Australian Central Bank to Buy Mortgage-Backed Debt

Lots of mistrust out there..... And when you talk about as the Ft calls it "Enron-esque characteristics" with off balance sheet vehicles like SIV / conduits in the ABCP market this should be no surprise....

Jede Menge Misstrauen am Markt vorhanden..... Und das sollte auch vorhanden sein wenn man sich die wie die FT es schön ausdrückt "Enron-esque characteristics" der Zweckgemeinschaften ansieht die ausserhalb der Bilanz geführt werden. Fragt hier in Deutschland bei der IKB und in Sachsen nach.

Sept. 6 (Bloomberg) -- Australia's central bank said it will buy debt backed by home loans to add cash to the financial system, after the U.S. subprime credit rout eroded demand for asset-backed securities and drove up interest rates.

> Looks like Bloomberg is overstating it. If you read the official press release Reserve Bank Of Australia DOMESTIC MARKET DEALING ARRANGEMENTS they are not buying RMBS they are taking it as collateral. But nevertheless they have widened the possible funding options....

> Sieht so aus als wenn Bloomberg hier etwas zu dick aufgetragen hat. Wenn man die offizielle Pressemitteilung Reserve Bank Of Australia DOMESTIC MARKET DEALING ARRANGEMENTS als Maßstab nimmt, werden die Papiere nicht direkt erworben sondern wie auch von der Fed & Co lediglich als Sicherheit herangezogen. Bleibt aber trotzdem festzuhalten das die Notenbank die Möglichkeiten der Geldbeschaffung erheblich ausgeweitet hat....

The rate banks charge each other for three-month loans fell 15 basis points from yesterday's 11-year high of 7.06 percent after the Reserve Bank of Australia said in a statement today it will buy top-rated bonds linked to mortgage payments. Asset- backed commercial paper and bank bills are also eligible for purchase.

The move increases funds available to banks and supports the market for asset-backed debt in Australia, where credit markets have been roiled by losses related to debt backed by loans to U.S. homeowners. National Australia Bank Ltd., the nation's largest lender, yesterday said an affiliate had been unable to refinance A$6 billion ($4.9 billion) of loans.

> The FT has this to say Bad pennies roll back to NAB?

NAB’s chief financial officer Michael Ullmer will tell a UBS investment conference in London that the bank expects to see about A$11bn of these assets migrate to its balance sheet by the end of September

And, quoting directly from the Cheery PR Guide to Complex Financial Crises, a spokesman told the newswire:

So whilst this wasn’t a predicted event, it isn’t an event that causes us any concern.

All the assets are rated AA- or higher and the impact on NAB’s core capital ratios will be minimal, the spokesman added.

We aren’t concerned about the credit quality of the assets coming on board because they are subject to our normal credit processes and of course we have done a lot of work to diversify our funding over the years so we are in a strong funding position.

Good pennies, in other words, rather than bad pennies rolling back. Honest (End FT)

Australia's lenders depend more on capital markets for funds than other banks in the Asia-Pacific, Moody's Investors Service said in a report. Australia & New Zealand Banking Group Ltd., the third-largest lender, said Aug. 30 profit margins on its loans have narrowed as much as 25 basis points.

`Helps the Markets'
The Reserve Bank yesterday left the overnight cash rate unchanged at an 11-year high of 6.5 percent. Central banks typically buy government securities in so-called repurchase agreements, or repos, for a set period to bring money market rates closer to their targets. At maturity, the securities and the cash are returned to the central bank.

The spread for three-month Australian dollar Libor over the RBA's benchmark rate touched 56 basis points yesterday, the widest since February 2000. It has averaged 12 basis points in the past five years. A basis point is 0.01 percentage point.

Refinancing Trouble
National Australia Bank moved funding for A$6 billion of loans onto its balance sheet after the unit holding some assets was unable to refinance in the short-term debt market, the Melbourne-based bank told investors in London yesterday.

The rate banks charge each other to borrow in dollar for three months in Singapore rose for a ninth day to 5.7775 percent, the highest since Jan. 3, 2001. A similar benchmark in Hong Kong rose to 4.972 percent, the highest since April 6, 2001.

``The higher cost of funding in the interbank market reflects the banks' reluctance to lend because nobody knows the extent of the subprime problem out there,'' said Joseph Tan, strategist at Fortis Bank SA in Singapore.

