World economy talk

[machine.pistol]

Lady Bathory, I'm doing a survey, and might be able to help. Would you happen to know of any Philippine company who might be engaged in derivatives trading, specifically forward sale contracts?

[Lady Bathory]

Lady Bathory, I'm doing a survey, and might be able to help. Would you happen to know of any Philippine company who might be engaged in derivatives trading, specifically forward sale contracts?

Like FX NDF? Try BDO.

[machine.pistol]

Gold. No, I'm not going to enter into a forward transaction. I'm just doing a survey on how popular derivatives, specifically forward sale contracts, are in the Philippines.

[Lady Bathory]

Things are going to be bad tonight.

[Lady Bathory]

The selloff last night was triggered by a report that Chesapeake Energy hired restructuring lawyers. Whether Chesapeake will declare bankruptcy or not isn't as important as the market reaction. Based on the reaction it's pretty clear the market is worried about commodity companies going bust and how it will affect the financial system.

Financial sector ETF (XLF):

[Lady Bathory]

Friday evening thoughts:
Germany should be concerned about Deutsche Bank. Loss-ridden DB is the least capitalized megabank in the world. Judging by the performance of its share price, preferred stock, contingent convertible bonds (CoCos), and credit default swap spread, the market is telling the bank it needs to raise more capital. It's only a matter of time DB suspends payment on the CoCos.

Keep an eye on Deutsche Bank.




If you want to buy insurance on DB the premium has skyrocketed reflecting higher risk.

Feeling the pressure, DB had to reassure investors that they have enough cash to make coupon payments this year. Whether they'll have enough cash to make payments next year in another question.

https://www.db.com/newsroom_news/201...y-en-11385.htm

[Lady Bathory]

Brent bounces off the psychological $30 level.

[Lady Bathory]

What OFW story does this chart tell? A lot of dry bulk cargo ships were built during the boom years but the boom years are over so now there are too many ships. Shipping rates drop and many ships are idled. The Philippines is the world’s main supplier of seamen. You know the rest of the story.

[Lady Bathory]

Deutsche Bank Is `Absolutely Rock-Solid,' Cryan Tells Employees - Bloomberg Business

If a bank CEO had to send a memo to his employees to remind them that the bank they're working for is "rock solid", well, it's not very confidence-inspiring.

[Lady Bathory]

WTI sinks into the twenties but the $30 psychological barrier still holds for Brent.

[Lady Bathory]

Tokyo we have a problem.

[Lady Bathory]

Japan cannot tolerate strengthening yen. Must intervene.

-

This morning...
Dad: What's going on with European banks?
Me: They can't make any money.
Dad: Why?
Me: Because of negative rates.
Dad: Please explain.
Me: European banks are charged for parking funds at the central bank but they didn't to pass the charge to depositors fearing depositors will pullout money.
Dad: What are those cocos i keep reading about?
Me: Contingent convertible bonds. Bonds issued by banks to raise capital.
Dad: Please explain. And why are they in the news lately?
Me: Convertible because the bonds are convertible to equity. Contingent because the conversion will happen when an event takes place like when a bank's capital falls below a certain level. In the news lately because those bonds are falling in value because the market thinks those bonds are at risk of being converted to equity.
Dad: I see. That's bad for current shareholders right?
Me: Yes because when debt is converted to equity current shareholders get diluted.

[badkuk]

Aren't negative interest rates supposed to encourage people/banks to invest their money elsewhere e.g. stocks? Seems this move(by BoJ) had the opposite effect

[Lady Bathory]

It may look like the BOJ's move is having an opposite effect but it's not the BOJ's fault. To be fair, when they lowered rates to negative on Jan. 29 the yen did weaken. USDJPY rose above 120 and stayed there for a few days (see chart).
Then USDJPY started falling. Global risk-off sentiment caused the yen to strengthen. The yen is a funding currency for carry trades so when things turn bad the yen gets bought back.

In theory, negative interest rates should force banks to lend out money instead of parking money at the central bank. However, negative interest rates are squeezing banks' net interest margin (NIM). NIM is the difference between how much banks earn from their assets (loans) and now much they pay on their liabilities (deposits). Bank profits are already squeezed by low interest rates, new regulations, lower trading revenue, and fines. By lowering interest rates to negative territory you make it impossible for banks to make money. So banks become weak and weigh on the economy. So much for the stimulative effect of negative interest rates.

[Lady Bathory]

The world is not ending.

[Lady Bathory]

The Nikkei continues to recover thanks to a weak yen and improved sentiment.



Gold back below $1200. The world isn't ending.

[Lady Bathory]

Brent crude breaks above the psychologically important $35 level.

[yebo]

Brent crude breaks above the psychologically important $35 level.

up! up! $60/barrel please!

[jefbuan]

+1 on 60$ pls

[Monseratto]

Brent Crude drops to US$ 34...





Saudi Arabia and Russia Agree to Freeze Oil Output - Bloomberg Business