Il costo dei CDS sul debito nostrano continua a crescere

Five-year Italian government CDS widened to 161.5 basis points from 155 basis points at Monday's close, while the French equivalent reached a record 56.8 basis points from Monday's 54.4 basis points.

(...)

The move was most severe in Greek, Irish and Italian CDS, with 5-year Irish CDS having blown out almost seven-fold to 213.4 basis points on Tuesday compared with levels seen mid-September when the global financial crisis reached new depths with the collapse of Lehman Brothers.

Five-year CDS on Italian government debt widened from 47 basis points on Sept. 16, with similar moves from double digit to triple seen in CDS on UK and Swedish sovereign paper, according to CMA DataVision.

"In our opinion, the Italian budget will veer into unsustainability in 2009. By unsustainable we mean new debt issuance will be required to cover the interest payments in 2009. The same problem is likely to recur in 2010 as well," Chapman at UBS said.

"We also believe the average Italian state debt service cost is not likely to fall much from recent 4.4 percent unless the duration of the portfolio shrinks much more than we expect. In fact, the duration has been extending in recent years."

Italian and Greek government bonds have also cheapened sharply, with their yield premium over benchmark German Bunds soaring well over 100 basis points as investors switched into safer haven German assets. (...)

Reuters.com

I dati del mercato dell'auto negli USA a novembre

Ford - 30.6%;
Toyota - 33.9%.
Honda - 31.6%
Volvo - 46.5%
Chrysler - 47%
GM - 41%

The Big Picture

Mercato dell'auto: -30% a novembre

In Italia crollano le immatricolazioni delle auto in novembre: -29,46 per cento, rispetto allo stesso periodo di un anno prima a 138.352 unità. Lo comunica il ministero delle Infrastrutture e dei Trasporti, precisando che per i trasferimenti di proprietà di auto usate la flessione è del 12,45% a 394.667.

Ilsole24ore.com

Il quartetto degli orsi

Chi voleva uccidere Morgan Stanley?

Sul Wall Street Journal è stata pubblicata una ricostruzione degli ultimi giorni di settembre in cui anche Morgan Stanley sembrava destinata a sparire come Lehman. 

Una storia torbida che ha come protagonisti alcuni dei principali concorrenti di MS, gli short sellers, i rumors e le  movimentazioni inusuali dei CDS relativi a MS.

Anatomy of the Morgan Stanley Panic

Two days after Lehman Brothers Holdings Inc. sought bankruptcy protection, an explosive rumor spread that another big Wall Street firm, Morgan Stanley, was on the brink of failure. The chatter on trading desks that Sept. 17 was that Deutsche Bank AG had yanked a $25 billion credit line to the firm.

John Mack

That wasn't true, but it helped trigger a cascade of bearish bets against Morgan Stanley. Chief Executive Officer John Mack complained bitterly that profit-hungry traders were sowing panic. Yet he lacked a critical piece of information: Who exactly was behind those damaging trades?

Trading records reviewed by The Wall Street Journal now provide a partial answer. It turns out that some of the biggest names on Wall Street -- Merrill Lynch & Co., Citigroup Inc., Deutsche Bank and UBS AG -- were placing large bets against Morgan Stanley, the records indicate. They did so using complicated financial instruments called credit-default swaps, a form of insurance against losses on loans and bonds.

A close examination by the Journal of that trading also reveals that the swaps played a critical role in magnifying bearish sentiment about Morgan Stanley, in turn prompting traders to bet against the firm's stock by selling it short. The interplay between swaps trading and short selling accelerated the firm's downward spiral.

This account was pieced together from the trading documents and more than six dozen interviews with Wall Street executives, traders, brokers, hedge-fund managers, regulators and investigators.

For years, sales of credit-default swaps were a profit gold mine for Wall Street. But ironically, during those tumultuous few days in mid-September, the swaps market turned on Morgan Stanley like a financial Frankenstein. The market became a highly visible barometer of the Panic of 2008, fueling the crisis that ultimately prompted the government to intervene.

Other firms also were trading Morgan Stanley swaps on Sept. 17: Royal Bank of Canada, Swiss Re, and hedge funds including King Street Capital Management LLC and Owl Creek Asset Management LP.

