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May 12 (Bloomberg) -- By Mark Gilbert
Investment banks have personalities
that are reflected in how they go about their business and how
their peers view them. Bands express their character traits
through the music they make and the company they keep. What
happens when you match banks with musicians?
1) Goldman Sachs = The Rolling Stones
Goldman Sachs Group Inc. occupies an odd position in the
investment-banking pantheon. The world's No. 1 securities firm by
market value is unloved by its peers and universally regarded as
arrogant. Its prodigious appetite for hard work and its unrivaled
profit-generating abilities arouse jealousy and admiration in
equal measure.
Goldman could almost be U2. While its followers are devoted,
it's still not quite cool to admit to loving the Irish band. The
rock 'n' roll establishment struggles to cherish a band whose
lead singer, Bono, rubs shoulders with presidents and popes as he
campaigns against global poverty.
U2, though, would never embrace Goldman's aim of being
``long-term greedy.'' So, step forward the Rolling Stones; no one
ever accused Mick Jagger and Keith Richards of paying anything
less than full attention to the bottom line.
2) Citigroup = Ozzy Osbourne
In ``Liar's Poker,'' Michael Lewis wrote that the key to
being a successful trader at Salomon Brothers in the 1980s was a
willingness to bite the ass off a bear every morning. Ozzy
Osbourne would have fitted right in; around the same time he is
reputed to have bitten the head off a dead bat thrown on stage
after assuming it was a rubber toy.
Salomon is now part of Citigroup Inc.'s empire. Ozzy is now
more famous for parading his family on a reality television show
broadcast by MTV. Both Citigroup and Ozzy are growing old
disgracefully; Citigroup's many and varied brushes with the
authorities around the world make the bank worthy of an alliance
with the former Black Sabbath singer.
3) Deutsche Bank = Fleetwood Mac
A lazy comparison would equate Deutsche Bank AG, Germany's
only global bank, with Kraftwerk, Germany's only global band.
Reliant on technology for success, secretive, Teutonic and
somewhat emotionless, they have a lot in common.
A different list of attributes, though, suggests an
alternative. Immensely profitable? Check. Years of infighting and
not communicating with one another? Check. Badly in need of a
style makeover? Check. It's Fleetwood Mac.
4) JPMorgan = Radiohead
JPMorgan Chase & Co. executives used to boast about the
bank's roomful of 250 Ph.D.s, designing exotic derivatives
strategies and proprietary mathematical models to tickle the
wackier wedges of the world's financial markets for profit. Too
clever by half, and needing another big hit to remain relevant?
It could almost be REM. Radiohead edges it.
5) Barclays Capital = Oasis
The capital-markets division of Barclays Plc could be the
Red Hot Chili Peppers; chaotic in the 1990s, gained some focus in
the early years of this decade, now looking a bit bloated and
self-indulgent. Or Barclays Capital could be Keane, since both
rose without a trace and are seemingly missing a key component,
with Barclays surviving without an equity business and Keane
bashing out pop music without the aid of guitars.
Oasis is a better fit. Snarling insolence failed to break
the U.S. market and, while past its peak, the band is still
capable of flashes of brilliance. Moreover, it probably has twice
as many employees as needed. I just can't work out which
Gallagher brother, Noel or Liam, is Barclays Plc President Bob
Diamond.
6) Morgan Stanley = Coldplay
Deadly earnest. Blue-blooded. Well-heeled. Regularly at the
top of the charts, though even fans have the nagging sense they
might just be going through the motions. Morgan Stanley and
Coldplay are made for each other.
7) Merrill Lynch = Madonna
Both Merrill Lynch & Co. and Madonna peaked in the 1980s and
have been irrelevant since the 1990s, notwithstanding umpteen
attempts at reinvention. A willingness to jump on any passing
bandwagon keeps David Bowie fresh; it leaves both Merrill and
Madonna looking a bit like Whitney (Houston) dressed as Britney
(Spears).
8) HSBC = any boyband
Guns N' Roses has been poised to release ``Chinese
Democracy'' for a decade. While some tracks have been performed
live or been leaked in rough form, the album itself still isn't
available. HSBC Holdings Plc has been poised to use its platform
in Asian investment banking as the springboard to become a fully
fledged global investment bank for at least as long.
