Tranches of tranches…of tranches
How did MBS all go so very very wrong? Here’s the visual answer.
Yes, what you’re looking at is AAA rated securities being created out of debt that, if the system were to be under financial stress, would likely be (depending on the exact structure of the security) among the last 4 per cent to be paid. You buy a AAA security, and if the default rate on subprime mortgages hits 4 per cent, the security is worthless. Read more
Pity the poor UK Treasury
If we get a Conservative/Liberal Democrat government in the next day or so, pity the UK Treasury. It had been preparing to tell the new chancellor that the public finances were in a terrible shape and new tax increases were extremely difficult to avoid. That pep talk seems to have become quite a bit more difficult.
There was no doubt at the gathering of central bankers here in Zurich today that Britain was the big unanswered question when it came to the next big global risk. Read more
Three-year government bonds today sold at yields lower than March bonds, as demand picked up for assets perceived as safe. Falling yields have also been seen recently in the 1- , 5- and 7- year bonds. If the yield drop is temporary, the US stands to benefit in particular tomorrow and Thursday, when 10- and 30- year bonds are auctioned. Read more
The Fed debates sterilisation
A new debate is set to rage within the Fed in the wake of its decision to re-open currency swap lines with foreign central banks.
Jeffrey Lacker, president of the Federal Reserve Bank of Richmond, today said at an event in North Carolina that the move was “not a problem” but “we’re going to think about whether we sterilise” the swaps. Read more
The Fed mired in politics again (or not)
After Ben Bernanke was confirmed for a second term as Fed chairman back in January, the political heat surrounding the US central bank died down a little.
But with the Fed re-establishing currency swap lines with the European Central Bank and others over the weekend to help the strains of the sovereign debt crisis, some lawmakers have ratcheted up their criticism again. Read more
Global policy challenges
Four things have struck me at today’s high-level meeting on the international monetary system, organised by the International Monetary Fund and Swiss National Bank. Read more
The UK government has just secured £2.25bn debt to be repaid over 17.5 years at a rate of 4.472 per cent. This is pretty good going, relative to other European countries: the rate (middle dot, green line) is only fractionally higher than the Feb-Mar yield curve (red line). Maybe, as Chris said yesterday, the UK is just lucky, for now. (Source data: Debt Management Office.) Read more
Eurozone debt crisis
Other news Read more
China’s central bank has spoken of measuring the yuan “with reference to a currency basket”. One of the bank’s academic advisers, Xia Bin, said the change in language suggests a change to the dollar peg, reports Business Week. An economist at Morgan Stanley interpreted the shift in the wording of the report as significant, and yuan forward prices have been rising for the past two days on speculation of a rise in the currency. Read more
Why Toyota prospers and Sony does not
Apart from the Bank of Japan, the other part of my job in Tokyo is covering the electronics industry, including companies such as Sony, Panasonic, Toshiba and NEC. They don’t often overlap, but I was struck by this chart from Tetsuya Inoue, who follows Japanese monetary policy at Nomura Research Institute.
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Chris Giles has been the economics editor of the Financial Times since 2004. Based in London, he writes about international economic trends and the British economy. Before reporting economics for the Financial Times, he wrote editorials for the paper, reported for the BBC, worked as a regulator of the broadcasting industry and undertook research for the Institute for Fiscal Studies. RSS
Michael Steen, Frankfurt bureau chief, covers the ECB and the eurozone's economies. He joined the Financial Times in 2007 as Amsterdam correspondent and later worked as a front page news editor in London. Before joining the FT, he spent nine years as a correspondent at Reuters, mostly in foreign postings that included a previous stint in Frankfurt, as well as Moscow, Kiev and central Asia. He read German and Russian at Cambridge.RSS
Robin Harding is the FT's US economics editor, based in Washington. Prior to this, he was based in Tokyo, covering the Bank of Japan and Japan's technology sector, and in London as an economics leader writer. Robin studied economics at Cambridge and has a masters in economics from Hitotsubashi University, where he was a Monbusho scholar. Before joining the FT, Robin worked in asset management and banking. RSS
Ralph Atkins, capital markets editor, has been writing for the Financial Times for more than 20 years following an economics degree from Cambridge. From 2004 to 2012, Ralph was Frankfurt bureau chief, watching the European Central Bank and eurozone economies. He has also worked in Bonn, Berlin, Jerusalem and Brussels. RSS
Claire Jones is Money Supply economics team writer, based in London. Before joining the Financial Times, she was the editor of the Central Banking journal and CentralBanking.com. Claire studied philosophy and economics at the London School of Economics. RSS
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