Pressure also mounted on another front. There was a surge in "short sales" -- bets against the price of Morgan Stanley's stock -- by large hedge funds including Third Point LLC. By day's end, Morgan Stanley's shares were down 24%, fanning fears among regulators that predatory investors were targeting investment banks.

That pattern of trading, which previously had battered securities firms Bear Stearns Cos. and Lehman, now is dogging Citigroup, whose stock fell 60% last week to a 16-year low.

Andrew Cuomo

Investigators are attempting to unravel what produced the market mayhem in mid-September, and whether Morgan Stanley swaps or shares were traded improperly. New York Attorney General Andrew Cuomo, the U.S. Attorney's office in Manhattan and the Securities and Exchange Commission are looking into whether traders manipulated markets by intentionally disseminating false rumors in order to profit on their bets. The investigations also are examining whether traders bought swaps at high prices to spark fear about Morgan Stanley's stability in order to profit on other trading positions, and whether trading involved bogus price quotes and sham trades, people familiar with the probes say.

No evidence has emerged publicly that any firm trading in Morgan Stanley stock or credit-default swaps did anything wrong. Most of the firms say they purchased the credit-default swaps simply to protect themselves against potential losses on various types of business they were doing with Morgan Stanley. Some say their swap wagers were small, relative to all such trading that was done that day.

Proving that prices of any security have been manipulated is extraordinarily difficult. The swaps market is opaque: Trading is done by phone and email between dealers, without public price quotes.

Erik Sirri

Erik Sirri, the SEC's director of trading and markets, contends that the swaps market is vulnerable to manipulation. "Very small trades in a relatively thin market can be used to … suggest that a credit is viewed by the market as weak," he said in congressional testimony last month. He said the SEC was concerned that swaps trading was triggering bearish bets against stocks.

Morgan Stanley had entered September in pretty good shape. It made money during its first two fiscal quarters, which ended May 31. It didn't have as much exposure to bad residential-mortgage assets as Lehman did, although it was exposed to commercial-real-estate and leveraged-loan markets. Mr. Mack knew that third-quarter earnings were going to be stronger than expected.

On Sept. 14, as Lehman was preparing to file for bankruptcy protection, Mr. Mack told employees in an internal memo that Morgan Stanley was "uniquely positioned to succeed in this challenging environment." The following day, the firm picked up some new hedge-fund clients who had fled Lehman.

But rumors were flying as traders worried which Wall Street firm could fall next. The chatter among hedge funds was that Morgan Stanley had $200 billion at risk as a trading partner with American International Group Inc., the big insurer on the brink of a bankruptcy filing, according to traders. That wasn't true. Morgan reported in an SEC filing that its exposure to AIG was "immaterial."

Some brokers at rival J.P. Morgan Chase & Co. were suggesting to Morgan Stanley clients it was risky to keep accounts at that firm, people familiar with the matter say. Mr. Mack complained to J.P. Morgan Chief Executive James Dimon, who put an end to the talk, these people say. Deutsche Bank, UBS and Credit Suisse also marketed to Morgan Stanley's hedge-fund clients, people familiar with the pitches say.

On Sept. 16, Morgan Stanley's stock fell sharply during the day, although it rebounded late. Some hedge funds yanked assets from the firm, worried that Morgan might follow Lehman into bankruptcy court, potentially tying up client assets. In an effort to quell concerns, Morgan Stanley released its earnings that afternoon at 4:10 p.m., one day early.

Colm Kelleher

"It's very important to get some sanity back into the market," said Colm Kelleher, Morgan's chief financial officer, in a conference call with investors. "Things are frankly getting out of hand, and ridiculous rumors are being repeated."

UBS analyst Glenn Schorr asked Mr. Kelleher about the soaring cost of buying insurance in the swaps market against a Morgan Stanley debt default. Protection for $10 million of Morgan Stanley debt had risen to $727,900 a year, from $221,000 on September 10, according to CMA DataVision, a pricing service.

"Certain people are focusing on CDS as an excuse to look at the equity," Mr. Kelleher responded, implying that traders betting on swaps were also shorting Morgan Stanley shares, betting that the stock price would fall.

