their...shall we say...reluctance to come clean as to their exposure. Forget about the Ukraine/Russian thing; think Swiss Franc and mortgages taken out in the same and funded by Austrian banks. This is going to be fun to watch unfold over the next few months. Now having always taken the view that the Austrians have had the best public relations firm ever, having convinced the world that Beethoven was Austrian and Hitler was German, if you really want a prediction as to the outcome, don't ask me. I'm babysitting.
Back in a couple of days.
One of the questions that has been floating around is how is it that with things so confused in Euroland everyone in sight is prepared to accept below zero interest rates on sovereign debt? Don't ask me, I don't know, but the overall attitude is that in these times it's probably safer to pay a government to look after your money than a bank, or an investment advisor, or in a stock market anywhere as they are all driven by this massive ocean of liquidity that has been created in the past 6 years. Austria is the latest "below zero" borrower even in the face of a Fitch downgrade which puts them in the same class as...as...the United States. Go figure.
Then again, our ten year yields remains remarkably constant at somewhere between 1.80% and 2.10 per cent which I can't figure out either. The spread against Bunds continues to widen. Go figure.
In the face of all of this, next week marks the start of QE on the part of the ECB leaving open for the time being just what it is that they are going to buy because the governments have been issuing like crazy which may be a good thing or not depending on one's view. I mean, think about a bidding war for Bunds between the market and the ECB? Forgive me, but I simply don't understand the purpose behind all this when it is obvious that there is a ton of liquidity out there that perhaps is not being put to use in the manner like Little Paulie Krugman and politicians of various shapes and sizes may like, but it's there so why try to pretend that it isn't? Go figure.
And speaking of the ECB, that little bunch is off to Cyprus this week for a bit of a chin wag, out of which will probably emerge some turgid statement relating to how all governments in these time must practice constraint and sound fiscal practices, blah, blah, blah. Now I know that Cyprus is a hell of a lot cheaper than Frankfurt given that it's economy has been...ah...refocused in the past few years, but it does take a bob or two to get there in order to same exactly the same thing that you could say where you live. Go figure.
Last but not least in a return to Austria, a little item that has been missed by everybody Over Here including me was the impending bankruptcy of region known as Carinthia which seems to have issued guarantees a number of years ago to a financial institution know as Hypo Alpe Adria which promptly set up a fund to invest in Eastern Europe, in particular, Hungary, Russia and Ukraine. Well, Hypo is long gone but the debts--and the guarantees--survive. Apparently, Wein has said "no more" or the Teutonic equivalent thereof. Now this isn't a little thing: Creditors are all over the lot including our latest geniuses The Blackstone Group, and while we are not talking Lehman by any means, the Austrian banks have been notorious for their coziness with Eastern Europe and their...shall we say...reluctance to come clean as to their exposure. Forget about the Ukraine/Russian thing; think Swiss Franc and mortgages taken out in the same and funded by Austrian banks. This is going to be fun to watch unfold over the next few months. Now having always taken the view that the Austrians have had the best public relations firm ever, having convinced the world that Beethoven was Austrian and Hitler was German, if you really want a prediction as to the outcome, don't ask me. I'm babysitting.
Back in a couple of days.
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