Reuters blog archive
from Alison Frankel:
The hedge fund NML Capital is going to have to execute some fancy footwork to maintain its argument that Argentina is plotting to evade a ruling by the 2nd U.S. Circuit Court of Appeals that prohibits the foreign sovereign from making payments to holders of its restructured debt before paying off hedge funds that refused to exchange defaulted bonds.
As I told you last week, NML presented U.S. District Judge Thomas Griesa with what it considered smoking-gun evidence: published accounts of a May 2 memo from Argentina's lawyers recommending that the country's "best option" if the U.S. Supreme Court refuses to hear Argentina's appeal of the 2nd Circuit decision would be to default "and then immediately restructure all of the external bonds so that the payment mechanism and the other related elements are outside of the reach of American courts."
But in a June 3 letter to lawyers for NML and for Argentina, Judge Griesa said that the memo, written by Cleary Gottlieb Steen & Hamilton for Argentina's Minister of Economy and Public Finance, "is clearly privileged," based on his assumption that Cleary didn't intend the document to become public. (It was leaked in the Argentine press, then was reported by the Financial Times's FT Alphaville blog, which links to an English translation of the entire five-page memo, entitled "Possible Outcomes of the Petition for Certiorari and Issues Regarding the Settlement of the Debt.") The judge said he would "not make use of" the privileged document.
In a separate letter, NML lawyer Robert Cohen of Dechert assured Griesa that the hedge fund had taken "remedial steps" to redact from its filings any references to websites that link to the Cleary memo and any quotations from the document. (NML's original filing did not attach the memo out of concern about its privilege but did provide links to Argentine press coverage.) The hedge fund, in other words, won't be able to say publicly exactly how the document supposedly contravenes Griesa's own orders, affirmed by the 2nd Circuit, barring Argentina from taking steps to evade his pari passu (or "equal footing") injunction. That's what I mean about fancy footwork.
Greece will sell its first bond in four years.
We know it will aim to raise up to 2.5 billion euros of five-year paper via syndication and wants to pay less than 5.3 percent – remarkable since only two years ago it was tipped to crash out of the euro zone and yields on 10-year debt peaked above 40 percent on the secondary market. They dropped below six percent for the first time since 2010 on Wednesday.
Athens has no pressing funding needs but wants to test the waters as part of its strategy to cover all its financing from the market by 2016. It still has a mountain to climb and may well need more debt relief from its EU partners to corral a national debt that is not falling much from 175 percent of GDP.
Vladimir Putin will meet senior Russian government officials to discuss Russia's economic ties with Ukraine, including on energy after state-controlled natural gas producer Gazprom said Kiev missed a deadline to pay a $2.2 billion bill.
In previous years, gas disputes between Moscow and Kiev have hurt supplies to Europe. The Ukraine government has said it would take Russia to an arbitration court if Moscow failed to roll back gas price hikes.
How much time does massive central bank currency intervention buy? About a day at a time in Turkey’s case. It spent $1.3 billion of its reserves yesterday to stop the lira going into freefall having thrown a record $2.25 billion at the market on Monday.
So far this year, the central bank has burned over $6 billion of its reserves which have now dropped below $40 billion. So that can’t go on for long, meaning an interest rate rise which a slowing economy really doesn’t need must be on the cards. The lira hit a record low versus the dollar on Monday.
from Global Investing:
Of all the emerging currency and bond markets that are feeling the heat from the dollar's rise, none is suffering more than South Africa. A series of horrific economic data prints at home, the prospect of more labour unrest and the slump in metals prices are making this a perfect storm for the country's financial markets.
Some worrying data from the Johannesburg Stock Exchange this morning shows that foreigners sold almost 5 billion rand (more than $500 million) worth of bonds during yesterday's session alone. Over the past 10 days, non-resident selling amounted to 10.7 billion rand. They have also yanked out 1.2 billion rand from South African equities in this time. And at the root of this exodus lies the rand, which has fallen almost 15 percent against the dollar this year. Now apparently headed for the 10-per-dollar mark, the rand's weakness has eaten into investors' total return, tipping it into negative return for the year.
from Global Investing:
Global Investing has written several times about Japanese mom-and-pop investors' adventures in emerging markets. Most recently, we discussed how the new government's plan to prod the Bank of Japan into unlimited monetary easing could turn more Japanese into intrepid yield hunters. Here's an update.
JP Morgan analysts calculate that EM-dedicated Japanese investment trusts, known as toshin, have seen inflows of $7 billion ever since the U.S. Fed announced its plan to embark on open-ended $40-billion-a-month money printing. That's taken their assets under management to $67 billion. And in the week ended Jan 2, Japanese flows to emerging markets amounted to $234 million, they reckon. This should pick up once the yen debasement really gets going -- many are expecting a 100 yen per dollar exchange rate by end-2013 (it's currently at 88).
from Global Investing:
It's the scenario that Bank of England economist Andrew Haldane last year termed the Big Fish Small Pond problem -- the prospect of rising global investor allocations swamping the relatively small emerging markets asset class.
But as of now, the picture is better described as a Small Fish in a Big Pond, Morgan Stanley says in a recent study, because emerging markets still receive a tiny share of asset allocations from the giant investment funds in the developed world.
from Davos Notebook:
The programme may strike a different note -- this year's Davos is apparently all about Shared Norms for the New Reality -- but much of the discussion at the 41st World Economic Forum annual meeting in Davos this month will have a distinctly familiar ring to it.
Last January, the five-day talkfest in the Swiss Alps was dominated by Greece's near-death experience at the hands of the bond market and recriminations over the role of bankers in the financial crisis, as well as worries about China's rapid economic ascent and a lot of calls for a new trade deal.
from The Great Debate UK:
- Laurence Copeland is a professor of finance at Cardiff University Business School and a co-author of “Verdict on the Crash” published by the Institute of Economic Affairs. The opinions expressed are his own. -
As the G20 ministers gather for their meeting this week, there should be no doubt about the item at the top of the agenda: the re-entry problem. At what point should the expansionary monetary and fiscal policy of the past year be reversed? And, if the answer is “not yet”, how soon does the re-entry plan need to be announced?
from Global Investing:
Ministers from Iraq, from prime minister Nuri al-Maliki down, are in London on Thursday to attract investment into the country. Could Iraq be one of the few investment regions decoupled from the global economic cycle?
It was having a war while the rest of the world was enjoying economic boom. As well as signs of lessening violence now and the promised withdrawal of U.S. combat troops by August 2010, it does have oil.