It's impossible to know for sure what was motivating buyers of Morgan Stanley credit-default swaps. The swap buyers stood to receive payments if Morgan Stanley defaulted on bonds and loans. Some buyers, no doubt, owned the firm's debt and were simply trying to protect themselves against defaults.

But swaps were also a good way to speculate for traders who didn't own the debt. Swap values rise on the fear of default. So traders who believed that fears about Morgan Stanley were likely to intensify could use swaps to try to turn a fast profit.

Amid the uncertainty that Sept. 16, Millennium Partners LP, a hedge fund with $13.5 billion in assets, asked to pull out $800 million of the more than $1 billion of assets it kept at Morgan Stanley, according to people familiar with the withdrawals. Separately, Millennium had also shorted Morgan Stanley's stock, part of a series of bearish bets on financial firms, said one of these people. In addition, the hedge fund bought "puts," which gave it the right to sell Morgan shares at a set price in the future.

"Listen, we have to protect our assets," Israel Englander, Millennium's head, told a Morgan Stanley executive, according to one person familiar with the conversation. "This is not a personal thing."

Those bearish bets, small compared to Millennium's overall size, rose in value as Morgan Stanley shares fell.

That same day, Sept. 16, Third Point LLC, a $5 billion hedge-fund firm run by Daniel Loeb, began to move $500 million in assets out of Morgan Stanley. The following day, Sept. 17, Third Point, after seeing the surge in swaps prices, made a substantial bearish bet, selling short about 100,000 Morgan Stanley shares, trading records indicate. Third Point quickly closed out that position for a profit of less than $10 million, says one person familiar with the trading.

Around the same time, hedge fund Owl Creek began asking to withdraw its assets, and ultimately took out more than $1 billion.

On the morning of Sept. 17, David "Tiger" Williams, head of Williams Trading LLC, which offers trading services to hedge funds, heard from one of his traders that a fund had moved an $800 million trading account from Morgan Stanley to a rival. His trader, who was on the phone with the fund manager who moved the money, asked why. Morgan Stanley was going bankrupt, his client responded.

Pressed for details, the fund manager repeated the rumor about Deutsche Bank yanking a $25 billion credit line. Mr. Williams hit the phones. His market sources told him they thought the rumor false.

But damage already was being done. By 7:10 that morning, a Deutsche Bank trader was quoting a price of $750,000 to buy protection on $10 million of Morgan Stanley debt. At 10 a.m., Citigroup and other dealers were quoting prices of $890,000.

As the rumor about Deutsche spread, Morgan shares fell sharply, from about $26 at 10 a.m. to near $16 at 11:30 a.m.

Before noon, swaps dealers began quoting the cost of insurance on Morgan in "points upfront" -- Wall Street lingo for transactions where buyers must pay at least $1 million upfront, plus an annual premium, to insure $10 million of debt. In Morgan Stanley's case, some dealers were demanding more than $2 million upfront.

Bearish Signal

Firms making trades protecting against a Morgan Stanley default during Sept. 17 and 18, 2008

Firm	Net Purchase+ (in millions)	Comment
Merrill Lynch	$149.2	Doesn't comment on trades
King Street	110.0	Hedging
Royal Bank of Canada	69.0	Replacing Lehman swaps
Citigroup	55.7	Hedging, customers
Deutsche Bank*	50.6	Hedging, customers
Swiss Re*	40.0	No comment
Societe Generale**	37.5	No comment
Owl Creek*	35.5	Insuring collateral held at Morgan Stanley
UBS*	35.0	No comment
Liberty Harbor Master Fund**	30.0	Hedging
ACM Global Credit Fund	28.0	Hedging
Bank of America**	27.0	No comment
Castlerigg**	25.0	No comment
Barclays**	21.0	No comment
Cyrus Opportunity Fund**	20.0	No comment

+ Morgan Stanley debt covered by credit default swaps.

* Trading on Sept. 17

** Trading on Sept. 18

Source: Trading records, Wall Street Journal research

During the day, Merrill bought swaps covering $106.2 million in Morgan Stanley debt, according to the trading documents. King Street bought swaps covering $79.3 million; Deutsche Bank, $50.6 million; Swiss Re, $40 million; Owl Creek, $35.5 million; UBS and Citigroup, $35 million each; Royal Bank of Canada, $33 million; and ACM Global Credit, an investment fund operated by AllianceBernstein Holding, $28 million, according to the documents.

