March 14th, 2011 13:35:45 GMT

Nowotny:ECB ‘Strong Vigilance’ Message Still Relevant:Reuters

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PARIS (MNI) – Despite growing uncertainty in the global economy,
the European Central Bank’s signal for an imminent tightening of
monetary policy remains valid, according to Governing Council member
Ewald Nowotny.

“Strong vigilance is the message that has been given and that is
still relevant,” the Austrian central bank president told Reuters in an
interview published Monday, noting that the Council will study new
developments in the run-up to its April meeting.

Nowotny assessed the outcome of last week’s summit of Eurozone
leaders as positive overall: “The hope is that the new features that
have been decided last Friday will also bring more market efficiency and
transparency to the markets.”

“It has been agreed the [EFSF] may buy bonds from governments
directly,” he said. “But of course one has to be quite aware, always
with added conditions.”

As a result, the risk of sovereign default has receded, Nowotny
said, according to Reuters. He argued that Portugal has no immediate
need to tap the rescue fund.

It is still too early to end definitively the ECB’s bond-buying
program, Nowotny said, but added that once it is no longer necessary, it
need not be extended.

[TOPICS: M$$CR$,MGX$$$,M$$EC$,M$X$$$]

March 14th, 2011 13:25:27 GMT

Pentagon downplays talk of a no-fly zone

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Al Jazzera earlier reported that the UK, France and the UK had approved a no-fly zone for the east of Libya. The Pentagon is downplaying the report, telling Reuters it is very unlikely such a decision has been made…

March 14th, 2011 13:07:06 GMT

Package out of the way, focus turns back to yields

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Now that the euro pact is out of the way for another 10 days (until it is ratified March 24-25), the market has turned its focus on to yields. The spread between 2-year German and US paper has widened 6.5 bp in favor of the euro again.

Though the pact proved more bark than bite, the CDS market had widened so much ahead of the summit on Friday that spreads have narrowed-in considerably today.

Can’t keep a good euro down… Central banks remain in buy-dips mode while sellers are seen toward 1.3980/90.

3-14 spreadscds

March 14th, 2011 13:05:39 GMT

Germany FinMin Plans 2012 Fed Net Borrow Of E31.5 Bn: Source

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BERLIN (MNI) – The German Finance Ministry wants to lower federal
net new borrowing next year to E31.5 billion, thanks to prospects for
stronger tax revenues, senior finance ministry officials said Monday,
citing a ministry proposal to be adopted by the government cabinet on
Wednesday.

For 2013, the ministry proposal foresees federal net new borrowing
of E22.3 billion, for 2014 of E15.3 billion and for 2015 of E13.3
billion, the sources said.

Federal expenditures are tabled at E303.8 billion in 2012, E305.7
billion in 2013, E304.4 billion in 2014 and E309.5 billion in 2015, the
officials said.

Federal tax revenue is projected at E243.0 billion in 2012, E252.9
billion in 2013, E261.4 billion in 2014 and E270.5 billion in 2015, the
sources said.

Other revenue is seen at E29.3 billion in 2012, E30.5 billion in
2013, E27.6 billion in 2014 and E25.8 billion in 2015, the officials
said. This includes, for example, proceeds from highway tolls,
distributed dividends and the Bundesbank profit.

The budget projections are based on the expectation of GDP growth
of 2.3% this year, 1.8% next year and 1.6% per year for 2013-2015, the
sources pointed out.

For the current year, the ministry still intends bring down federal
net new borrowing below E40 billion, despite lower transfers from the
Bundesbank, Deputy Finance Minister Werner Gatzer said last week.

“We still believe that we can meet that goal,” Gatzer said,
pointing to the improving economic development. “Several economic
research institutes have revised up their growth forecasts in recent
days,” he observed.

The Bundesbank announced last week that its 2010 profit fell to
E2.2 billion. The government had projected a profit of E3.0 billion in
its 2011 budget. The profit of the central bank flows directly into
government coffers.

–Berlin bureau: +49-30-22 62 05 80; twidder@marketnews.com

[TOPICS: MT$$$$,M$X$$$,M$G$$$,MFGBU$,MGX$$$,MFX$$$]

March 14th, 2011 12:04:58 GMT

ECB’s Nowotny: Economic uncertainty has risen, “strong vigilance” message still relevant

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  • Euro zone summit outcome will bring more efficiency, transparency to markets
  • Too early to take final decision on ECB bond programme; if not needed no need to prolong it
  • Euro zone summit outcome positive, possibility sovereign default/restructure has receded
  • Do not see need now for Portugal to tap European rescue fund
  • Spain fundamentals very different to Portugal, mistake to think of any automatic contagion

March 14th, 2011 12:00:40 GMT

ForexLive European Wrap: Given all that’s going on, markets remarkably calm

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Given all the developments around the globe, things seem to me remarkably calm at present.  Certainly this morning’s European session has seen little net change in the levels of the major spots and crosses.

EUR/USD sits at 1.3945, effectively unchanged from where it opened in Europe.  Early dip saw BIS buy below 1.3910 and that was the downside secured.  Then as periphery/German govt bond yield spreads narrowed further,  so EUR/USD recovered.

So far sell orders just ahead of psychological 1.4000 level are capping rally attempts.

USD/JPY down marginally at 81.85 from early 82.10.  Asian sovereign buy interest around 81.80 has lent some tenuous support.  Hard to rule out further repatriation/insurance-related flows supporting the yen, but market definitely wary of possible offiical intervention on any move through 80.00.  Obviously addtional BOJ QE has lent some support to USD/JPY.

Cable up marginally at 1.6095 from early 1.6065.  Eastern European buying was noted this morning.  Talk of sell stops gathering down in 1.6015/20 area.  Sell orders meanwhile seen clustered up at 1.6120/30 and more up at 1.6190/00.

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