Archives of “sovereign debt” tag

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Euro Last Support or Hope :136

  
Analysis, Education, Forex
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EURO -WEEKLY CHART

Last week ,The epicenter of many of  questions seems to be southern Europe, where Greece, Portugal, Spain and to a lesser extent the remainder of the so-called PIIGS (Portugal, Italy, Ireland, Greece and Spain) have flamed investor concerns that burgeoning public debt may significantly weaken investor demand for sovereign debt and exacerbate an already trouble budgetary crisis.

Many investors have taken to selling the euro is as a means by which to reduce exposure to these problem areas and/or speculate on one or more of these crises spiraling out of control.

-Just look at above chart :Weekly chart includes a powerful rally of Year 2009 and more recently and two-stage selloff, starting in the first half of December and picking up steam over the course of the past 3 ½ weeks as traders looked to capitalize on weakness stemming from the problems in Greece, Portugal and Spain.

ALERT25

Just watch 136 level.Three consecutive close below this level+ Weekly close will take to 131.70-130 level.

-If not breaks 136 & trades above 138 level will create buying upto 140-141 level.

-Best Strategy :Sell on Rise.

-Will update more very soon.

Updated at 13:10/8th Feb/Baroda

Will Japan Be the Next Debt Crisis?

  
Analysis, Economy, Education
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Japan may spark the next global debt crisis unless the nation’s new leader addresses its widening fiscal deficit, Kusano Global Frontier Co. said.

What is bothering foreign investors the most is Japan’s debt issue and the related risk of Japan triggering the next sovereign debt crisis,” Kusano said in an interview.

Japan’s 10-year yields have stayed mostly below 2 percent in the past decade partly because domestic investors hold over 90 percent of government debt, according to Kusano. Overseas investors will start avoiding Japanese bonds as the supply of the securities exceeds local demand, Kusano said.

“Japan’s inability to finance its debt sales domestically is approaching,” Kusano said. “And when that time comes, you can’t expect foreign investors to accept Japanese debt with such a low coupon

‘If you really want a fiscal problem, look at the UK’

  
Analysis, Economy, Education
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uk crisisInvestors are asking if Britain may soon face its own sovereign debt crisis if the government fails to slash its growing budget deficits quickly enough to escape the contagious fears of financial markets.…

“If you really want a fiscal problem, look at the U.K.,” said Mark Schofield, a fixed-income strategist at Citigroup. “In Europe, the average deficit is about 6 percent of G.D.P. and in the U.K. it’s 12 percent. It is only just beginning.”

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the government and its citizens have been able to continue to borrow at interest rates that do not reflect their true financial situation.

…

As for the British government, it has been able to finance a budget deficit of 12.5 percent of G.D.P. — equal to Greece’s — at an interest rate more than two full percentage points lower only because the Bank of England bought the majority of the bonds it issued last year.

David Rosenberg of Gluskin Sheff also referred to the piece in his morning missive, noting:

Britain is probably one of the few countries in the world where political uncertainty, a renewed round of house price deflation and a sinking currency can manage to elicit a bounce in consumer sentiment (the country has a Greek-like 12.5% deficit-to-GDP ratio, which is double the European average and a household debt-to-GDP ratio that, at 170%, makes the U.S. household sector downright frugal at 130%

EU sues Goldman over volcanic ash

  
  Education
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European Commission President Jose Manuel Barroso announced late Sunday that the European Union has filed suit against investment banking giant Goldman Sachs for the fallout of ash from Iceland’s Eyjafjallajökull volcano.  The volcanic ash, which has blanketed the skies over most of Europe for the last four days, has grounded almost all European air traffic, stranding travelers and disrupting economic activity throughout the European Union.

In a statement delivered in Romansh, the official EU language of the month, Barroso said, “We have uncovered evidence that this so-called ‘natural disaster’, which is costing the EU hundreds of millions of Euros, is in fact an Act of Goldman, and we intend to hold the Zionist-American cabal in charge of the firm accountable.”  “First the profligate Americans drag the world into a near-depression and now they crap all this ash on us.  Who the hell do they think they are?” added Greek Prime Minister George Papandreou from Athens, where he was chairing a conference on Greek sovereign debt entitled, “How American Speculators Forced Us to Cook the Books, Lie to Our European Partners, and Pretend We Don’t Need A Massive Bailout”.