HSBC, though, could be any manufactured boyband. The true
performers earn peanuts, while the management reaps the financial
rewards. And, if there is a genius Robbie Williams lurking in the
line-up, there's too much dead wood for the talent to shine
through.
9) UBS = Phil Collins
The bank and the former Genesis drummer/singer are both
rich, both based in Switzerland, and no one with any sense gives
a hoot about either. Medallion men with year-round tans and
chunky gold watches bank with UBS AG, and rate ``In the Air
Tonight'' as their favorite track of all time.
10) Commerzbank = David Hasselhoff
Both Commerzbank AG and David Hasselhoff, the singing star
of Knight Rider and Baywatch, are huge in Germany. Scientists
have failed to explain why.
· USD Swap Spread Market Gyrations.
· USD Swaption Market Swings.
USD Swap Spread Market Gyrations.
US dollar swap market spreads are quoted in the market as spread between Libor Market yields and on the run Treasury yields. For instance 10 year swap spread is quoted as
Swap Spread = Swap Rate (10 yr) - US Treasury (on the run) 10 Yr
Genesis of swap market happened by pure necessity of corporate companies. Later this market has grown to today’s gigantic size at the behest of a multitude of players like, central banks, mortgage investors, MSR, speculators, hedge funds and others. Consequently, US dollar swap market has matured and commoditised and attained a status equivalent to Treasury debt market in terms of credit quality and depth of the markets. To attain this status swap market had to weather many fierce crisis points. Each crisis had added towards depth and as a proxy to treasury debt. For instance, 1998 LTCM crisis and eventual flight to quality was instrumental for mortgage players to start using swaps to hedge their exposures.
Current state of Swap market makes it an imperative, to understand what forces dictate, long term level and short term daily movements in swap spreads. This understanding lends us a perspective to what to anticipate in terms of flow of trades and position our self to do the business more effectively.
Long term level of swap spreads is determined by two fundamental factors.
· Treasury debt supply
· Shape of the Yield curve.
Short term movements (daily, weekly) are caused by an array of factors. These factors work into daily ups and downs in swap spreads and summarizing short term gyrations.
· Asian central banks
· Corporate debt swapped issuance (or rate locks etc)
· Mortgage investors hedging (negative convexity etc)
· Repo Rate (Funding cost for treasuries)
· Credit Markets (market sentiment)
· Hedging activities by dealers/investors, like hedging exposure from exotic options like PRDC under inclement market environment.
Now that we have outlined, various forces affecting swap markets. I will discuss in detail, how each factor can impact swap spreads and identify whether a factor is swap spread widener ( increase the spreads) or tightner ( lower the spreads)
Treasury debt supply: Long term Swap spread levels mainly depend on the relative levels of treasury debt supply and non treasury debt supply in the debt markets. Stated differently as per the definition of swap spread, difference between, swap rate and Treasury yield, it measures the relative price between, bond and swap. This means heavy treasury supply will cause the relative levels to narrow or tighten and limited supply or fiscal surplus will cause these spreads to widen to their highest level.
During the decade of 1994- 2004, 10y swaps spreads have moved from their lows of 40bp as of 1994 and rising to a high of 120 in year 2000 and slowly dropping to levels of 40bps by end of 2004. During the same time, we have witnessed a fiscal deficit transforming to a surplus around 2000 and later moving back into deficit territory.
Therefore, current situation of fiscal deficit, suggests, spreads will not be reaching their highest levels of over 100 near future as we have to cross the gulf of deficit territory.
In conclusion, we can safely assume, spread levels will stay around current levels for some time in future. Also, growing treasury supply is spread tightener and diminishing supply is spread widener
Shape of the Yield curve: Curve shape is another first order determinant of swap spreads. Spread between long term and short term rates, like difference between 10y rate and 2y rate is representative of curve shape. If this spread is small, curve is flat and otherwise, curve is too steep. Curve shape is correlated with swap spread levels historically. Movement in the curve shape is governed by demand and supply dynamics of investment grade borrowers and pension fund/insurance company requirements. Former borrows when curve is steep and swap the issuance to floating rate liability and narrowing the spreads. Later is interested in hedging long term liabilities so prefer long dated assets. On the other hand when curve flattens and short term rates are closer to long term rates, then commercial banks enter the swap market to pay fixed and receive floating. This will put pressure on the spreads to spearhead upward.
