Total Money Market Fund assets (from Invest Co Inst) increased $2.4bn to $3.906
TN, with a 52-wk expansion of $545bn, or 16.2% annualized.
Total Commercial Paper outstanding slipped $4.3bn this week to
$1.585 TN. CP has declined $263bn over the past year (14.2%). Asset-backed CP
dropped $7.8bn to $734bn, with a 52-wk decline of $89bn (10.8%).
The Asset-Backed Securities (ABS) market remains quiet. Year-to-date total US
ABS issuance of $1.8bn (tallied by JPMorgan's Christopher Flanagan) is a
fraction of 2008's comparable $24.6bn. There has been no home equity ABS
issuance in months. Year-to-date CDO issuance is less than $300 million.
International reserve assets (excluding gold) - as accumulated by Bloomberg's
Alex Tanzi - were up $405bn y-o-y, or 6.4%, to $6.735 TN. International
reserves have declined $212bn over the past 16 weeks.
Global Credit Market Dislocation Watch
February 4 - Associated Press (Andrew Taylor): "The cost of President Barack
Obama's economic recovery plan now exceeds $900 billion after the Senate added
money for medical research and tax breaks for car purchases. It could go higher
Wednesday if a tax break for homebuyers is made more generous, even as
centrists in both parties promise to clear away spending items that won't
jump-start the economy immediately… In a victory for auto manufacturers and
dealers, Sen. Barbara Mikulski, D-Md., won a 71-26 vote to allow most car
buyers to claim an income tax deduction for sales taxes paid on new autos and
interest payments on car loans. The break would cost $11 billion over the
coming decade… 'Just as we need to get the housing market going, we need to get
auto sales going,' said Sen. Debbie Stabenow, D-Mich."
February 6 - Bloomberg (Rebecca Christie and Alison Vekshin): "US Treasury
Secretary Timothy Geithner's strategy to aid the nation's banks will likely
emphasize guarantees of toxic assets over proposals to create a so-called
aggregator bank that would remove them from balance sheets, according to people
familiar… The government guarantees, which might be modeled on those already
given to Citigroup Inc. and Bank of America Corp., may be coupled with the
purchase of preferred shares in the banks that would be later convertible into
common stock, some of the people said. The aggregator bank or 'bad bank,' has
lost favor, in part because the potential costs involved, they added."
February 4 - Bloomberg (Jeremy R. Cooke): "Top-rated US state and local
governments' borrowing costs are falling… Yields on tax-exempt general
obligation bonds due in 10 years have dropped almost one percentage point in
eight weeks to 3.36%, according to Municipal Market Advisors."
February 2 - Bloomberg (Bryan Keogh): "The percentage of high-yield corporate
bonds trading at distressed levels fell to the lowest since September…
according to Merrill Lynch… The percentage of so-called junk bond issues with
yields at least 1,000 basis points more than Treasuries of similar maturity
dropped to 69% from 82% at the end of December and a record 84% in November…
The ratio was about 40% at the end of September."
February 2 - Bloomberg (Jody Shenn): "The first increase in four months in
foreign central banks' holdings of so-called US agency debt and mortgage bonds
was 'extremely noteworthy,' showing those investors can be wooed back to the
market, according to a Morgan Stanley analyst. Foreign central banks'
investments in the debt, including Fannie Mae and Freddie Mac securities,
climbed $5 billion to $811.3 billion…"
February 2 - Bloomberg (Sarah Mulholland): "Yields on bonds backed by credit
card payments and automobile loans fell in January from record highs relative
to benchmark interest rates… The gap, or spread, on top-rated credit
card-backed debt maturing in three years fell 260 bps to 290 bps more than the
one-month… Libor, in January, according to JPMorgan Chase… The spread on
similar bonds backed by auto loans fell 175 bps to 425 bps more than Libor…"
February 3 - Bloomberg (Caroline Salas and Neil Unmack): "Bond investors' bets
on bank nationalizations are hindering already reduced lending by the world's
biggest financial institutions. The market for securities with characteristics
of both debt and equity that Citigroup Inc., Bank of America Corp. and other
financial companies used to bolster their capital is in freefall… The hybrids…
fell 11% last month in the US , more than they did in all of 2008, according to
Merrill Lynch…"
February 2 - Bloomberg (John Glover): "Investors in subordinated bonds sold by
European banks had their worst month on record in January. So-called Tier 1
bonds posted a decline of more than 22% during the month…"
February 3 - Bloomberg (Adriana Brasileiro): "Brazil's local bond yields fell
to the lowest since October 2007 and the real weakened after industrial output
plunged the most in 17 years in December, prompting traders to step up bets on
interest-rate cuts."
February 3 - Financial Times (Paul J Davies): "UK banks and building societies
borrowed ฃ185bn through the Bank of England's emergency support facility…
The special liquidity scheme was designed as a temporary crutch for banks while
credit markets were seized up leaving them unable to offload assets they had
created before 2008. Initially, demand was expected to reach about ฃ50bn
and the scheme was to be open for six months from April last year."
February 3 - Bloomberg (Niklas Magnusson and Johan Carlstrom): "Sweden's
government will inject as much as 50 billion kronor ($6 billion) in the
country's banks to make it easier for them to lend to companies in a fresh
attempt to pull the economy out of its first recession in 15 years."
February 4 - Bloomberg (Brad Cook and William Mauldin): "Russia had its debt
rating cut by Fitch Ratings for the first time in more than a decade as falling
oil prices contributed to dwindling foreign currency reserves and record
capital flight. The rating was lowered to BBB, the second-lowest investment
grade…"
February 2 - Bloomberg (Neil Unmack): "Catastrophe bonds sold by Allstate…face
'imminent' default because of losses caused by the failure of Lehman Brothers
Holdings Inc., according to S&P. S&P downgraded $250 million of debt
sold by Allstate's Willow Re Ltd. to D, the lowest grade… Allstate sold the
bonds in 2007 to protect against losses caused by US hurricanes."