The Bank of Japan refrained from adjusting funds in the financial system today. In Japan, the rate for overnight call loans between commercial banks and other financial institutions in Japan rose to 0.49 percent as of 12:13 p.m. in Tokyo from 0.42 percent yesterday, according to brokerage company Tokyo Tanshi Co. That's still below the BOJ's target of 0.5 percent.

Yields on three-month U.S. asset-backed commercial paper rose on Sept. 4 to 6.16 percent, the highest in more than six years, according to data compiled by Bloomberg. In Australia, margins lenders have to pay on the securities have risen up to 20 times the level of a month ago to as much as 40 basis points.

While the Australian dollar Libor rate rose 54 basis points from the end of July until yesterday, the dollar Libor rate climbed 36 basis points to a seven-year high of 5.72 percent

Bloomberg has some details on the impact on the important core capital

Moving loans onto National Australia's balance sheet will reduce core capital by 0.15 percent

Australia & New Zealand Banking Group Ltd., the nation's third-largest bank, has moved A$2.5 billion of loans back onto its balance sheet, and may shift the remaining A$2.1 billion by the end of this fiscal year, spokesman Paul Edwards said today. That will reduce its core capital ratio by as much as 20 basis points

Poof....There Goes The Carry Trade....

This should come as no surprise. On top of all the players that leveraged them to their eyeballs the clearest sign that something was about to happen came direct from Japan . The following stats are taken from Housewives Outmaneuver UBS, Deutsche Bank Trading Yen .

Das dürfte aber nun wirklich niemanden überraschen. Zu einen sind fast alle Marktteilnehmer bis über beide Ohren ins Risiko gegangen auf der anderen Seit kam das wohl klarste Signal direkt aus Japan. ( siehe Housewives Outmaneuver UBS, Deutsche Bank Trading Yen )

Japanese businessmen, housewives and pensioners betting against the yen in their spare time are wrecking the forecasts of the world's biggest currency traders

They tripled their trading in the year ended March to a record $11 billion a day

In Japan, individuals have opened 600,000 so-called margin trading accounts at brokerages that lend money for currency bets, 80 percent more than a year ago

Feels a little like the cab driver giving stock tips

Bei uns würde man das wohl "Milchmädchenhausse" nennen....

Thanks to Henry k. To. Chart taken from Market Not Close to Capitulation Just Yet

Chart does not include the brutal move today in Asia

As mentioned o n the above chart, the most recent correction in the four popular Yen cross rates is still not severe enough as what we witnessed during the late February to mid March correction. More importantly, these cross rates have only corrected to levels last seen during early June - definitely nowhere close to "capitulation" levels and a far cry to what we witnessed in Fall 1998, when the Yen - at one point - rose over 10% in a space of 24 hours!

bigger/größer

> It will be interesting to see how all the Japanese investors will react.... I can imagine that some of them are drinkng more Sake than usual...... :-)

> Ich bin gespannt wie all die japanischen Investoren reagieren werden... Ich kann mir gut vorstellen das einige in letzter Zeit mehr Sake als gewöhnlich getrunken haben... :-)

Aug. 16 (Bloomberg) -- The New Zealand dollar slumped, heading for its biggest weekly loss since the 1987 stock market crash, as investors slashed holdings of high-yield assets funded by loans in yen.

Australia's dollar, another favorite for investors who bought the nation's securities with money borrowed cheaply in Japan, tumbled as a drop in Asian stocks encouraged investors to unwind their carry trades. Both currencies fell to their lowest in more than four months against the dollar and yen on concerns losses related to subprime mortgages are deepening.

``The subprime issue is the center of the credit crisis universe and everything else is orbiting around it,'' said Alex Sinton, senior currency dealer at ANZ National Bank Ltd. in Auckland. ``The kiwi is one of fringe planets in that universe and it's going through a meteor belt at the moment.''

New Zealand's dollar slid 3 percent to 69.39 U.S. cents at 3:08 p.m. in Wellington. It fell as low as 69.37 cents, the weakest since March 16. It has tumbled 8.4 percent in the past 5 days and 14 percent since touching 81.10 cents on July 24, the strongest since being allowed to trade freely in 1985.