The EU complaint alleges that Goldman operated a proprietary wind-blowing strategy to direct the volcano’s ash into Europe’s stratosphere.  Goldman is accused of profiting from the fallout by buying complex Flight Cancellation Swaps that are netting Goldman millions of dollars every time another European flight is cancelled.  The complaint cites a smoking gun email from Francois Tubbey, a 16-year old Goldman vice president, to an unidentified woman at “i@&$*[email protected]” stating, “That’s right, baby, Fat Franky’s in charge of the weather.”

Several European banks who are counterparties to the FCS’s are alleged to be suffering billions in losses with no end in sight, apparently because they continue to sell the FCS’s to Goldman.  Reached for comment, the Chairman of Royal Bank of Scotland, one of the counterparty banks, said, “Yes, we know almost all European flights are cancelled, but our advisor is Goldman Sachs, and they keep urging us to sell these FCS’s to them, so we do.  We intend to hold them fully responsible.”

Goldman issued a statement saying that it intends to “vigorously defend itself,” adding that the EU’s charges are “unfounded in meteorology and probably also in fact.”

In a related development, the InterGovernmental Panel on Climate Change said today it is considering investigating Goldman’s role in climate change.  “We’re going to get the documents, proceed cautiously, and determine precisely when Goldman started melting the Polar icecaps.” [via email]

Japan: Land of the Rising Debt

  
Analysis, Economy, Education
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Investors are understandably scared of the sovereign debt crisis unfolding in Europe. Amid their angst, however, they are ignoring a more likely, and significantly larger, debt catastrophe that is about to hit the nation with the second-largest economy in the world — Japan. Two decades of stimulative, low-interest-rate fiscal policy have made Japan the most indebted nation in the developed world, and as new Prime Minister Naoto Kan recently said, in his first address to Parliament, that situation is not sustainable. Japan has little choice but to raise interest rates substantially, with dire consequences far beyond its shores.

The prelude to the current crisis began in the early 1990s, after Japan’s housing and stock market bubbles burst and its economy slipped into recession. For the next 20 years, using flashy names like Fiscal Structural Reform Act, Emergency Employment Measures and Policy Measures of Economic Rebirth, the government cut taxes, increased spending and borrowed money to finance itself. Today, Japan’s ratio of debt to gross domestic product stands at almost 200 percent, more than twice that of the U.S. and Germany and second only to Zimbabwe. (more…)

ECB Purchases Of Sovereign Bonds Surge Tenfold Compared To Prior Week, Hit €1.4 Billion

  
  Education
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After dropping to a modest €134 million last week, ECB purchases of sovereign debt exploded tenfold in the last ended week to €1.384 billion, confirming that the ECB continues to bid up all Portuguese and Irish bonds available for sale, so the market does not crash. As Reuters notes, this is the highest weekly amount purchase since early July. Once again it is up to the European Fed-equivalent to be the buyer of only resort. And Europe’s continued central bank facilitated life support comes on the heels of the latest joke in recession timing: per Dow Jones, the Center for Economic Policy Research Monday said its Euro Area Business Cycle Dating Committee had determined that the currency area’s recession began in January 2008 and ended in April 2009, lasting a total of 15 months and reducing gross domestic product by 5.5%. Some recovery there, when half the PIIGS have no access to capital markets, have their Prime Ministers mocked during conference calls, and are fighting with an exchange rate last seen long before Greece, Portugal, Spain and Ireland had to be rescued. We wonder what the CEPR’s timing on the end of the European depression will end up being?

Grade 3 Math Assignment

  
  Education
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Grade 3 Math Assignment

Tom has 1 apple.

Tom has promised to give Robbie, Jim, Anne and Mary, half an apple each.

How does Tom get 4 half apples from 1 apple?

Bonus Question:

While Robbie, Jim, Anne, and Mary are waiting for their half apple, Tom gets hungry and takes a couple bites out of the apple.  How does Tom now turn a half eaten apple into 4 half apples?

And you aren’t allowed to call it an iApple and say it can do anything.

Here is the basic problem and why Italian and Spanish bonds are getting crushed again today (ignoring horrific unemployment data out of Spain).

If Italy defaults with a 40% recovery, there  is 1.613 trillion euro of debt affected (that is up about 10 billion in about a month).  That means creditors would lose 970 trbillion.   Spain with 663 billion would cost almost 400 billion (its debt has shot up about 15 billion in a month). 

The problem is that EFSF doesn’t take default off the table.  It may delay the time to default (by helping roll debts as they mature), but all it mainly does is shift who would take the loss.  The guarantors can’t handle losses that big. (more…)

Greece 10-Year Bond Oversubscribed

  
Analysis, Economy, Education
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LONDON—The Greek government’s offering for a 10-year bond attracted around €14.5 billion ($19.86 billion) in bids and the books have closed, the head of the country’s debt-management agency said Thursday.

