Monday, July 09, 2007

Monday morning bullet points

Macro Man was stunned to discover over the weekend that the sun has not, in fact, spontaneously extinguished itself. It had been so long since our local star had appeared in the sky that Macro Man had to explain to his children what that bright thing up above was. No doubt its sporadic appearances for the remainder of the summer will be timed around Macro Man's holidays; such is the nature of British weather.

There are a few things that have grabbed Macro Man's eye this morning, including the following:

* As expected, an enterprising pubic figure has decided to have a go at the ratings agencies. Ohio attorney general Marc Dann is investigating the agencies for aiding and abetting subprime mortgage fraud. Readers will be shocked to learn that prominent Ohio pension funds are long MBS and ABS out the wazoo...

* It's official: the name of China's soverign wealth fund will be China Investment Co. , Ltd. (CIC for short.) Central Huijin will be folded into the CIC but evidently maintain some investment autonomy. PBOC will apparently broker (but not underwrite) the sale of CIC's bonds, likely to be timed with the maturity of PBOC's own sterlization bills. Replacing short term bills with CIC's long term debt should serve to steepen China's already-steep yield curve; this is a trade that may merit some consideration in the future. CIC plans to open its door for business in September.

* The policymaker backlash against carry continues apace. The FX market is abuzz with talk that Nicolas Sarkozy will have a proper moan about the strength of the euro (particularly EUR/JPY) at this week's Ecofin meetings. Today, Taiwan's central bank sold USD/TWD into the close, getting maximum bang for their buck and sending USD/TWD sharply lower. Do you think the closing pip price was some sort of editorial comment about the carry trade from CBC?

* Another piece of propaganda has appeared in today's Nikkei newspaper: Weak Yen Threatens Japan's Global Stature (subscription required.) Is this a pre-emptive strike by the MOF to counter Sarkozy-esque complaints, or a legitimate change of opinion within Japan? Perhaps a bit of both. Regardless, the steady stream of yen propaganda is certainly interesting and suggests to Macro Man that USD/JPY is very, very unlikely to go above 130 for the foreseeable future.

* The RUB has appreciated slightly against its basket today, suggesting that last week's shellacking may well have been a flow-driven phenomenon. What's interesting is that NDFs are still pricing the forward basket at the reval level. Is this a change in regime towards a more flexible basket peg or a one-off discrepancy? What is certain is that Russia should have a stronger exchange rate on both a terms of trade and monetary policy basis.
* Those with access to the hard copy of The Times of London can obtain a firsthand view of how manipulated/manipulative the mainstream media really is. Page 9 offers up a pseudo-panegyric to Boeing's new 787 Dreamliner, as does the editorial page. Imagine Macro Man's shock when he turned to page 15 and saw a full page ad from Boeing (the first he has ever observed in The Times) declaiming the eco-merits of the latest iteration of the 747. Yet another timely reminder of the importance of filtering media reports through a critical lens....



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