Treasuries doing what you’d want them to do, sorta

Yields on US Treasuries are rising rapidly this afternoon but so far it’s not clear its for the “right” reasons.  One would hope that investors would feel comfortable moving out of the relative safety of US government paper and put money to work in other areas of the still-frozen credit markets. At the moment, it just looks like fear of supply as the US deficit rises to fund all the new programs. We’d feel a lot better if stocks were higher and gold lower in addition to the higher bond yields.

A steep yield curve can be eyed as a subsidy to the banking system as firms will be able to borrow at 1.5% from the Fed and buy 10 year Treasuries at 3.75%. This is how the Fed reflated the banking system in the early 1990s after a real-estate bust and the savings and loan debacle.

Treasuries doing what you’d want them to do, sorta

Yields on US Treasuries are rising rapidly this afternoon but so far it’s not clear its for the “right” reasons.  One would hope that investors would feel comfortable moving out of the relative safety of US government paper and put money to work in other areas of the still-frozen credit markets. At the moment, it just looks like fear of supply as the US deficit rises to fund all the new programs. We’d feel a lot better if stocks were higher and gold lower in addition to the higher bond yields.

A steep yield curve can be eyed as a subsidy to the banking system as firms will be able to borrow at 1.5% from the Fed and buy 10 year Treasuries at 3.75%. This is how the Fed reflated the banking system in the early 1990s after a real-estate bust and the savings and loan debacle.

ECB narrows lending, deposit rates

The ECB usually pays banks 100 bp below the refi rate, which stands at 3.5% after today’s rate cut, and charges 100 bp above the refi rate for its emergency lending facility. Those rates have been narrowed to 50 bp above and below the refi rate for the duration of the market crisis. This is a technical change which will not impact market rates but it will make it easier for banks to park cash and raise cash from the ECB.

Say goodbye to mark-to-market accounting

The one upshot of this weekend’s G7 meeting looks like it will be the suspension of mark-to-market accounting. Banks would be able to halt markdowns on their books for illiquid assets, the source of most of the losses over the last year and a half. It doesn’t change the reality of these assets plunging in value but it does allow the banks to hang onto some of their distressed assets rather than sell them into illiquid markets. Some see this as the biggest fundamental shift regulators can make in the short-term. EU officials are making that proposal and there a section of the TARP package dealt with mark-to-market…

Real money ralphs commodity currencies

US real money accounts have been belated sellers of the commodity currencies, reluctantly cutting out of longs as the global growth story implodes. Big breaks like those seen overnight force corporates to hedge exposures and prompt options books to buy dollars in thin, rising markets. Commodity currencies are off their earlier lows but are in sell-the rallies mode until global turmoil begins to steady. There is no sign of that yet, unfortunately.

Another day, another 10%

In Latin America, that is. The MSCI LatAm index is tumbling. down another 10% today. The US is down less than 2%, a relative victory compared to other markets, like Tokyo. I know, I know, it’s early yet.

It is going to be tough for EUR/JPY, and other JPY crosses, the best barometers of risk in the currency markets, to rally much against this backdrop.

GBP under intense pressure

With bad news flowing like water and almost no left dry at the moment, I’m not exactly sure what the catalyst is for the renewed sterling weakness this morning. Grave concerns over the soundness of deposits in Icelandic-owned UK Bank Icesave seems to be one source of stress. There is also the usual chatter that the bank bailout is insufficient. Any government action that does not result in immediate broad stock market gains is immediate branded as insuffutient, as we’ve seen  time and again in the last weeks.

1.7300 barriers are rumored below the market; a break targets the huge area of support between 1.7050 and 1.7225.

Bingo! The “too-little/too-late” card is played

I knew it in my bones. Even before the rate cut was announced I knew it would be greeted as too little/too late. Right again!

We’re gonna have to change the tagline to tomorrow’s conventional wisdom yesterday!

Bingo! The “too-little/too-late” card is played

I knew it in my bones. Even before the rate cut was announced I knew it would be greeted as too little/too late. Right again!

We’re gonna have to change the tagline to tomorrow’s conventional wisdom yesterday!

Bingo! The “too-little/too-late” card is played

I knew it in my bones. Even before the rate cut was announced I knew it would be greeted as too little/too late. Right again!

We’re gonna have to change the tagline to tomorrow’s conventional wisdom yesterday!