Global financial system implosion begins

[CH1]

The failure of Republic First is a blip — in a rising tide of blips

The failure of Republic First isn't a systemic threat or even a surprise. But the conditions that led to its failure are not all that unique and may foreshadow a secular rise in bank consolidation — one that policymakers can either embrace or resist.

www.americanbanker.com

https://archive.ph/gIuEv

Here’s What Led To Republic First’s Collapse—And Why It’s Different From 2023 Failures

An auditor previously warned the bank of “material weaknesses” of internal controls.

www.forbes.com

Yeah well - delisted from NASDAQ in August 2023 - takeover by regulator for selling on to competitors the following April.
The United States moves at the speed of light - as we saw from t eh Ukrainian arms legislation.
Apart from which Republic Bank seems rather third order - we are talking Metrobank here, not Halifax.

 

[yield]

Central banks may have misread the impact of QT, says an economist
May 1st 2024 https://archive.ph/oSBM3

But this theory was designed for normal times, when fluctuations in excess bond supply are small, not for today’s world of high public bond ownership. For example, the share of Bunds (German government bonds) available for private-sector purchase has fallen from 72% in 2011 to around 40% now. Given such large public ownership, yields probably don’t reflect the levels that would clear a purely private market for government debt. Allowing the private sector to buy more government debt can therefore lead to higher yields over time, beyond the initial effect of QT when it is announced.

 

[gosub]

Central banks may have misread the impact of QT, says an economist
May 1st 2024 https://archive.ph/oSBM3

When is QT not QT?
America’s reckless borrowing is a danger to its economy—and the world’s https://archive.ph/3cm78

Anyway, with inflation not going away government debt balloning https://www.cnbc.com/2024/05/01/us-treasury-yields-ahead-of-fed-decision-policy-guidance.html

 

[gosub]

The Perils of the Fed’s Vast Bond Holdings https://archive.ph/s7h4P

If Fed's reserves assets went down..we already pinned that on the now ended BTFP. (ball park 500 smaller banks now drowning )

In other news. https://www.google.com/amp/s/www.cn...s-kind-of-debt-since-the-napoleonic-wars.html

 

[yield]

The era of globalisation is about to come screeching to a halt
telegraph. 16 May 2024 https://archive.ph/lraKp
The engine of prosperity that has propelled growth since the Cold War is on its way out

Reports that Microsoft has asked hundreds of employees in China to consider transferring outside of the country are another reminder of how quickly the walls are coming up between East and West.

Is the great era of globalisation that turned China into the workshop of the world effectively over? It’s still too early to say for sure but there is clearly a dramatic correction taking place – the big question is how severe and painful it will be.

Donald Trump has called it “decoupling”. Brussels prefers to talk more diplomatically about “de-risking”. With more than an eye on getting re-elected, Joe Biden has seemingly chosen to go in the other direction and turbo-charge the realignment into a full-blown divorce.

 

[CH1]

The era of globalisation is about to come screeching to a halt
telegraph. 16 May 2024 https://archive.ph/lraKp
The engine of prosperity that has propelled growth since the Cold War is on its way out

You know what - I would call this apocalypticism.
The Chinese have sent 40 years building up an export infrastructure.
The question is not whether there would be dislocation if we "decoupled".
The question is where is OUR infrastructure after 40 years of cuts?

In the UK were even import trains from Germany - annd talk about shutting the last train maker in Britain, in Derby (owned by Bombardier if Canada).
I'm sure rust belt America is the same - they think they can make iPhones in China and use the US constitution to enforce intellectually supremacy.

Dream on I say. Not globablisation. Penny pinching cuts and rentier capitalism.

 

[yield]

Losses Pile Up in Top-Rated Bonds Backed by Commercial Real Estate Debt
Bloomberg. 23 May 2024 https://archive.ph/GaXdX

For the first time since the financial crisis, investors in top-rated bonds backed by commercial real estate debt are getting hit with losses.

Buyers of the AAA portion of a $308 million note backed by the mortgage on the 1740 Broadway building in midtown Manhattan got less than three-quarters of their original investment back earlier this month after the loan was sold at a steep discount. It’s the first such loss of the post-crisis era, according to Barclays Plc. All five groups of lower ranking creditors were wiped out.

Market watchers say the fact the pain is reaching all the way up to top-ranked holders, overwhelming safeguards put in place to ensure their full repayment, is a testament to how deeply distressed pockets of the US commercial real estate market have become.

Bonds backed by single mortgages and tied to older office buildings dominated by one anchor tenant — like 1740 Broadway — are especially vulnerable, they say. Some analysts are already predicting further losses as more loans get sold for a fraction of their former value.