Currently, we are seeing a flat yield curve but spreads are still at their tighter level around 50’s. This anomaly can be explained by current state of economy. High fiscal deficit and sufficient treasury supply always point towards low spread levels. Therefore, curve shape is giving precedence to state of economy in terms of effect on swap spreads.
Normally, curve steepness arises, because, fed rate cuts to stimulate the economy out of recession. At this point, GDP growth will be low, low tax receipts; abundant treasury supply into market will create a spiralling effect on swap spreads and pummel them to tighter levels. In contrast, when economy starts growing, increase of GDP growth rates, and increase in tax receipts due to increase on corporate profits accompanied by Fed hikes, will cause curve to flatten. This scenario will lead to spread widening as market is full of fixed payers.
When curve is flat, Spreads widen and curve is steep, Spreads narrow.
Summarily, two first order factors that affect; swap spreads levels in long term signal tighter swap spreads for some time in future.
Asian central banks: Asian central banks, have displayed enormous appetite for treasury debt. They gathered huge amounts of treasury debt and currently hold status of single largest investor in
Treasuries when available abundant, we observe, swap spreads getting narrow. Similarly, when treasuries are not available, this will create a temporary pressure on swap spreads to widen. These days, Asian central banks have become more of a permanent feature in the markets than a temporary.
For now, Asian treasury investing is an indication of spread widening.
Corporate debt swapped issuance (or rate locks etc) Corporate borrowers raise funds in the investment grade debt market. This debt is usually fixed coupon in nature. Therefore, these borrowers try to swap the issuance depending on the market environment. Fixed rate debt is issued usually when yield curve is steep and short rates are very low. This will enable them to swap by receiving fixed and paying floating. This process will lead to lower spreads as dealers are paying fixed. As of may 2006, corporate issuance is not being swapped because we see rates are moving up, yield curve is near flat compared to 2003 levels.
Corporate swapped issuance is a spread tightener.
MBS hedging (Mortgage backed Securities): Mortgage Backed securities are pool of loans held by GSE, US banks, US Money Managers, Servicers and Originators. Loans underlying these MBS have prepayment option. This makes the loan payer to refinance whenever market conditions are conducive. Therefore, MBS loose value in a rally because of prepayment causing duration reduction. Also, during a sell of it looses value due to extension risk or increase in duration. To protect from these adverse situations, MBS investors hedge their risk by paying fixed in swaps during sell off (rates rise) and receive fixed during rally (rates fall and durations falls).
Rates rise in sell of will lead to duration increase and requires Payer so widener.
Rates fall in rally will lead to duration decrease and requires Receiver so tightener.
Repo Rate (Funding cost for treasuries): Dealer paying fixed with hedged position has a cost of carry, difference between, repo and libor funding cost. Lower Repo rates and lower spreads and Higher Repo rates higher spreads
Credit Markets (market sentiment): Credit market spread change do not have a first order impact on the swap spreads. Market reacts to the bad news by widening the spreads and narrowing the spreads on the good news.
Hedging activities by dealers/investors: This factor most important and critical factor that determines day to day movement in the swap markets. I believe, this factor, can be understood only by reading the flow.
Hedging exposure of Power Reverse Dual Currency notes when market shifts gears suddenly. This activity has caused compression of spreads. This suggests dealers paid fixed rate and investors needed receiver positions or increase of duration.
Swap spreads are normally directional in their nature with respect to treasuries. Rising rates is a spread widener. Falling yield is a spread tightener.
USD Swaption Market Swings
Swap Volatility markets are quoted in the options market as Black Implied volatility of a payer or receiver swaption, with a fixed maturity (swap tenor) starting some time in future (option term).
]]> http://yousheng.org/blog/
速度很快，每天能轻松的提供比原来多10倍的信息。建议您到新博客看一看并提供意见。
]]>I am testing a new host site of my bolg for reasons that I will explain later. Feedback is appreciated. Tahnk you.
