Thursday, March 25, 2010

Nakheel PJSC-ECB collateral announcement-European money supply -US continuing claims-Fed Update – $SPY

 Eco/sovereign Headlines

·         Fed Update – Bernanke testified before the House today on “exit strategies”; Bernanke actually released extensive testimony in preparation for this hearing a few weeks back and the update published this morning was pretty much a reiteration of those prior comments.  Bernanke reiterated the “extended period” language re the Fed Funds rate. 

·         US continuing claims - Initial jobless claims for the week of March 20 declined 14,000 to 442,000. The 4-week average declined 11,000 to 453,750. Continuing claims for the prior week declined 54,000 to 4.648mn and the insured unemployment rate held at 3.6%. Note that the reported series reflects annual revisions and the level of continuing claims for recent weeks has been revised up about 125,000.  Robert E Mellman 

·         European credit - As in recent months, today’s ECB’s money and credit report provided further encouragement about the availability of bank lending in the Euro area overall. Bank lending to households increased for the tenth consecutive month in February, driven by higher mortgage lending. Household loans are continuing to expand at a respectable 3% annualized pace.    

·         European money supply - the broad money aggregate M3 contracted slightly more than consensus expectation (J.P. Morgan: -0.4%oya, Consensus: -0.1%oya). The slight undershoot, relative to consensus, has little significance in our view given that M3 is noisy and is currently being depressed somewhat by various portfolio shifts.  Greg Fuzesi    

·         ECB collateral announcement - ECB President Trichet today announced that the ECB will keep the minimum credit threshold on the collateral it accepts at BBB- beyond the end of this year. This compares to a threshold of A- before the financial crisis. The move takes pressure off Greece and banks more generally by reducing the risk that Greek sovereign debt will become ineligible as ECB collateral, should further credit rating downgrades materialise. Even though the extension of the lower threshold is not a huge surprise, the announcement comes somewhat earlier than expected and, more significantly, just ahead of the EU summit.  Technical details will be provided at the upcoming policy meeting on 8 April.   

·         Nakheel PJSC: Dubai World restructuring proposal: Thoughts on Nakheel, DP World, DIFC, JAFZA and DHCOG – JPMorgan’s Zafar Nazim - Even as the entire Dubai Inc bond / sukuk universe rallies on this morning's seemingly positive announcement on Dubai World (DW) and Nakheel's restructuring proposal (Proposal), we would be cautious on indiscriminately extending the potential positive outcome for Nakheel bonds to other Dubai Inc entities

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