Daily Archives: March 4, 2010

From Marc Jones at Reuters:

Eurozone central banks made a hefty €20bn in shared profits last year thanks to the interest they earned on the billions of euros of emergency loans given to the region’s commercial banks. Read more

Ralph Atkins

From tomorrow’s paper:

The European Central Bank yesterday pressed ahead with the dismantling of emergency support for financial markets, unbowed by the crisis over Greece’s public finances, even as it remained cautious on eurozone growth prospects. Read more

“Time has run out,” Finance minister Steingrimur Sigfusson has told parliament. From Reuters:

Iceland’s economic woes looked set to worsen as it headed for a “no” vote in a referendum on terms for repaying “Icesave” debts that have held up vital aid to the crisis-hit North Atlantic island nation. Read more

A hung parliament could be an opportunity for Britain. All parties agree that spending cuts lie ahead, but no party will want to be saddled with the attendant unpopularity. A coalition government could push through the obvious legislation, and then call another election.

But this week, sterling was sold heavily after polls suggested a hung parliament likelier than had been thought. Why? Apparently it is the fear that no clear majority would result in gridlock rather than co-operation, leaving deficits unaddressed. Read more

British economic commentary – even at the most respected levels  - has got a nasty bout of “spurious precision disease”. One that shows people are not thinking very carefully about the budgetary problems facing the country.

The disease is the obsession with talking about the “structural” or “underlying” budget deficit as if we have the faintest idea what it is. The two “official” structural budget deficit numbers – 9 per cent of national income for the overall deficit and 5.5 per cent of national income for the current deficit excluding net investment – are made up in the Treasury, based on its assumption of the permanent lost economic output. But the Treasury itself says this number, “remains subject to significant uncertainty”.

As I will explain, the disease is serious and potentially dangerous. It is setting up incentives for just the sort of uncertainty and rule-bending that undermined the credibility of  Gordon Brown and the 1998 fiscal framework. We should all resist this. Avoiding using spurious structural deficit numbers would be a good place to start.

Who has caught the disease? Read more

The $5bn sale of Greek bonds today has been oversubscribed by a factor of almost 3. The requested yield has tightened throughout the day, reflecting increasing demand. Actual details are expected at about 4.30pm London time.

Is this affordable, and is it fair? Greece has $15bn more financing to find over the next three months. The chart below shows comparative 10-year benchmark government bond yields for Portugal, Ireland, Spain and the UK. Portugal, in many ways a comparable economy to Greece, can raise 10-year debt for 1.8 percentage points less than Greece. Comments welcomed. More on ft.comRead more

From Jude Webber on ft.com:

An Argentine senate committee on Wednesday voted against the nomination of central bank governor Mercedes Marcó del Pont, raising the prospect that the country could be looking for a second new bank chief in as many monthsRead more

The central bank of the eurozone has kept the main refinancing rate at 1 per cent. The marginal lending facility and deposit facility remain at 1.75 and 0.25 per cent, respectively. There will be a video stream of the press conference at 2.30 CET. The bank is expected to make some comment on exit strategy.

The central bank of the United Kingdom has kept rates at 0.5 per cent, and chosen not to extend quantitative easing – although that is not ruled out in future. The stock of asset purchases therefore remains at £200bn. This is as expected.

The central bank of Malaysia has increased the overnight policy rate from 2 to 2.25 per cent, with the floor and ceiling rate trading band moved to 2 and 2.5 per cent. Kuala Lumpur had hinted heavily at the last rate meeting, at which rates were held. Recovery is thought to be entrenched now, with strong growth and improving internal and external demand. The Malaysian economy grew by 184bn ringgit ($54.6bn) in Q4, up 6.5 per cent on the previous quarter.

Robin Harding

Backward-looking surveys of corporate investment are precisely the kind of tree that makes it hard see the wood when looking at economic data. The quarterly Ministry of Finance survey is important in Japan for one reason, however: it is the main source of revisions – sometimes very large revisions – to GDP estimates. The second estimate for Q4 2009 GDP in Japan is due out next week.

Take Q3 last year, for example. The initial estimate on November 16th was growth of 1.2 per cent on the previous quarter; about three weeks later that was revised down to 0.3 per cent. Read more

By David Oakley, capital markets correspondent

Athens will sell about $5bn today in the 10-year bond market. Market reaction – and pricing – of this deal will be key. Greece needs to raise about $20bn in the coming three months. The riskier the perception of debt, the higher the cost of borrowing. The four banks managing the deal are HSBC, Barclays, Nomura, National Bank of Greece and Piraeus‬ Bank. Read more on ft.com.