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June 2006

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  • Greece has lagged behind the rest of the eurozone in its use of techniques to free up value in real estate loans and assets. But banks’ needs for capital should fuel securitization, and new legislation will enable public bodies to make sale and leaseback deals. Dimitris Kontogiannis reports.
  • “Given all that has happened I’m surprised it wasn’t negative $60 billion” James Gorman, Morgan Stanley In his first public presentation since joining Morgan Stanley in February as president and COO of the global wealth management business, James Gorman outlined how he intended to turn the dwindling arm into a competitive force in the industry.
  • “It’s so bloody liquid, it’s not even funny.”
  • One piece of analysis that is certain to be a fixture on desks this summer is a 59-page report by Goldman Sachs. In preparation for the football World Cup, which kicks off on June 9 in Germany, Goldman Sachs has put together a guide to each participating country and its team’s chances of success.
  • The dealers at Scottish Widows cemented their reputation as smart traders by winning the Goldman Sachs trading game at the Trade Tech Equities conference for a second year in a row.
  • A busy sporting calendar means a burgeoning expense account for many investment banks.
  • The ballooning demand for mortgage credit in Spain is attracting new players and more flexible products.
  • The ability of the US to run a high current account deficit rests on a widespread belief that inflation and the cost of capital will remain low. But the conditions that underpin the deficit and the dollar’s role as the principal source of global capital are unlikely to be sustained for long.
  • ...While Wax wows them
  • “Financial institutions should put customers’ needs first”, according to a report published by PriceWaterhouseCoopers on May 24. But should their services extend to matchmaking for young journalists? One of Euromoney’s débutant hacks was secretly pleased on a recent trip back from Moscow when his host bank’s head of IR forgot her passport: the subsequent delay meant a missed flight back to London, and a chance to watch the Champions’ League final in Vienna with the bank’s PR man and a gentleman from the Austrian media.
  • If a product swamps a market, prices go down. Yet this basic economic tenet seems to have eluded many of the issuers in the Spanish covered bonds market. How else to explain the consistent lack of coordination in issuance endemic in the world of the cédulas?
  • Buy-to-let mortgage originators in the UK market have often argued that these assets should be seen as prime assets rather than non-conforming.
  • Barely a month seems to pass without either the launch of a new foreign exchange trading platform or at the least a significant enhancement and upgrade to an existing one.
  • Why the European government bond markets have failed...and what the European Union would like to do about it
  • Merrill Lynch has hired Tim Skeet as a covered bond product specialist reporting to Amir Hoveyda, European head of debt capital markets. He joins Merrill from ABN Amro where he was head of financial institutions origination for Germany and France. He joined the Dutch bank at the start of 2003, before that he held a senior FIG relationship banker role at Barclays Capital. Skeet is a veteran of the debt capital markets and one of the best-known faces in the covered bond sector. He started in the business some 25 years ago at Samuel Montagu.
  • Funds may take the chance to rebalance but don’t expect a crash.
  • Although adoption of an exchange-like structure has been predicted for years, foreign exchange has predominantly been traded over the counter. Could a new initiative by the CME and Reuters finally force the transition through? Lee Oliver reports.
  • Is there too much capital trying to find a home?
  • Investment banks are thinking of setting up their own alternatives.
  • The ability of the CDO bid to distort the wider capital markets is significant – and growing.
  • The advent of whole-business securitization and the creation of a liquid market in project-related debt has opened investors’ eyes to the rewards available in infrastructure. Governments’ desire for off-balance-sheet funding has also boosted the supply of suitable investments. But what makes infrastructure different? How do you buy it, sell it and manage it?
  • It is a good job that investors don’t seem to be able to get enough of UK prime RMBS as the pipeline of such paper stood at more than £9 billion ($16.7 billion) towards the end of May. The new RMBS issuers poised to launch into this market (revealed in Euromoney’s April issue) were flexing their muscles mid-month, with Lloyds TSB confirming its RMBS programme and RBS first out of the gate with its £4.7 billion Arran Residential Mortgages Funding. The bank has decided not to set up a master trust but will have securitized £9.2 billion of UK mortgage risk via just two transactions in roughly six months when the deal closes. Arran Residential Mortgages, which accounts for half of the pipeline on its own, should get a rapturous reception, given how buyers responded to Standard Life’s latest Lothian issue, which achieved record tights for the sector with dollar-denominated triple-A paper placed at eight basis points over Libor. Later in the month Granite Mortgages saw triple-B risk sold at an eyewatering 47bp over Libor, which could go a long way to explaining the recent intense issuer interest in this sector.
  • Floating rate notes are typically a short-dated bank product traditionally aimed at other banks’ treasuries. Is this the start of a new trend?
  • Andy Abrahams, you’re rubbish...
  • UBS has appointed Tom Fox and Matthew Koder as joint global heads of equity capital markets, replacing Lucinda Riches, who has headed the division for the past seven years.
  • US inflation fears spooked nervous markets this May, causing the biggest one-day falls in years. In the space of a week, the Nasdaq Composite Index and the FTSE 100 gave up their entire gains for the year. Both indices shed about 7%. Markets took fright at the larger-than-expected 0.6% rise in April’s US consumer prices, which also spilled over into commodities markets. Although many think the sell-off has been exaggerated, May’s Merrill Lynch’s Global Fund Manager Survey shows growing pessimism about inflation and corporate profits. The survey shows a sharp increase in the percentage of fund managers who expect a rise in core inflation, to 64% from 47% a month earlier. A net 9% of fund managers also expect corporate profits to deteriorate while a net 27% except operating margins to deteriorate. Nevertheless, half the sectors in the S&P500 have been posting double-digit earnings growth. Despite the uninspiring outlook for equities, bonds are still looking overvalued to a net 48% of respondents while equities by contrast are still looking underpriced to a net 3% of investors.
  • Richard Longmore, head of EMEA FX sales, has abruptly left Merrill Lynch.
  • Following a two-year hiatus, Belgium settles trade with Citi.
  • Lebanon puts itself back at the hub
  • As more and more Mexicans are encouraged to buy their own homes, the companies that provide mortgages will increasingly look to the international capital markets to fund their lending. Armando Guzman, director general of mortgage provider Metrofinanciera, talks to Lawrence White about his expansive borrowing strategy and his hopes for the development of mortgage-backed securitizations.
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