Currency Watch
The dollar index declined 1.1% this week to 85.54. For the week on the upside,
the South African rand increased 6.6%, the Australian dollar 5.9%, the New
Zealand dollar 4.5%, the Brazilian real 3.5%, the Swedish krona 3.0%, the
Norwegian krone 2.0%, the British pound 1.7%, the Danish krone 1.0%, the
Singapore dollar 1.0%, and the Euro 1.0%. On the downside, the Japanese yen
declined 2.1% and the South Korean won 0.3%.
Commodities Watch
February 5 - Bloomberg (William Bi and Feiwen Rong): "China, the world's
largest grain grower, said a three-month drought has hurt nearly 46% of the
winter wheat crop in its major growing provinces and may slow the planting of
other crops in spring. Dry conditions 'rarely seen in history' threaten about
139 million mu (23 million acres) of wheat in eight provinces including Henan
and Anhui, the Office of State Flood Control and Drought Relief Headquarters
said…"
Gold declined 1.7% this week to $912 (up 3.4% y-t-d), while silver rose 3.9% to
$13.05 (up 15.5% y-t-d). March Crude dropped $1.65 to $40.0 (down 10% y-t-d).
March Gasoline slipped 0.8% (up 17% y-t-d), while March Natural Gas rallied
9.1% (down 14% y-t-d). March Copper surged 10.5% (up 15% y-t-d). March Wheat
declined 1.9% (down 8.8% y-t-d), and Corn slipped 0.5% (down 7.3% y-t-d). The
CRB index gained 1.8% (down 2.3% y-t-d). The Goldman Sachs Commodities Index
(GSCI) increased 0.5% (down 3.2% y-t-d).
China Watch
February 2 - Bloomberg (Robert Hutton): "Chinese Premier Wen Jiabao said the
worldwide economic crisis shows 'how dangerous a totally unregulated market can
be.' 'It brings disastrous consequences,' Wen said… 'The main causes are for
some economies, they have imbalances in their economic structure. For a long
period of time they've had dual deficits, trade deficits and fiscal deficits.'"
February 4 - Bloomberg (Luo Jun): "Chinese banks may have offered a record 1.2
trillion yuan ($175 billion) of new loans in January, the China Securities
Journal reported… The four biggest state-owned banks completed 20% of their
full-year target, with majority of the loans lent for railways, highways,
electricity grids and the infrastructure, report said."
February 3 - Bloomberg (Wang Ying): "China's oil refineries posted a loss of
149.3 billion yuan ($22 billion) in the first 11 months of last year because of
higher raw material costs… China faced an energy shortage in the first half
though supplies became ample in the second half as the economy slowed, the
Ministry of Industry and Information Technology said…"
February 1 - Bloomberg (Dune Lawrence): "China's retail sales during the week-
long Lunar New Year holiday climbed to 290 billion yuan ($42.4 billion), 14%
higher than last year's holiday period, the Ministry of Commerce reported
yesterday."
February 3 - Bloomberg (Chia-Peck Wong): "Hong Kong's home sales fell for a
seventh month in January… The number of residential units changing hands last
month slumped 67% from January 2008…"
Japan Watch
February 3 - Bloomberg (Toru Fujioka and Keiko Ujikane): "The Bank of Japan
will buy 1 trillion yen ($11.1 billion) of shares owned by financial
institutions to shore up their capital, which has been ravaged by the global
stock-market rout."
February 2 - Bloomberg (Makiko Kitamura): "Toyota Motor Corp. and Honda Motor
Co., Japan's two largest carmakers, led the biggest drop in the country's auto
sales in 35 years last month as a recession cut wages and jobs and crippled
consumer demand. Sales of cars, trucks and buses fell 28 percent to 174,281
vehicles in January…"
India Watch
February 5 - Bloomberg (Cherian Thomas): "India's budget deficit may triple
this year from the planned target as the government steps up spending to arrest
an economic slowdown, said Suresh Tendulkar, the top economic adviser to Prime
Minister Manmohan Singh. The deficit may widen to 7.5% of gross domestic
product in the year ending March 31 from a target of 2.5% of GDP…"
Asia Bubble Watch
February 2 - Bloomberg (William Sim): "South Korea's exports tumbled by a
record 32.8 percent in January, foreshadowing a deepening slump in Asia's
export-driven economies."
Latin America Watch
February 3 - Bloomberg (Andre Soliani and Jeb Blount): "Brazil's industrial
output fell the most in 17 years… Total goods produced by factories declined
14.5% in December from the month a year earlier…"
February 2 - Bloomberg (Iuri Dantas): "Brazil had its first monthly trade
deficit in almost eight years in January as exports plunged by a record amount
on falling prices for the country's commodities. The $518 million deficit in
January compares with a $2.3 billion surplus in December, the Trade Ministry
said today. It was the first monthly deficit since March 2001 and the largest
gap since November 2000, the ministry said."
January 30 - Bloomberg (Diana Kinch and Andre Soliani): "Brazilian President
Luiz Inacio Lula da Silva raised the minimum wage by 12% starting next month, a
move the government said will increase incomes of more than 20% of the
population."
Central Banker Watch
February 5 - Bloomberg (Brian Swint): "The Bank of England cut the benchmark
interest rate to the lowest since the bank was founded in 1694 to help drag the
British economy out of the deepening recession. The nine-member Monetary Policy
Head
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