Further jitters at the eurozone periphery today with Irish, Spanish and Greek sovereign yields higher, and news that Spanish banks tapped the ECB for €140bn during July.
Of particular interest, demand for Italian bonds dropped significantly. This matters because European banks are exposed very heavily to Italian sovereign debt – the top 91 banks own €100bn of the stuff in their trading books. This is quadruple the trading holdings of Spanish debt, and 22 times holdings of Irish debt. Indeed, Italian debt is held in the trading books of Europe’s banks more than any other European sovereign – even German-issued debt totals just $70bn.
Italian banks Intesa and Unicredit carry the greatest trading exposure to Italy, as we would expect. After that come Deutsche Bank and Credit Agricole, each with about €10bn. See the data, split by bank, below: Read more
American unemployment is worse than forecast under the “No Stimulus” scenario. This from Dallas Fed research (h/t zero hedge).
This rather sobering chart shows unemployment more than two percentage points above plan. The forecasts, which come from the Bureau of Labour Statistics in January 2009, predicted an almost immediate turning point in labour market fortunes. In fact, unemployment continued exactly on trend. Read more
Rising energy prices pushed US inflation up the most for almost a year in July. Consumer prices in July rose 0.3 per cent, the first month-on-month rise since March and the largest rise since August 2009, when the rise was 0.4 per cent.
Fuel oil rose 15 per cent, month-on-month, the highest rate for many months (alas, BLS data revisions prevent a decent historical comparison). Gasoline was up 7.4 per cent. Had the four energy indicators remained static, inflation would have declined during July.
Non-energy prices such as food, autos, clothes, shelter and transport continued their decline, however. See the table below. Read more
UK and French banks will be nursing losses this morning, after Irish bonds lost value yesterday. Rumours that that the ECB and Irish central bank were buying Irish bonds prompted us to look at banks’ sovereign debt holdings (the stress tests were useful, after all*).
RBS comes out with €1.1bn Irish debt in its trading books. It is followed by Credit Agricole (€0.76bn) and HSBC (€0.6bn). See chart, above. Read more
Chile’s central bank has agreed on the third consecutive half point rise, taking its policy rate to 2 per cent.
Interest rate futures point to a year-end level of 3.75 per cent, but analysts are divided about the likely pace of increase. Read more