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In one of the more quirky results of the rush for short-term protection and macro overlays this morning, the price of index protection was bid so far above the 'fair-value' based on the volatility of the underlying S&P 500 index components that the implied correlation (a modeled measure of the relationship between index and single-name implied vol demand - often reflective of 'crash risk' sentiment) for Jan 2011 exploded above 100%. Yes, we know that is 'impossible', but the point being that last week's smash higher in equity (and credit), as we noted at the time, had the feel of hedgers capitulating which leaves today's growing tensions (Europe and domestic) enough to push nervous traders massively into liquid hedges (macro protection).
We commented earlier on the precipice of LCH.Clearnet's margin rules for Italian debt and the 450bps spread Maginot Line. Well, as always, there is some wiggle room in here and instead of using what seems 'obvious' as a benchmark (Bunds), LCH uses a blended AAA sovereign benchmark (consisting of Germany, France, and Holland). This makes a significant difference, obviously, and with Bunds massively outperforming today (now 86bps tighter than this archaic benchmark), ITA 10Y bonds ended the day at a spread of 355bps (not 440bps). So as long they keep France or Holland 'weak' then ITA margin calls should be safe for now.
An MF Global executive admitted that to federal regulators in a phone call early Monday after regulators discovered money missing from clients' accounts, according to an official familiar with the conversation.
The official spoke on condition of anonymity because he was not authorized to discuss a preliminary investigation by federal regulators.
Government rules require securities firms to keep clients' money and company money in separate accounts. Violating them could result in civil penalties.
* GREEK GOVERNMENT SPOKESMAN TOLKAS SAYS REFERENDUM TO GO AHEAD
Originally posted by marg6043
reply to post by Vitchilo
That if, if, he makes it to Friday in one piece.
JP Morgan (JPM) says its interests are at 'significant risk' and seeks to avoid 'complete dissipation' of its cash collateral
JP Morgan (JPM) cut by S&P Equity research to Hold from Buy
So here is this month's refresh from the Supplemental Nutrition Assistance Program, which informs us that in August, a new all time record number of Americans, or 45.8 million, relied on food stamps for sustenance.
There will be NO announcement of QE 3 tomorrow. Why? Because the Fed has trapped itself into a corner. The first two rounds of Quantitative Easing (QE1 and 2) were viable for the Fed as inflation was running at deflationary levels in 2009 and at the bottom of their target range of 1-3% in 2010.
In both instances the implementation of asset purchase programs, which immediately juiced liquidity in the financial markets, had an immediate and pronounced effect on the level of inflation.
Today, with inflation currently approaching 4% on a year-over-year basis the Fed is not only outside its inflation mandate of 1-3% but any further cost pressures on the consumer is going to drive the economy into a recession.
* GREEKS TO VOTE ON EURO MEMBERSHIP IN REFERENDUM: PAPANDREOU - BBG
* Netherlands Will Try to Get Greek Referendum Canceled, PM Says
The Super Mario of video game fame fights off Goombas and Koopa Troopas to save Princess Peach Toadstool. The suave, 64-year-old Italian economist nicknamed Super Mario by the Italian press looks nothing like Nintendo’s mustachioed plumber, but the mission he faces is even harder. As the new president of the European Central Bank starting Tuesday, Nov. 1, Mario Draghi faces the challenge of a lifetime: to save Europe’s damsel in distress, the 12-year-old single currency known as the euro.
De Grauwe wants Super Mario to get himself a bazooka—a weapon so powerful that he might never need to pull its trigger. The bazooka would be a firm commitment from the European Central Bank that it will buy as many Italian bonds as necessary to keep interest rates from spiraling out of control. With default risk off the table, Italian bond yields would fall to levels that the government could more readily afford to pay. Crisis averted
The bazooka would be a firm commitment from the European Central Bank that it will buy as many Italian bonds as necessary to keep interest rates from spiraling out of control.
European leaders racing to prevent their week-old debt crisis strategy from unraveling convene emergency talks today to tell Greece there is no alternative to the budget cuts imposed in the bailout plan.
“Uncertainty and fear is palpable,” Marc Chandler, chief currency strategist at Brown Brothers Harriman & Co. in New York, said by e-mail. “The political cost of the economic austerity does not appear fully appreciated by policy makers or investors.”
Papandreou will join a group at about 8:30 p.m. comprising Sarkozy, German Chancellor Angela Merkel, European Central Bank President Mario Draghi, International Monetary Fund Managing Director Christine Lagarde as well as European Union authorities, according to a statement from Sarkozy’s office. They will have met at about 5:30 p.m. without Papandreou.
Italian Prime Minister Silvio Berlusconi, under pressure to cut Europe’s second-biggest debt load, convened a special meeting of advisers late yesterday to discuss budget-cutting plans. Like Sarkozy, Berlusconi held crisis talks with Merkel yesterday. His key cabinet ministers will meet today to draft measures for the country’s financial stability legislation, the Italian news agency ANSA said, citing government officials.
The deal to reduce Greece’s debt load will do nothing to aid the country’s recovery from recession, opposition New Democracy leader Antonis Samaras said on Oct. 27. Papandreou’s majority meanwhile slipped as his support narrowed to 152 lawmakers in the 300-deputy parliament amid a party rebellion.
Friday’s confidence vote in the Greek parliament will be extremely important in our view and will likely set the pace of the anticipated EUR decline over the coming months. Greek Prime Minister Papandreou could now find it difficult to win a confidence vote (due Friday 10GMT) given the defections from the government leave only the slimmest of majorities (just 151 votes in the 300 parliament). If the Greek PM fails to win the confidence vote then the government will fall. There is the possibility for a new Government under a different PM or the formation of a unity government. But these outcomes seem unlikely given that the opposition is strongly in favour of new elections. While new elections will delay the vote on the new budget reform measures and potentially delay the next round of bailout funds from the EU, this is likely to be seen as one of the most positive (least bearish) outcomes for the EUR as it will avoid a referendum. There could even be an initial relief rebound for the EUR on any news that a referendum is being avoided, by the continued uncertainty and delays with regard the passing of the new budget measures and payment of EU bailout funds will likely keep the EUR under pressure over the medium term. Indeed, most of the options under discussion in the market are EUR negative in our view. A victory by Papandreou in the confidence vote on Friday is likely to be seen as the most bearish for the EUR, opening the door to a referendum and the potential rejection of the bailout package by the Greek population.
Originally posted by wondera
If the germans send "peace keepers"
well that will be the end of the game. german sodiers on greek soil will not be taken
lightly by the greeks.
The bankruptcy of MF Global Holdings (NYSE: MF) was a distressing signal to investors that it is possible for U.S. financial institutions to fall victim to the Eurozone debt crisis.
"Given that U.S. banks have an estimated loan exposure to German and Frenchbanks in excess of $1.2 trillion and direct exposure to the PIIGS valued at $641billion, a collapse of a major European bank could produce similar problems inU.S. institutions," a CRS research report said earlier this month.
Although the major U.S. banks have less exposure relative to available capital, their many tendrils in Europe - particularly to European banks - will inevitably drag them into any financial meltdown in the Eurozone.