Economy
In reply to the discussion: Weekend Economists Ring in the Old, Wring Out the New: Dec. 30, 2011 to Jan. 2, 2012 [View all]Demeter
(85,373 posts)YES, THE FIX IS OUT AND THE HEAT IS ON--CAN THE FOUR HORSEMEN BE FAR BEHIND?
QUERY, WAS THIS DONE SOLELY TO EMBARRASS CORZINE, OR IS THERE A BIGGER GAME AFOOT?
http://www.bloomberg.com/news/2011-12-29/fed-says-dealers-tighten-terms-on-hedge-fund-securities-trades.html
Wall Street dealers made it tougher for hedge funds to finance trading of securities and derivatives in the three months through November, a Federal Reserve survey showed today...Responses indicated a broad but moderate tightening of credit terms applicable to important classes of counterparties, especially hedge-fund clients, trading real estate investment trusts and nonfinancial corporations, according to the quarterly survey of senior credit officers at 20 dealers covering the period of September to November. The central bank released the report in Washington. The report adds to evidence of stress in the financial system from Europes sovereign-debt crisis. Investor concern about the continents turmoil has helped drive the premium banks pay to borrow dollars to the highest in more than two years. The Fed survey didnt discuss causes of the tighter financing terms...Respondents reporting tougher borrowing terms for hedge funds most frequently pointed to a worsening in general market liquidity and functioning and to reduced willingness to take on risk and, to a lesser extent, adoption of more-stringent market conventions and deterioration in the strength of counterparties as the reasons, the Fed said.
Credit Limits
The Feds Senior Credit Officer Opinion Survey on Dealer Financing Terms was conducted from Nov. 15 to Nov. 28. Respondents, who arent identified, account for almost all of the dealer financing of dollar-denominated securities for nondealers and are the most active intermediaries in over-the- counter derivatives (OTCDTOTL) markets, the Fed said. (NOT IDENTIFIED, TO PROTECT THE GUILTY--WANNA BET JPMORGAN IS FIRST AND FOREMOST?--DEMETER) Measures of stress in credit markets soared during the three-month period surveyed to the worst levels in more than two years as Europes fiscal imbalances intensified, fueling concern that the regions upheaval would taint bank balance sheets globally...
Interbank Lending Divergence
While the Fed said today that 80 percent of dealers reported lowering credit limits for some specific financial- institution counterparties, evidence grew that banks were growing more wary of lending to each other. The gap between the highest and the lowest rates that banks say they can borrow from each other in dollars is close to a 2.5-year high. The divergence from reported fixings by the 18 banks contributing to the three-month London interbank offered rate reached 28 basis points Thursday, within two basis points of the widest since May 2009. Libor (US0003M) for three-month loans climbed to 0.581 percent, the most since July 2009, even as central banks injected cash into the market...
...The swaps index, which typically falls as investor confidence improves and rises as it deteriorates, has declined from 127.8 on Nov. 30. It rose from 114.5 at the end of August to 150.1 on Oct. 3, the highest level since May 2009. Credit swaps pay the buyer face value if a borrower fails to meet its obligations, less the value of the defaulted debt. A basis point equals $1,000 annually on a contract protecting $10 million of debt...
Dealer Report
The Federal Reserve began querying dealers in 2010 as part of efforts to boost surveillance of financial markets following the panic of 2007-2008 that caused the worst economic downturn since the Great Depression. The prior survey, covering June through August, showed that 86 percent of respondents reported that the number of dealers tightening financing rates outnumbered those easing...The latest responses reflect an apparent continuation and intensification of developments already in evidence in the September survey, the Fed said today. About one-third of respondents tightened pricing terms, such as financing rates, to hedge funds, while one-fourth reported tightening nonprice terms including maximum maturity, the central bank said.
MUCH MORE AT LINK--MEATY, IF A BIT DRY