The currency also tumbled 3.2 percent against Japan's currency to 80.79 yen after having the biggest loss since December 2005 yesterday.

The Australian dollar declined 1.2 percent to 81.40 U.S. cents from late in Asia yesterday. It touched 81.38 cents, the least since April 5 and lost 4.9 percent over the past five days, the most since May 2004. The currency fell 1.5 percent against the yen to 94.72.

`Jumped On'
``The kiwi and Aussie will underperform,'' said Jonathan Cavanagh, a currency strategist at Westpac Banking Corp. in Sydney, referring to the currencies by their nicknames. ``Any bad news is jumped on in a big way.''

The Morgan Stanley Capital International Asia Pacific Index of shares fell 3.4 percent to the lowest since March.

Japan's 0.5 percent overnight lending rate is the lowest of any major economy. New Zealand's central bank raised borrowing costs four times this year to 8.25 percent and the Reserve Bank of Australia increased rates last week to 6.5 percent, making their currencies more appealing for carry trades.

New Zealand Finance Minister Michael Cullen said the nation's currency, which has slumped 11 percent the past three weeks, is still unjustifiably high.

> And when you look at the cuurent account balance...... But who cared about fundamentals just a few weeks ago....

> Wenn man sich die Daten zum Defizit ansieht ist diese Aussage mehr als berechtigt.... Aber wen haben bis vor einigen Wochen Fundamentaldaten interesssiert.......

Australian buyout spree could end in tears

good to hear some honest words from a ceo of a major bank. unfortunately he is by far the minority. some big players in the us are increasing their exposure (just ask morgan stanley etc....)

tut gut ehrliche worte von einem hochrangigen bänker zu hören. in der zwischenzeit fahren gerade in den usa einige häuser ihr engagement gen norden ( morgan stanley etc....)

National Australia Bank Ltd. (NAB) chief executive John Stewart said Wednesday the local multibillion dollar private equity market is starting to overheat and is headed for a correction. (i think it could be a severe correction...., tippe auf ne "ernsthafte" korrektur...)

Stewart told shareholders at NAB's annual meeting the boom in private equity could "end up in tears". .

NAB - which ranks as Australia's largest bank with a market value of A$65.9 billion - is "very cautious" about its own participation. ( with a pe 16/17 there is really no room for error..../ bei nem kgv von 17 bleict auch kein raum für fehler....)

"We are a big player in private equity but we don't hold it," he said. Stewart said the NAB Capital unit, which originates most of the bank's private equity business, repackages the loans and sells the risk on to institutions. (like hedge funds, pension funds etc....thin ice.../ dünnes eis....)

....Merger & acquisition activity in Australia more than doubled last year to a record US$103.4 billion, according to data firm Dealogic, with the market ranking as the region's most active outside Japan. ......

With the board of Australian icon Qantas agreeing in December to a A$11 billion bid from a consortium led by Macquarie Bank Ltd. (MBL.AU) and Texas Pacific Group (TPG.XX), analysts say no company seems out of reach.

"We have now got private equity coming in and they are starting to look at very well run companies. And we see this often in any cycle where things just go too far," he said.

Central Bank Also Has Concerns

Westpac chief executive David Morgan said in November the big four bank is reluctant to play a key role in the wave of debt-funded buyouts, citing the high leverage of many of the deals.

"We are very, very wary about the private equity segment, have very low exposure to it and are approaching it very, very cautiously," Morgan said after unveiling the bank's annual profit.

the chairman of consortium member Allco Finance Group (AFG.AU), has questioned the sustainability of the private equity boom with deals being done at increasingly high leverage.

"If we neglect to ensure sustainable cash flows, if and when the markets turn down, we will see a crisis," Coe told Dow Jones Newswires in an interview this week.

"If we gear the bejesus out of business, we will see a crisis."

Reserve Bank of Australia Governor Glenn Stevens in December warned the trend toward more leveraged deals could heighten the risks to Australia's continued financial stability.

Paul Masi, the chief executive of Merrill Lynch in Australia, says buyouts have become more debt laden over the last few years.

"In the private equity space, deals were typically two times geared, now they are seven times geared," Masi told Dow Jones Newswires in an interview last month. ( add to this the explosion in australian hedge funds.......dazu noch die explosion der australischen hedge fonds....)

