As news goes, it’s so 2010. European bond yields are rising again, with Portugal passing 7 per cent. Greece is at another new high, having passed its bail-out peak yesterday. But there is something different about it this time. In the 2011 version of the story, is the cost of government debt rising on worries about bank debt? Government debt, after all, is pretty much covered by the EFSF.
The Irish crisis was arguably prompted by some ill-timed comments from Angela Merkel. She suggested that bondholding rules be rewritten so that in the event of a default, bondholders would share the pain. Understandably, markets reckoned bonds were worth less than before, so prices fell and yields rose. After all, a change to bondholder rights is no small matter: it’s rather like saying new cars will no longer be sold with a warranty. If something goes wrong, you’re on your own.
Rather than clarify the bond issue, ministers Read more
Do we need a new acronym? It is now more expensive to insure against a Belgian default than it is against an Italian one. The comfortably distant notion adopted by richer European countries of a “eurozone periphery” should be deeply challenged by troubles in Brussels. According to MarkIt data, it now costs $240,000 to insure $10m Belgian debt – nearly five times the cost this time last year.
The “periphery” used to mean the PIIGS – Portugal, Italy, Ireland, Greece and Spain. Increasingly it has been used to mean PIGS – as above but without Italy. But more importantly, perhaps, it meant “somewhere else” to those using the term in the more prosperous north of Europe. The “periphery”, we thought, may be recklessly run or deeply unlucky, but at least it’s somewhere else.
As if that weren’t enough CDS-gloom, the cost of insuring Spanish debt has gone up today, despite China’s pledge Read more
Banks betting that the real will go up have 90 days to comply with a new reserve requirement from the central bank aimed at weakening the real. The measure is the latest in a series of tools emerging markets are adopting to slow currency appreciation.
Financial institutions with short dollar positions must deposit cash – which will not earn interest – at the central bank. According to the release, the amount is worked out by formula (via Google Translate):
financial institutions should collect the Central Bank in the form of compulsory deposits, 60% of the value of the sold foreign exchange position that exceeds the lesser of: $ 3 billion, or heritage reference (PR). This compulsory deposit will be collected in kind and will not be paid. Institutions will have 90 days to fit the new rule.
Germany’s heavyweight Frankfurter AllgemeineZeitung is the voice of the country’s conservative establishment. So it is interesting to see almost the entire front page of Thursday’s “Feuilleton” (arts features) section devoted to a piece on Germany’s relationship to the euro by Werner Plumpe, an economic historian at Frankfurt’s Goethe university.
Headlined “The euro is not our destiny,” Plumpe takes issue with the claim by Angela Merkel, Germany’s chancellor, that Europe’s future is bound to the fate of the eurozone. Read more
For those following the UK’s economic recovery, there is little to cheer in today’s closely-watched indicator of the services sector. For the Bank of England, there is every reason to be pleased.
The CIPS services purchasing managers’ index fell sharply from 53 in November to 49.7 in December, a level associated with stagnation or contraction in the sector. New business was down too, as was employment. Since surveys do not intrinsically matter, the reason to worry about the CIPS survey is that it has a better record than most at foreshadowing the actual output of the private services sector – the area of the UK economy which needs to grow reasonably strongly if the recovery is going to be robust.
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