 

[CH1]

Losses Pile Up in Top-Rated Bonds Backed by Commercial Real Estate Debt
Bloomberg. 23 May 2024 https://archive.ph/GaXdX

Bring it on. Third hand 1950 New York office block multiple tier dodgy bonds go bust because Victoria's Secret owner moved out.
Who couldn't make it up?

 

[yield]

Commercial Property Meltdown Clobbers Pension Funds
Government retirement funds are selling property at a loss as the slump spreads
WSJ. May 31, 2024 https://archive.ph/1x9t4

Government pension plans are getting hit by the commercial real-estate meltdown and many fear the bleeding is far from over.

Canada’s national pension plan said in May that it is selling stakes in Manhattan and San Francisco office towers for $225 million less than it paid for them. In April, California’s government worker pension fund said it had unloaded a Sacramento property it had been trying to develop for almost two decades. In March, consultants warned California’s teacher pension that office holdings would continue to drag down returns, even after a 9% real estate loss in 2023.

The moves offer a new glimpse into the widespread and slow-moving commercial real-estate slump. Because those investments generally don’t trade on public markets like stocks, there isn’t an agreed-upon price. When the market shifts, it can take months or years for managers to adjust the value of their holdings.

 

[discokermit]

end of the petrodollar.

https://www.nasdaq.com/articles/us-saudi-petrodollar-pact-ends-after-50-years

 

[gosub]

U.S. Banks face $517 billion in unrealized losses

With almost $517 billion in unrealized losses, U.S. banks have faced nine consecutive quarters of growing losses.

finbold.com

It's not good...butits also wired into the expansion plans of the BIG banks who can't buy up these things due to regulations UNLESS they are earmarked distressed....

 

[ska invita]

end of the petrodollar.

https://www.nasdaq.com/articles/us-saudi-petrodollar-pact-ends-after-50-years

not seen this mentioned much anywhere...i wonder how serious the implications

 

[CH1]

not seen this mentioned much anywhere...i wonder how serious the implications

Probably not too - I had a memory flash when it was first posted up about the Eurodollar markets - which were considered crucial in the says of the 1982 financial crisis.
No-one mentions Eurodollars any more. But the Eurodollar market is still thriving now.

I guess IF all OPEC producers switched to accepting Roubles and Yuan this would seriously affect the dollar. But would the OPEC states want to end up like Venezuela?

 

[teuchter]

not seen this mentioned much anywhere...i wonder how serious the implications

Well... it's the 7,630th post that has been made on this thread without the global financial system imploding.

 

[ska invita]

Well... it's the 7,630th post that has been made on this thread without the global financial system imploding.

ok bro, thanks

 

[yield]

end of the petrodollar.

https://www.nasdaq.com/articles/us-saudi-petrodollar-pact-ends-after-50-years

The story above was apparently fake but these two articles are interesting

Saudis Warned G-7 Over Russia Seizures With Debt Sale Threat
July 9, 2024 https://archive.ph/WeRbP

Saudi Arabia privately hinted earlier this year it might sell some European debt holdings if the Group of Seven decided to seize almost $300 billion of Russia’s frozen assets, people familiar with the matter said.

The kingdom’s finance ministry told some G-7 counterparts of its opposition to the idea, which was meant to support Ukraine, with one person describing it as a veiled threat. The Saudis specifically mentioned debt issued by the French treasury, two of the people said.

Iraq halts financial transactions in Chinese Yuan under US pressure
11/07/24. IntelliNews (who they?) via MSN

Iraq has decided to stop using the Chinese yuan for financial transactions following a directive from the US Federal Reserve, citing concerns over potential manipulation and other issues with some transfers, a parliamentary finance committee member revealed to Al Forat News on July 11.

“The US Federal Reserve has mandated Iraq to cease dealing in the Chinese yuan, alleging irregularities and certain problems in transactions,” said Moeen Al-Kadhimi in a press statement. “Many decisions by the Central Bank of Iraq are imposed by the US Federal Reserve,” he added.

 

[yield]

Private Equity Investors Plead for More Clarity on NAV Loans
Bloomberg July 25, 2024. https://archive.ph/e3PIG

Private equity firms should alert investors before they borrow against their funds’ assets — especially when using so-called net-asset-value loans to juice returns, according to new guidelines from a trade group for such investors.

The Institutional Limited Partners Association issued the guidelines Thursday on NAV loans after much debate about their use amid a prolonged deal drought that has dampened distributions. While some firms contend NAV loans can help them raise cash when times are tight, certain investors perceive them as risky financial engineering that can imperil portfolio companies.

In particular, investors — known as limited partners — fret that any distributions they receive from a NAV-based facility could later be recalled to help pay down the loan.

There's also a paywalled FT article, that is broken when I try to read it through archive. Subscribe to the Financial Times

As higher interest rates put pressure on borrowers, regulators are asking an important question: could the private equity industry pose a risk to the wider financial system?