The following day, Sept. 18, some of those same names were back in the market. Merrill bought protection on another $43 million of Morgan Stanley debt; Royal Bank of Canada, $36 million; King Street, $30.7 million; and Citigroup, $20.7 million, the trading records indicate.

None of the firms will comment on how much they paid for the swaps, or whether they profited on the trades.

"The protection we bought was a simple hedge, not based on any negative view of Morgan Stanley," says John Meyers, a spokesman for AllianceBernstein. A Royal Bank of Canada spokesman says the bank bought the swaps to manage its Morgan Stanley "credit risk," and was not "betting against Morgan Stanley and conducted no bearish trades on its stock."

King Street, a $16.5 billion hedge fund, bought the swaps to hedge its exposure to Morgan Stanley, which included bond holdings, according to a person familiar with the fund. The fund didn't hold a short position in the stock, this person says.

Spokespeople for Deutsche Bank and Citigroup say their trading was relatively small and meant to protect against losses on other investments with Morgan, and to handle client orders. An Owl Creek spokesman says it bought the swaps "to insure collateral we had at Morgan Stanley at the time," and that it continues to do business with the firm.

Merrill, UBS and Swiss Re declined to comment on the trading.

As Morgan Stanley's stock tumbled, the number of shares sold short by bearish investors soared to 39 million on Sept. 17, nine times the daily average this year, adding to the 31 million shares shorted in the prior two days, according to trading records.

Mr. Mack sent a memo to employees on Sept. 17. "I know all of you are watching our stock price today, and so am I.… We're in the midst of a market controlled by fear and rumors, and short sellers are driving our stock down."

The stock and swaps trading were feeding on each other. That afternoon, Mr. Schorr, the UBS analyst, wrote: "Stop the insanity -- we need a time out." In an interview that day, he said "the negative feedback loop of stocks and CDS making each other crazy shouldn't be able to destroy the value of companies."

Scrambling to stop the crisis of confidence, Mr. Mack phoned Paul Calello, investment-banking chief at Credit Suisse, and asked whether he knew what was driving the cost of the swaps up so quickly, say people familiar with the call. Mr. Calello said he didn't.

Morgan Stanley's chief legal officer, Gary Lynch, once the SEC's enforcement chief, called New York Stock Exchange regulatory head Richard Ketchum. He said he was suspicious about manipulation of Morgan Stanley securities, and asked whether the NYSE would support a temporary ban on short selling, according to people familiar with the call.

Mr. Mack called SEC Chairman Christopher Cox, Treasury Secretary Henry Paulson and others. Trading in Morgan Stanley securities, he groused, was irrational and "outrageous," and "there's nothing to warrant this kind of reaction," says a person familiar with the calls. The steps already taken by the SEC to prevent certain types of abusive short selling, he argued, didn't go far enough.

In his memo to employees that day, Mr. Mack had made it clear that he intended to press regulators to rein in short sellers. When word about that got out, hedge-fund managers were up in arms. Some yanked business from Morgan Stanley, moving it to rivals including Credit Suisse, Deutsche Bank and J.P. Morgan. They said the trading represented legitimate protection and speculation.

James Chanos

Hedge-fund veteran Julian Robertson Jr. and James Chanos, a well-known short seller, both longtime Morgan Stanley clients, were both angry. Mr. Chanos says he "hit the roof" when he heard about Mr. Mack's memo.

After the stock market closed that day, Mr. Chanos decided that his hedge fund, Kynikos Associates, would pull more than $1 billion of its money from a Morgan Stanley account.

"It's one thing to complain, but another to put out a memo blaming your clients," says Mr. Chanos, who adds that the development all but ended a more-than-20-year relationship with Morgan Stanley. He says his fund hadn't bought any Morgan Stanley swaps or sold short its stock.

Other Wall Street executives, concerned about their stocks, were also calling regulators. At about 8:15 that night, the SEC said it would require more disclosure of short selling. Late the following day, Sept. 18, the SEC moved to temporarily ban short selling in financial stocks.

