Anthony Peters, SwissInvest strategist
Enough people have complained to me that I never seem to have anything nice to say about anything and that writing critical columns is many times easier than writing positive ones. Well, today I will go the other way and, first up, chapeau to the Spanish government for successfully launching its €4 billion 30 year Bono, something which until very recently would have appeared utterly implausible.
Actually, it still appears pretty implausible but the evidence is there for all to see. Priced at mid-swaps +250bp, the transaction attracted a book of €10.8bn, was well bid in the real money space and looks to be opening this morning at or around 5bp tighter. The Treasury would have been foolish not to grab long term money as cheaply as it did for I find 5.15% interest on thirty year debt for a Baa3/BBB- utterly compelling, albeit from the borrower’s perspective, if not from the lenders’.
Longer serving readers will remember the Greenspan put. Well, the Draghi put which laid the foundations for this deal makes the Greenspan put look like Wile E. Coyote compared to the Road Runner. The idea that a country with the financial troubles of the Kingdom of Spain should so easily be able to issue anything beyond 3 years in the market will amaze but, that said, as far as the country itself is concerned as well as its tax-payers, taking what is on offer had to be a non-brainer.
Yellin’ for Yellen
Being in “nice” mode, I’d like to congratulate Janet Yellen on her nomination to the chair of the Fed and, although there will surely be plenty of fatuous back-chat during the confirmation process, she has to be well on the way. She might be the first woman to lead the Fed but she is, should anyone have missed that detail, the third successive Jew in the post. I just wonder how that would play out in this, our so highly prized “multi-cultural society” here in the UK.
I hear first moans and groans that she is to institutionalised in the Fed, that she will be a Mark II Bernanke, that she will not be able to bring anything radical to the central bank’s approach to either the domestic or global economic situation. To those who say that, all I can do is to quote Brig.Gen. Anthony McAuliffe’s response to the offer of surrender when he was encircled with the 101st Airborne at Bastogne in 1944 by saying “Nuts!”
Firstly, what the Fed has done in the past five years in terms of rates policy, of monetary stimulus and of verbal guidance has already been nothing less than revolutionary, possibly even reckless. It has done all it can to ease immediate pressure on both the economy and the administration but as German finance minister Wolfgang Schaeuble kindly reminded us on Tuesday, printing money resolves nothing. Dramatic shifts in policy should now be coming from Capitol Hill and 1600 Pennsylvania Ave and not from 20th and Constitution. A change in budgetary discipline is required from households and government alike. When will people get their head around the simple fact that the Fed can oil the wheels of growth but it cannot provide those wheels as well.
While still in nice mode, I am wondering what fun the head-line writers are going to have with such lines as “Yellen from the Rooftops” and whatever else they get paid to make up. There’s certainly more there to conjure with than there was with a name like Bernanke.
Mail and regrets
Also on a happy note, the privatisation of the UK’s Royal Mail looks to be an absolute blow out which will please those investors who got in on the act. Priced at £3.30/share, it was seven times over-subscribed with something in the region of 700,000 orders. In the grey market, it has been trading closer to £4.00 which makes it look a bit like one of the big utility privatisations of the 1980s.
The irony in this is that the pricing was signed off by the bank-basher in chief, Business Secretary Dr.Vince Cable. Private investor demand will most probably trigger the 8% green-shoe and Cable is under pressure to reallocate stock reserved for institutions to the pool reserved for private individuals. Whether the deal is mis-priced or simply over-hyped is to be seen but maybe Cable will finally get the message that hindsight vision is cheap and abundantly available. There’s more to the City and to markets than greedy, champagne swilling cardboard cut-outs. We’re not all straight out of the Alex cartoon, you know… Well, not all of us.
Today marks the 50th anniversary of the death of Edith Piaf - no better time to hum “Non, rien de rien…non, je ne regrette rien…”