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Russia to invest in Fannie Mae, Freddie Mac bonds

Posted Feb 21st 2008 4:44PM by Joseph Lazzaro (RSS feed)
Filed under: International markets, Good news, Russia, Federal Natl Mtge (FNM)

In a development likely to be warmly-received by international finance and stock markets, Russia announced Thursday it will buy Fannie Mae and Freddie Mac bonds through its sovereign wealth funds, Russia's Finance Ministry said and Bloomberg News reported.

Russia will invest money from its Reserve Fund and National Wellbeing Fund into 15 government bond funds in Europe and the United States, including those in Fannie Mae (NYSE: FNM) and Freddie Mac (NYSE: FRE). Russia will also purchase government bonds in the U.K., Germany, France, Austria, Canada, and the Netherlands, Bloomberg News reported.

Both Fannie, down 56 cents $29.27, and Freddie, down 80 cents to $27.94, moved lower Thursday afternoon; however it should be noted that the declines occurred during a broad market sell-off, with the Dow down 159 points to 12,267.

Continue reading Russia to invest in Fannie Mae, Freddie Mac bonds

European Central Bank head offers no hint of rate cuts

Posted Jan 23rd 2008 5:02PM by Joseph Lazzaro (RSS feed)
Filed under: International markets, Forecasts, Economic data, Recession

European Central Bank President Jean-Claude Trichet ECB President Jean-Claude Trichet said the European Central Bank needs to maintain its inflation-fighting stance, amid a very significant, ongoing market correction, Reuters reported Wednesday.

Trichet said, "In demanding times of significant market correction and turbulences, it is the responsibility of the central bank to solidly anchor inflation expectations to avoid additional volatility in already highly volatile markets," Reuters reported.

Many economists and analysts had hoped that the ECB would modify its inflation-focused stance in the face of mounting evidence of a U.S. economic slowdown and concerns that a prolong U.S. slowdown would slow global growth. Asian and European markets sold off more than 5%, and the U.S.'s Dow Jones Industrial Average plunged more than 400 points Tuesday, before the U.S. Federal Reserve cut key, short-term interest rates by 75 basis points in an emergency meeting.

Europe's major stock exchanges in London, Frankfurt and Paris continued their slide Wednesday, falling about 2% across the board by mid-day, The Financial Times reported.

Continue reading European Central Bank head offers no hint of rate cuts

European Central Bank offers unlimited funds to ease credit crunch

Posted Dec 18th 2007 8:07AM by Joseph Lazzaro (RSS feed)
Filed under: International markets, Other issues, Housing, Federal Reserve

The European Central Bank late Monday announced that it will offer banks unlimited funds starting Tuesday at below-market interest rates, in a special operation to head-off a year-end liquidity crunch, The Financial Times reported Monday night.

The move, which follows last week's coordinated series of measures by the world's major central banks to increase market liquidity, suggests the ECB is still frustrated at the failure to ease financial market tensions, The Financial Times said.

Agence France-Presse Monday night reported that during the two-week market refinancing operation [MRO], the ECB will allow banks to borrow an unlimited amount of funds and would keep the key short-term rate near 4.21%, below the 4.9% rate for similar operations over the past few days.

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Who's afraid of coordinated central banks?

Posted Dec 14th 2007 6:08PM by Joseph Lazzaro (RSS feed)
Filed under: International markets, Other issues, Economic data, Housing, Federal Reserve

Once again, the ever-incisive Financial Times columnist Martin Wolf, an economist, identifies with laser-accuracy what ills the current market. The problem, Wolf argues, is not a lack of solvency but a lack of liquidity (i.e. 'panic').

Wolf does not deny that there have been bad loans (there have been) or that no companies will go out of business (some will). But the circumstance that froze credit markets, that caused quality corporate bonds to fail to price, and that leads to 100-point spreads between the LIBOR rate (what banks charge each other) and the ECB's benchmark interest rate, is rooted more in a lack of confidence, than a lack of sound economic fundamentals or a lack of resources.

A lack of liquidity

And a lack of liquidity or 'panic' is something that central bankers can address. With the above in mind, the U.S. Federal Reserve's plan, in consultation with the European Central Bank, the Bank of England, the Swiss National Bank, and the Bank of Canada, to inject $40 billion via auctions into the financial system is appropriate and prudent. (Further, in addition to reciprocal currency arrangements, the companion central banks will take related actions, including the Bank of England's decision to accept a wider range of collateral on 3-month loans).

Continue reading Who's afraid of coordinated central banks?

U.S. November job gains seen easing pressure on Fed

Posted Dec 7th 2007 12:55PM by Joseph Lazzaro (RSS feed)
Filed under: Other issues, Employees, Economic data, Housing, Federal Reserve

November's 94,000 added jobs statistic is likely to tip the scales in favor of a quarter-point cut in short-term interest rates instead of a half-point cut, economists and analysts say.

"The November job creation number, while not outstanding, is more than enough to quell the half-point hawks," economist Steve Affinito told BloggingStocks Friday. "The Fed will cut interest rates by one-quarter point next week."

Affinito said the November 2007 jobs report was "the sole bright spot" after a string of negative economic data recently reported for the U.S. economy. That data points to a slow-growing U.S. economy (or possibly worse) through Q1 2008, many economists agree.

"If we can register 2% GDP growth in the first quarter of next year, that would be acceptable at this point, and I would take it," Affinito said, adding that Q1 could conceivably show a contraction. For Q4 2007 Affinito estimates that the economy will have slowed to 2.3-2.6% growth.

Continue reading U.S. November job gains seen easing pressure on Fed

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Last updated: November 10, 2009: 05:47 AM

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