Mr. Mack contacted hedge-fund clients to tell them he hadn't single-handedly brought on the ban, and that he was primarily interested in giving the market a temporary "time out" from the volatile mix of rumors and trading.

But within days, more than three-quarters of Morgan Stanley's roughly 1,100 hedge-fund clients had put in requests to pull some or all of their assets from the firm, according to a person familiar with the operation. Even though most kept some money at the firm, Morgan Stanley couldn't process all the withdrawal requests at once, adding to market fear.

Morgan Stanley was in a precarious position. During the Sept. 17 trading frenzy, Mr. Mack had begun merger talks with Wachovia Corp. Four days later, Morgan Stanley shifted course, becoming a bank-holding company and gaining wider access to government funds. Last month, after raising $9 billion from a Japanese bank, it received a $10 billion capital injection from the federal government.

Morgan Stanley must now revise its business strategy to contend with a more risk-averse environment and the more stringent government oversight that comes with being a bank-holding company. Earlier this month, it announced it would fire about 2,300, or 5%, of its employees.

The cost of insuring its debt has come back down from its peak, but its stock remains in the doldrums. On Friday, it was trading at $10.05 a share in 4 p.m. composite trading on the New York Stock Exchange -- less than half of the $21.75 close on Sept. 17.

A month after the mayhem, Mr. Mack said in an interview that he had all but given up trying to get to the bottom of what was driving the trading in his firm's securities during those chaotic days in mid-September. "It's difficult to say what's rumor and what's fact," he said.

L'Italia (e il Regno Unito) fatica(no) a collocare le proprie obbligazioni

The UK and Italy struggled to sell bonds on Thursday in a fresh sign of the difficulties governments are facing because of the debt needed for economic stimulus packages and bank recapitalisations.

The two bond auctions saw both governments forced to pay higher yields to attract investors and Italy scaled back the amount on offer.

Analysts say it is an "ominous" warning that debt raising is likely to become even tougher in the coming months if problems are emerging so soon after government announcements to increase issuance. A record of more than €1,000bn ($1,290bn) of debt is expected to be issued in Europe next year.

Significantly, the bond auctions were for shorter-dated securities, usually the most sought after.

Roger Brown, global head of rates research at UBS, said: "The UK auction was dire. I do not remember one as bad for shorter-dated bonds. It is an ominous sign of trouble ahead.

"It is surprising to us that the UK Treasury should encounter such weak demand for a four-year gilt in only the second auction since Monday's pre-Budget report, when record levels of issuance were announced."

Giuseppe Maraffino, fixed income strategist at UniCredit, added: "The Italians ran into difficulties because of the lack of liquidity and investors. People are worried about the large amount of supply and the general environment."

Both the UK and Italian governments had to offer an extra 10 basis points compared with similar existing debt to entice investors to sell £3.75bn in four-year bonds and €1.4bn in three-year bonds respectively. The Italians also raised a lower amount than expected because of worries over weak demand.

Analysts emphasise that expectations of interest rate cuts in the UK, Europe and the US are supporting the bond markets and keeping yields historically low. For example, 10-year gilt yields this week dropped below 4 per cent for the first time since records began in 1961.

However, with economies contracting, lower tax receipts and rising benefit payments mean countries could face higher debt servicing costs as overall debt levels rise.

Among European countries, the UK and Italy may face the greatest difficulties because of their large debt programmes. The UK announced plans to raise an extra £37.4bn ($56.5bn) in gilts this year in the PBR.

This takes the overall total to £146.4bn – an all-time high and nearly three times the amount raised in 2007-08. The Debt Management Office forecasts bond issuance remaining high, at an average of £135bn a year, until 2013.

The Italians are forecast to issue up to €220bn in bonds next year, with €100bn in redemptions in the first half of the year – about €20bn higher than usual – putting the government under greater pressure to raise money.

UBS has warned that Italy's large debt burden of 103 per cent to gross domestic product – the highest in the eurozone – is unsustainable, forecasting it will rise to 107 per cent by the end of next year.