 

[Idaho]

Taking out loans to salt the mine for new investors. Seems legit.

 

[gosub]

https://archive.ph/krwxA

Article bcuster posted in Japan thread -Japan carry trade fckd.

 

[CH1]

https://archive.ph/krwxA

Article bcuster posted in Japan thread -Japan carry trade fckd.

Interesting - but they say its a market correction, not a melt-down.

 

[gosub]

Its carry trade...they've been borrowing cheaply from Japan and investing US...Magnificent 7 stocks that have been propping up US markets have been 'correcting' for the last couple of weeks whilst Japan has started raising rates...which impacts badly on the loans as well as raising exchange rate, which also hurts those in that position. Circuit breaker in both Tokyo AND Seoul tripped...

 

[bcuster]

Interesting - but they say its a market correction, not a melt-down.

That makes me feel much better...

 

[gosub]

That makes me feel much better...

It is August so a lot of people holidaying..so you do get larger movements relative to trading volume..if that helps.

However have seen estimates of size of carry trade of between $2 -10 trillion. Cathy Wood is saying 10 so I'd say closer to $2trillion

 

[bcuster]

It is August so a lot of people holidaying..so you do get larger movements relative to trading volume..if that helps

It does actually..

 

[og ogilby]

Buy the dip, is what they say.

 

[CH1]

Its carry trade...they've been borrowing cheaply from Japan and investing US...Magnificent 7 stocks that have been propping up US markets have been 'correcting' for the last couple of weeks whilst Japan has started raising rates...which impacts badly on the loans as well as raising exchange rate, which also hurts those in that position. Circuit breaker in both Tokyo AND Seoul tripped...

I have an 89 year old Japanese friend at the Proms. He was complaining at the Yen being too low. No doubt he will welcome an increase in the Yen on the foreign exchange.

 

[pbsmooth]

US stock market has been through the roof, especially tech stocks, so not a huge surprise. and when America sneezes...

 

[yield]

Japan’s benchmark Nikkei 225 index soars more than 10% after plunging a day earlier
August 6, 2024

TOKYO (AP) — Japan’s benchmark Nikkei 225 share index soared as much as 10.7% early Tuesday, a day after it plunged the most in 37 years.

 

[yield]

Global financial markets settle into ‘yo-yo pattern’ after Monday’s meltdown
CityAM 08/08/24

“Will the Fed back away from interest rate cuts to avoid further cutting the dollar-yen rate differential and further provoking yen-dollar volatility?” Mould said. “Or will that box in the US central bank just at a time when recession worries are gathering Stateside?”

How the world’s oldest bank brought a city to its knees
FT. 10/08/24 https://archive.ph/qi6B8
Monte dei Paschi has been Siena’s benefactor since 1472. But, in recent years, a multibillion-euro scandal in pursuit of aggressive growth has dealt it a crushing blow

It is hard to pinpoint the exact moment when things began to go wrong, but Pierluigi Piccini, a former mayor of Siena who once worked for the bank, put his finger on Monte dei Paschi’s acquisition of its Padua-based rival, Banca Antonveneta, in 2007. “Before the Antonveneta acquisition, [Monte dei Paschi] was one of the best capitalised banks in Italy,” he told me. “The financial problems started from that point.”

The decision to buy Banca Antonveneta from the Spanish bank Santander, for €9bn, just as the clouds of the financial crisis began to gather over Europe, would indeed go down as one of the worst mis-steps in the history of banking.
Santander had bought Banca Antonveneta only a few months before for two-thirds of what Monte dei Paschi agreed to pay. Santander’s chair, Emilio Botín, sounded almost embarrassed as he told shareholders about how his bank was making a €3.4bn profit from the deal.

To make matters worse, Monte dei Paschi had agreed to pay cash, rather than use its own shares. The management team were soon scrambling to raise the funds without affecting the bank’s capital position. They launched a series of retail bond sales, essentially borrowing money from households and small businesses to pay for the deal.

It soon transpired that very little due diligence had been done on the deal. Monte dei Paschi had paid massively over the odds for a badly indebted business with little opportunity for expansion. It had raised €1bn from Wall Street’s JPMorgan to contribute towards paying for Antonveneta through a type of bond that would convert into equity if the borrower ran into trouble. Italy’s central bank said Monte dei Paschi did not inform it about this transaction.

 

[CH1]

Not a global meltdown - but interesting to see how bond issuers have adapted to Grenada's recent disasters - but these "disaster break clauses" failed in Jamaica.
Grenada is not getting a hand-out here - the missed interest payments will simply be added to the total outstanding.
Towards the end of the article it notes that before the recent hurricane Grenada GDP had been 9.5% up partly due to citizenship sales - to people who could use Grenada citizenship to access US markets.
We are all prostitutes now - cf Malta and Ireland

https://archive.ph/PYCnw