Annie
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- Nov 22, 2003
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About author, more here, you'll still have to hit the biography link if you want more info:
Now to the article:
Slouching Toward Default, on Both Sides of the Atlantic - Megan McArdle - Business - The Atlantic
Megan McArdle is a senior editor for The Atlantic who writes about business and economics. She has worked at three start-ups, a consulting firm, an investment bank, a disaster recovery firm at Ground Zero, and the Economist. Megan holds a bachelor's degree in English literature from the University of Pennsylvania, and an MBA from the University of Chicago.
Now to the article:
Slouching Toward Default, on Both Sides of the Atlantic - Megan McArdle - Business - The Atlantic
It just gets worse...Slouching Toward Default, on Both Sides of the Atlantic
By Megan McArdle
You'll have to pardon me. I did mean to live blog this generation's Watergate hearings the second Dreyfuss trial Rupert Murdoch's fumbling appearance before British politicians, but I got distracted by less pressing events, such as the seeming stalemate over the US debt ceiling, and the ever widening gap between the bond spreads of Europe's center, and Europe's periphery. I do eventually hope to get back to the real story of the day, but I hope you'll permit me this small digression.
William D. Cohan, whose House of Cards is required reading about the crisis, sums up the disquiet in global markets:
Here are the facts: The yield on Greek sovereign debt is now at record highs for the euro era. Last week's state-managed bond auction in Italy almost failed. And, while few seem to have noticed, the overnight repurchase market -- for short-term, secured, corporate debt obligations -- nearly seized up amid what Combs described as "an almost panicky scramble" for less- risky paper.
Indeed, investors' manic desire for safety last week reached levels not seen since the most acute days of the financial crisis in September and October 2008. Ironically, though, given the pathetic display in Washington and the country's ongoing fiscal troubles, people turned in droves to the perceived security of the U.S. Treasury market, even though it has never looked shakier.
. . . At the same time, it's an open secret on Wall Street that the Federal Reserve Bank of New York has become increasingly concerned about the state of U.S. money-market funds. With as little fanfare as possible -- understandably, so as not to cause a panic -- the New York Fed has been urging domestic money- market funds to reduce their exposure to European banks, where the funds have turned to increase yields not available in the U.S. because of rock-bottom interest rates.
The Fed is said to be terribly worried that -- because of provisions in the Dodd-Frank law -- it will no longer be able to rescue a money-market fund if it "breaks the buck," as the Fed did famously the day after Lehman Brothers Holdings Inc. filed for bankruptcy.
Neil Hume channels Harvender Sian:
Spain has entered the danger zone for yield levels. The chart below shows the yield moves in the constant maturity 10y paper for the GIIPS countries. These markets traded a range between 6 per cent and 7 per cent but ultimately this proved to be a pause before the move to higher yields then accelerated. There is no consistent yield trigger level inside this range but market talk of point-of-no-return around the 6 ½% is not without foundation either.Slouching Toward Default, on Both Sides of the Atlantic
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