NEW YORK | As the European Central Bank signaled it may resume asset purchases if needed to stem the crisis, the yield on Spanish 10-year bonds slid to 5.82%. Notwithstanding the last few days Spanish bonds went under the unwanted spotlight: yields on the 10 years bonds rose to nearly 6% on Tuesday, the highest since January. In less than two months, Spain’s interest rate has risen about one point….
By Luis Arroyo, in Madrid | The ECB has lost all his monetary gunpowder, as this has become fragmented. In this graph I saw recently on the Greek money supply, monetary aggregates M1 M2 and M3 have collapsed. Deposits are falling, like savings accounts and time deposits. However, the monetary base or the money issued by the ECB is the same for everyone. What happens is that in normal countries the banking sector does not experience problems to expand its assets (loans), what results in an increase in deposits. The multiplier effect works. But what happens…
NEW YORK | It’s been a bad day for Spain in Wall Street’s most read media. The tepid bond auction is to blame: Spain sold a total of $3.43 billion in bonds with maturities between 2015 and 2020, near the bottom of its target volume. Spain expected to sell between $3,28 billion and a planned maximum of $4,6 billion. There was a weaker demand and therefore it had to pay…
By Tania Suárez, in Madrid | Alberto Matellán, director of Strategy and Macroeconomics at Inverseguros SVB, considers that the effect of the ECB liquidity auctions will fade away and that, in the end, fundamentals will have a bigger influence. In order to stabilise the euro zone situation, is it a reasonable option the simultaneous use of the rescue funds? The bailout funds are a mechanism for ‘buying time’; so, from that viewpoint,…
NEW YORK | Yields on Greek bonds are the highest ever. Spanish and Italians are pretty good also. If they pay back, it could be a very sweet deal for every savvy investor. And private assets are on sale too. In 2010, Apollo Global Management bought a portfolio of distressed property loans owned by Credit Suisse for about $1.2 billion, a roughly 50 percent discount to the face value, according…
By Luis Arroyo, in Madrid | The Greek restructuring has been a most impressive achievement. But it has fallen only on private investors’ heads. Public bondholders, like the European Central Bank (ECB), refused to take in their share of losses as everyone else did. When the EBC’s governor Mario Draghi was asked about the ECB’s special protection, turning the central bank into a super-privileged investor, he replied: “I can answer…
By Fernando González Urbaneja, in Madrid | Explaining the Spanish public deficit problem in 2012 in terms of confrontation between the government of Mariano Rajoy and Brussels is wrong and misleading. So far Brussels has not penalised members who do not meet their programmes, but has rather come to help achieve the objective, with more or less enthusiasm and more or less requirements imposed. Brussels may begin proceedings for an excessive…
LONDON | The latest edition of the liquidity expansion programme developed by the European Central Bank received Wednesday a warm welcome among several investment houses in the City. From their point of view, Long-Term Refinancing Operations or LTRO would not only help keep afloat European entities, within and out the euro zone, but prop up optimistic prospects over the global economic performance. In a report Schroders released today, chief economist…
By Juan Pedro Marín Arrese, in Madrid | Mervyn King sharply pointed out that banks are global in life but turn national in dying. The opposite can be applied to deficit targets. When you enjoy a comfortable budgetary position, you are able to fix them at your own wish. Brussels may get the sulks if you go beyond certain limits and fall into excessive overruns. But it can do very little…
By Luis Arroyo, in Madrid | The US economy is on its way up to the growth heaven while others, like Europe, live under the knife. Broad money or M3 volumes have increased in the US by 10pc. In terms of what it is strictly required, the Federal Reserve is fulfilling its duties. The broad money supply includes factors of money supply and money and credit demand, which means that there is activity in all money and financial markets. The…