“We are very happy with the bid because the re-entry into the market is always challenging. It went very well,” Petros Christodoulou said. The government aimed to raise €5 billion from the offering but it was heavily oversubscribed.

The offering—timed to coincide with an improving market for Greek government debt in the wake of tough budget cuts announced a day earlier—is a move to help cover short-term funding gaps.

Lead managers are Barclays Capital, HSBC Holdings, National Bank of Greece, Nomura and Piraeus Bank SA, one of the lead managers on the deal said.

Adjusted price guidance for the new issue is now 3.00 percentage points over the benchmark risk-free mid-swaps rate, reflecting the market’s demand for a premium.

An issue size of €5 billion for Greece’s new 10-year bond “would be a good result” but not enough to fully cover Greece’s near-term funding needs, said UniCredit strategist Luca Cazzulani.

Greek bond yields in secondary markets moved up on the news. The yield spread between Greek 10-year government bonds over equivalent German government bonds widened to around 3.03 percentage points from Wednesday’s close at 2.92 percentage points.

The cost of insuring Greek sovereign debt against default also rose slightly. The price of Greece’s five-year sovereign credit default swaps increased to 3.05 percentage points, from 2.945 percentage points, representing a €10,500 increase in the annual cost of insuring €10 million of debt for five years.

Greece, the European Union’s most indebted country, will face its biggest challenge in April and May this year, when more than €20 billion of debt comes due for repayment. So far, Greece has raised €13.6 billion via the sale of Treasury bills and an €8 billion bond syndication, the Public Debt Management Agency said. Greece plans to issue a total of €54 billion in debt this year.

While Greece has been encouraged by its ability so far to raise funds from public markets, the cost of issuing new bonds remains high. The yield on 10-year Greek government bonds has risen to as high as 3.40 percentage points over equivalent German bunds, from low-double-digits before the start of the financial crisis.

Greece’s latest set of spending cuts and tax increases aims to cut the country’s gaping budget deficit by €4.8 billion or about 2% of gross domestic product, and follows pressure from the European Commission, the EU’s executive arm, which said last week that Greece’s previously announced measures weren’t tough enough.

Greek officials worry that its budget cuts won’t be enough to restore investor confidence in Greek debt unless the government receives detailed financial backing from the European Union.

Greek Finance Minister George Papaconstantinou said in Athens Wednesday that if Greece can’t rule out turning to the International Monetary Fund for assistance if Greece needs help and euro-zone partners won’t give it.

IMF financing would need approval by European countries on the IMF’s board. Most euro-zone governments have made clear they want a European solution to the Greek crisis rather than IMF intervention, to show the euro zone can handle its own problems.

Greece is rated A2 by Moody’s Investors Service and BBB+ by Standard & Poor’s Corp. and Fitch Ratings Inc.

Sovereign Debt Estimates

  
Analysis, Economy, Education
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Sovereign debt is a key driver of the current economic jitters. The chart below shows next year’s sovereign debt estimates for the G-7 and other key global economies – the U.S. debt in 2011 would be about equal to GDP ($15 trillion), while the debt loads carried by Japan, Italy and Greece would exceed GDP.

Rogoff Sees Sovereign Defaults

  
Economy, Education
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rogoff01

Feb. 24 (Bloomberg) — Ballooning debt is likely to force several countries to default and the U.S. to cut spending, according to Harvard University Professor Kenneth Rogoff, who in 2008 predicted the failure of big American banks.

Following banking crises, “we usually see a bunch of sovereign defaults, say in a few years,” Rogoff, a former chief economist at the International Monetary Fund, said at a forum in Tokyo yesterday. “I predict we will again.”

The U.S. is likely to tighten monetary policy before cutting government spending, sending “shockwaves” through financial markets, Rogoff said in an interview after the speech. Fiscal policy won’t be curbed until soaring bond yields trigger “very painful” tax increases and spending cuts, he said.

Global scrutiny of sovereign debt has risen after budget shortfalls of countries including Greece swelled in the wake of the worst global financial meltdown since the 1930s. The U.S. is facing an unprecedented $1.6 trillion budget deficit in the year ending Sept. 30, the government has forecast.

“Most countries have reached a point where it would be much wiser to phase out fiscal stimulus,” said Rogoff, who co- wrote a history of financial crises published in 2009. It would be better “to keep monetary policy soft and start gradually tightening fiscal policy even if it meant some inflation.”

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