"There is some pretty heavy leverage in the system that is being manufactured, and I don't think that has been really completely understood.

"But to get the returns people want, gearing levels are going up. As long as the cycle stays good, it's fine." ......Australia's equity market is "highly vulnerable to the slightest disruption".

"It's all too easy, and in my view, the step up in private equity activity has brought a real complacency to the market. The market seems to think private equity will take them out of everything," he said in a client newsletter Tuesday. ( same globally , afdter every warning multiple "possible" bidders/buyers are in the news....dasselbe weltweit, nach jeder warnung werden diverse "mögliche" bieter/käufer genannt.)

Aitken estimates there is at least 400 basis points of "private equity hype" reflected in the country's benchmark S&P/ASX200 index. (close to 7% )

"And that's the 400 basis points that will be wiped out in the pending trading correction as bond yields rise," he said. The index fell 0.7% Wednesday to 5773.4 points.

Craig James, chief equities economist at Commonwealth Securities, urged investors to show "great diligence" in terms of assessing the potential impact of private equity on the market, with rising global interest rates posing a risk. ( or just rising spreads!)

"The fallout would be if one of these transactions goes south and that leads to an unraveling across financial markets," said James. .....

bubble world tour / economist

looks like germany is a weird place to start a "immobilienblasen"/housingbubble blog............. :-)
the bubble in the usa has popped. it is no question if it is a question when it will deflate in the rest of the world.
more on the bubble worldwide http://immobilienblasen.blogspot.com/2006/09/bubble-goes-global.html#links


schon komisch das ich als deutscher ein immobilienblasen blog gestartet habe..... :-)
in den usa ist die blase bereits geplatzt. beim rets ist frage eher wann und nicht ob sie platzen wird. mehr zum weltweiten bubble http://immobilienblasen.blogspot.com/2006/09/bubble-goes-global.html#links


While America's housing market cools, property elsewhere is still hot http://www.economist.com/finance/displaystory.cfm?story_id=8381960

IN MANY countries, people are showing little sign of losing their appetite for residential property. Although the pace in several of the raciest markets around the world has eased a bit in the last quarter, prices have risen by more than 10% in the past year in eight of the countries in our table. ....





However, in America the steam has come out of the housing market. .......


A huge number of homes is awaiting sale: 7.4 months' supply of both existing and new properties.


David Rosenberg, an economist at Merrill Lynch, points out that inventories of new homes are 40% above their historical norm. The number of new properties completed but not yet sold has risen by 50% in the past year, to 166,000. America's builders are cutting back hurriedly. In October alone private residential-construction spending fell by 1.9%; it was 9.4% lower than a year before.

Although America's bubble is deflating, other markets are still looking decidedly frothy. Denmark tops our property-inflation table; elsewhere in Europe, house prices in France, Spain and Ireland are still simmering. In Australia and Britain, where it once seemed that property markets had levelled off, prices have picked up again, rising by 9.5% and 9.6% respectively to November of this year.

The Australian figure disguises marked regional variations. Prices in Sydney rose rapidly in 2003, fell in late 2004 and 2005 and are (just) increasing again. In sizzling Perth prices rose by 46% in the year to the third quarter. In Britain too the pace varies from one area to another: in the year to the third quarter, prices in Northern Ireland rose by a third, ....., while those in the north of England rose by less than 1%. But the renewed pep in the national pattern has revived talk of a housing bubble.

In a thoughtful recent study David Miles, of Morgan Stanley, tries to explain the doubling of real British house prices in the past decade. Some of the increase, he says, can be ascribed to rising real incomes; a smaller share can be explained by increases in population; some can be put down to lower real interest rates (including the keener pricing of mortgages by lenders). However, a lot of it is speculative.(quite an understatement chart!/ lerichte untertreibung chart)

Between one-third and one-half is due to increased expectations of house-price inflation. These amplify the effects of other factors. Faster increases in prices foster the belief that future increases will also be stronger, so that higher prices fuel demand rather than dampen it.



The need to explain so much of Britain's house-price inflation by a change in expectations, writes Mr Miles, “suggests that the current level of house prices may be rather unstable.” Once those expectations come down, real house prices are likely to fall. The trouble, of course, is predicting when. (coming sooner than most people think, kommt schenller als die meisten denken....)