Greek debt diary: Deciphering the talks

Bellwether. n. From the practice of placing a bell around the neck of a castrated ram so that it might lead its flock DOES MORGAN STANLEY have a cost problem, or do its bankers have an attitude problem?  It would appear that the latter is the real drag on the share price – at least, according to the firm’s CEO James Gorman, who had the following to say about bankers unhappy about their pay: “I say you’re naive. Read the newspaper, number one. Number two, if you put your compensation in a one-year context to define your overall level of...

To cut or not to cut the ECB? That’s the dilemma facing those involved in Greece’s debt restructuring. Naturally, the private bondholders, represented by the Institute of International Finance, would like to see the monetary authority share some of the burden of the eventual haircut. The IMF has weighed in with its two-penneth worth. With considerable irony, given its own preferred creditor status, its chief, Christine Lagarde, has called on the ECB to take its share of the pain. “If the level of Greece’s privately held debt is not sufficiently...

European banks needing to sell off businesses and boost their capital ratios by €115bn before the end of June may be left looking forlornly at sovereign wealth funds for direct inputs of capital. Several of the largest sovereign funds have told IFR that they have been directly approached by lenders, but that they have no plans to get involved in big deals either to buy equity stakes or parts of banks’ existing businesses. The comments will be a blow to European banks, which collectively need to find €115bn of extra capital – either through...

Aegon NV has given the confirmation that everyone has been waiting for: US retail investors are ready to buy capital securities from European financials. The Dutch insurer last week priced a US$500m offering of US$25 par subordinated notes structured to qualify as Tier 2 capital securities under Solvency II, the first such deal since November, when Aviva issued a similarly structured US$400m offering. The fact that the Aegon deal was doubled in size, and priced at the tightest end of its 8.00%–8.125% price talk, has boosted confidence that...

Bank of America is likely to be the hardest hit when state prosecutors finally sign off on an industry-wide mortgage settlement that is expected to cost US banks some US$25bn. The firm’s Countrywide unit was one of the more prolific mortgage originators, meaning the country’s largest bank is likely to face a final bill of about US$9.5bn, according to independent bank analyst Tanya Azarchs. JP Morgan is likely to face the second-biggest fine – some US$7.3bn – followed by Wells Fargo with US$4.1bn and Citigroup with US$1bn. The settlement follows...

Ambitious boutiques are making the most of the regulatory storm facing their larger banking cousins, by both grabbing clients from and charging bulge bracket lenders for advice on how to fix their problems. Nowhere is the latter more apparent than in Europe, where banks have been told to plug a €115bn capital hole by the end of June. With the capital markets largely shut to them, most lenders are resorting to selling assets in order to achieve their capital targets. Independents with decent knowledge of the buyside are well placed to help...

Whether it’s the January effect, the ECB’s LTRO programme, the Fed’s dovish statement on US interest rates or the position of the moon and the stars, the emerging markets were in a sweet spot last week. Even the closure of many Asian markets for most of the week because of the Lunar New Year failed to douse the enthusiasm. Flows into all emerging market bond funds reached a 24-week high and commitments to local currency funds climbed to levels last seen in late August, according to EPFR Global data. Primary market issuance was mostly centred on...

Implied volatility on European equities has fallen to its lowest level since August last year, as market sentiment has shown signs of improving over the past month. The European Central Bank’s liquidity operations seem to have succeeded in buoying the market, with peripheral debt auctions becoming much better bid over the past two weeks. Despite this recent improvement in sentiment, some equity derivatives traders are surprised at the lack of demand for protection buying given the series of potential risks in the market. “It’s a good time to...

Lithuania (Baa1/BBB/BBB) raised enough money to more than cover its international debt redemptions this year through a bold new 10-year 144a/Reg S bond that was universally praised by bankers. The Baltic sovereign priced a US$1.5bn transaction on Wednesday – its largest deal in two years – which demonstrated the strength of demand for a country that has turned its fortunes around since its 2009 trough. The book reached US$5bn with 300 orders as investors were attracted by a new issue premium that was estimated at 17bp by the leads, though...

The CBOE Futures Exchange, a subsidiary of CBOE Holdings, plans to launch housing futures based on a real estate index from analytics provider Radar Logic. The firm calculates daily cash prices for real estate values for local regions. The futures, which will be linked to the Radar Logic 25-Metropolitan Statistical Area RPX Composite Index, will begin trading on February 2. Its futures symbol will be RPXCP. The index tracks US residential housing values as a whole. It is one of several Radar Logic 28-Day Real Estate indices on which CBOE...

Citigroup’s investment bank will pull its own weight in 2012 or it will get much lighter. That was the key take-away from a fixed income conference call with the US bank’s financial chief John Gerspach. Several analysts have taken the remark to mean that Citigroup will probably begin making aggressive cuts in the securities and banking group in the first quarter and certainly before the end of the first half. The bank declined to elaborate on its CFOs remarks. On the call, Gerspach reiterated that the bank was disappointed with fourth-quarter...

Following the Parliament of Canada’s recent vote of 51–33 that ended the Canadian Wheat Board’s monopoly over Prairie wheat and barley, ICE Futures Canada made a quick launch last week of two new wheat futures contracts and one barley futures contract.    “There is considerable interest in [the contracts],” said Brad Vannan, president and COO of ICE Futures Canada. The ICE contracts ended the day on January 25 with durum wheat last trading at C$262.50, milling wheat at C$260.50, and barley at C$171. Since the CWB retains its monopoly until...