Stocks continue rallying and the picture I painted two weeks ago and later updated still holds. Euro is surprisingly weak, and seems to be a major candidate for carry trade shorts. Finland's parliament prepares to debate the collateral agreement and Spanish bank bailout package on Thursday and the vote will happen on Friday. Conveniently the collateral documents were delivered to the parliament members at 8 p.m this evening. So plenty of time to go through structured finance agreements and understand concepts like ISDA, swap, etc. This is how democracy works in Europe nowadays.
The negative yields, possible upturn in US housing and deciphering further policy options of the Federal Reserve seem to dominate the discussions. I would turn my eyes to Friday's meeting - unless the European finance ministers come up with something really nice, Spain will be burned next week. The recent talks of finally hurting bank owners and bank bond holders is not helping the situation at all, even though it is the right thing to do. Some things are better left to die in peace and honor. But if the fire is let loose, what will remain of the original Euro dream? Or was it all about saving the German and French banks, sharing the cost with other countries and then letting everything fail?
Previously
on MoreLiver’s:
News – Between
The Hedges
Markets – Between
The Hedges
Recap – Global
Macro Trading
The Closer
– alphaville / FT
Market
Commentary – A
View from My Screens
Tyler’s US Summary – ZH
Low
Volume Equity Decoupling Becoming Farcical
Debt
crisis: live – The
Telegraph
The Euro
Crisis Blog – WSJ
FX Options
Analytics – Saxo
Bank
European
10yr Yields and Spreads – MTS indices
EURO CRISIS
…the cure suggested for the Eurozone in the
form of higher inflation in the “core” countries might actually rather turn out
to be poison.
The Growing Pressures Likely to Blow the
Eurozone Apart – Peak
Prosperity
While Slovakia is unlikely to make too much fuss, the same cannot be said of Finland, who offers the greatest danger of an exit altogether. She has been
sufficiently worried about previous bail-outs to independently seek
preferential terms from the recipients. In her alliances, Finland regards herself as Scandinavian first and European second.
Growing Up in the Eurozone – Project
Syndicate
All of this should not be seen as a concession,
but as part of the obligations undertaken by eurozone governments to address
excessive imbalances. Now more than ever, Germany must be persuaded that without its contribution in reviving growth and
correcting external imbalances, the eurozone faces prolonged depression and
certain collapse.
Collapsing German yields impacting currency
markets – Sober
Look
the new carry trade, long the yen short the
euro - the reverse of the original carry trade. And that is pushing up the
value of the yen, particularly against the euro. Euro-yen has touched a new
multi-year low today.
Nehmerländer! – alphaville
/ FT
What a grim lesson in microcosm for the
eurozone, you might think: rich states will always resist bailing out their
weaker neighbours,. The Germans don’t even like making fiscal transfers to
themselves, never mind to Greece or Italy. Ergo, fiscal
transfers won’t become a eurozone solution any time soon.
Article IV Consultation on Euro Area Policies – IMF
Selected
Issues Paper – IMF
Staff
Report – IMF
EURO CRISIS: SPAIN
House prices declined at the fastest pace since
the start of the crisis in the second quarter, the public ministry said, and
bad loans increased for a 14th month in a row
Spain's banks face Ireland style recap; will include sub debt haircuts and triggering CDS – Sober
Look
Unwilling to write off or mark down bad debt
quickly, Spain's banking system is taking in losses in a painful liner fashion
(see chart below - those who have seen a number of economic charts over the
years will recognize that this linear pace of write-downs looks artificial).
USA: FED
What Is On Bernanke's Easing Menu? – ZH
Goldman
Sachs: For Your Consideration, the Next Set of Easing Options
Bernanke – Still Part of the Problem – PragCap
Bernanke and Fed Options – Marc to
Market
August 1st QE3 Departure Date? – Calculated
Risk
Ben Bernanke’s Dilemma: To QE or Not to QE? – MarketBeat
/ WSJ
Will the Fed rev the housing engine? – Free
exchange / The Economist
USA: HOUSING
A Four-Year High For Housing Starts In June – The
Capital Spectator
Housing to the Rescue Again? – PragCap
Housing Checkup–Has the Market Finally Bottomed
Out? – The
Big Picture
CREDIT
We told you negative rates were a big deal – alphaville
/ FT
In a negative yield universe we may actually
all be wealthier than we think. It’s just that wealth is harder to access, at
least for as long as government spending is constrained.
The yield negativity is spreading… – alphaville
/ FT
euro-denominated non-eurozone debt is also
treading perilously close to the zero mark.