FT.com

Porsche: vendite in calo

Outlook: Porsche also affected by the general downward trend

Porsche Automobil Holding SE expects a significant drop in sales in the current business year 2008/09. The signs of a severe decrease in demand in the automotive industry are unmistakable the world over, and it is virtually impossible to calculate further developments particularly in the USA, Porsche's largest single market.

Porsche will hardly be able to escape this downward trend, so that currently we do not assume that we will be able to repead the high total sales of the previos business year. This is indeed borne out by revenue and sales figures in the current business year from 1 August to mid-November 2008, which indicate that turnover in the first four months of the business year 2008/09, that is up to 30 November 2008, will be slightly above two billion Euro following 2.36 billion Euro in the same period last year. Sales show a similar development, amounting to 25,200 units after 30,700 units year-on-year. The exact figures for the first four months will be published by Porsche in the Interim Report due in mid-December 2008.

Porsche.com

Nessun skateboarder nella stanza dei bottoni

«An Economist piece about incoming Treasury Secretary Tim Geithner explored Mr. Geither’s background in the Clinton Administration and his experience handling crises. But a number of blogs were more interested in a middle paragraph that that discusses Mr. Geithner’s youthful appearance and fondness for naughty words. It also notes that he snowboards and has tried skateboarding. The description prompted the Daily Showblog to correct an earlier post that described Mr. Geithner as “boring.”

A skateboarding Treasury secretary would indeed be something special. However, a Fed spokesman said yesterday that, in fact, Mr. Geithner doesn’t actively participate in skateboarding.

It was disappointing news, at least to this old skater — and probably a lot of others. You see, surfing and snowboarding have their government officials. Sen. John Kerry has been seen snowboarding and Hawaii State Sen.Fred Hemmings is a surfing legend. President-elect Barack Obama is known to bodysurf, which isn’t exactly surfing but surfers were still stoked .

We couldn’t find any skateboarders, at least active ones, in national office (we couldn’t find a survey). Best we could find was Tom Miller, who is indeed a ripper, as well as chief of staff for Portland, Oregon, Mayor-elect Sam Adams.

There are some theories as to why surfers and snowboarders have outdone skaters in seeking political office. Surfing and snowboarding tend to cost more, and this may act as a social filter.

Also, a lot of people start surfing and snowboarding in middle age. It’s certainly possible to pick-up skateboarding later in life, but few adults can stomach the time and pain commitment that learning skateboarding requires.

So it seems skaters will have to wait a bit longer for the first skateboarding Treasury secretary. Change can only happen so fast».

Real Time Economics

Pandit si giustifica (senza convincere)

Da Reuters.com

«Citigroup Inc Chief Executive Vikram Pandit on Tuesday blamed prior management for diving too deeply into real estate, causing losses that led to this week's massive government bailout of the second-largest U.S. bank by assets.

"What went wrong is we had tremendous concentration in the sense we put a lot of our money to work against U.S. real estate," Pandit said in an interview on PBS' Charlie Rose show. "We got here by lending money, and putting money to work in the U.S. real estate market, in a size that was probably larger than what we ought to have done on a diversification basis."

The government late Sunday rescued Citigroup by agreeing to shoulder most potential losses from a $306 billion portfolio of risky assets, and by injecting $20 billion of new capital, in its biggest effort to prevent a large U.S. bank from failing.

Citigroup has lost $20.3 billion in the last year, and many expect further losses from credit cards and other areas tied to the global economic crisis to pile up.

Since closing Friday at $3.77, Citigroup shares have risen 61 percent, and closed Tuesday up 13 cents at $6.08 on Monday. They have nevertheless tumbled 79 percent this year, after closing last year at $29.44.

Pandit said in the interview that short-sellers, as well as investors worried about Citigroup's asset quality, were among those who drove the bank's shares down in recent sessions, and that it was important "that we got control of the situation."

"I can completely understand how people on Main Street, people who are not close to this industry, would be furious at what's happened," he said.

Some wealthy investors have begun or pledged to begin buying Citigroup shares.

A Mexican brokerage controlled by Carlos Slim, one of the world's wealthiest people, spent about $150 million to buy nearly 29 million Citigroup shares between Nov 19 and Nov 25.

Meanwhile, Saudi Prince Alwaleed bin Talal last week said he plans to boost his stake in the bank to 5 percent from less than 4 percent».