正在测试新博客 （稍后将解释转换博客的原因）。 不知这个页面转换是否将给国内的读者带来不便， 如不能打开页面、速度太慢等等， 所以希望您将遇到的技术问题简要反馈以便帮助改进。 这段时间将在两个博客Blog. 谢谢。
]]>报道中引我的话:"...外管局所称的外汇储备多元化似乎更暗示着资产品种的多元化而非货币品种的多元化...". 但我确实还曾说过“...政府的外储多元化措施已经开始并且还将在未来借助传统金融工具以渐进的方式持续。石油黄金等商品储备虽可在边际上帮助外储多元化，但难成主流。 同时， 我们期待着看到中国的直接向外投资在今后几年中以各种形式拉开序幕。”
前一个观点两种观点确实有些不一致。 让我解释:一月初，曾向对中国外储多元化这个题材回答过记者的问题。 但当时由于各种原因， 哪篇采访并没有公布。 事后， 曾将问答纪录简要的登载在这个博客上 （原文）。 三月份，在对新数据分析后，认为黄金和石油等并不能有效的帮助多元化， 所以曾写过另一篇关于外储短评并发表（原文）。
有趣的是，一月份的采访竟在上周（4个月后）被总结发表。
Like what is always heared on the trading floor, "it's about timing".
个人目前的观点还是和三月份哪篇短评中的相同。
P.S. 既然又提起这个话题，索性将一些个人关于外储问题的其他，但没有公布过的，笔记，一起拿出和大家一起分享：
中国的外汇储备总量究竟多少才是最合理?
中国的外汇储备在2005年中净增2,090 亿美金,于年底达到8,190亿美金,仅次于日本的8,469亿美金居世界第二位。 如果加上央行在过去两年里动用外储注资于三大国有银行的600亿美金，中国的隐含外储已经居世界首位。
2006年一月,中国贸易顺差达到95亿美金。 照此速度,中国的外储总量将在今年一季度内成为实际的世界第一。
政府对于外储总量的观点曾经是”越多越好”， 但是在这种背景下,政府的观点似乎已经越来越不明显。
国际市场上衡量外储总量常用的指标有很多，其中主要的有两个: 一是看外汇储备可以负担多少个月的外贸进口,二是看外储总量占GDP的百分数。 对于亚洲国家，一些金融研究机构提议这两个指标的基准水平应该分别是6个月和20%。
评论这个基准的合理性超出本文的范围, 但是我们至少可以用它作为参照将中国和周边的国家地区作一下比较。 以日本、印度、韩国、新加坡、香港为例，这些地区的两项指标分别是：日本（19个月，18%）、印度（12个月，19%）、韩国（9个月，26%）、新加坡（7个月，98%）、香港（5个月，69%）。 作为对比，中国的两项指标是：15个月和38%。
可以发现，和日本、印度这些更可比的国家对照, 中国的外储总量偏高。或者说，中国目前有过剩的外汇储备。
具有过剩的外汇储备是好事还是坏事?
不妨让我们再一次从实际数据中寻找提示。
外储总量的增加有大致如下来源: 经常帐户(货品及服务出口及转口总值与进口总值的差额,不包括金融资产及负债的交易)顺差, 外国直接投资,中国公司海外IPO融资,国家外债净增长,民间和企业存款在人民币和外币间的兑换,误差忽略等。
根据最近4年的历史数据，中国外储总量的增长中来自于贸易顺差和外资直接投入的份额（2002-2005年的份额分别是：8,810, 9,940, 1,296, 1,904亿美金）远远大于来自其它项目的的份额（2002-2005年的份额分别是：-139，624 , 770 , 185亿美金）。 这表明中国外储总量的增加是来自于基本经济的健康增长而非来自于短期波动性资金的输入。 从这方面看，外储增长是件好事。
同时, 外储总量的增加也引入了问题。 最直接的例子莫过于外储的保值：据估计, 65-70%的外储是以美金和美金资产的形式存在。 在目前美金动荡的环境下,这笔巨额资产的保值问题不可轻视。 另一个例子：由于各银行的外币资产通常是停留在央行的帐上而且这类外币资产目前估计已经占M2货币量的25%, 外储的增加将妨碍央行货币政策的灵活性。 类似的例子还有很多。由此看来, 外储总量太大、增长速度太快，不一定总是好事。
中国外汇储备总量的高速增长还将持续吗?
一月份是贸易的淡季, 加上是农历的新年，贸易量应该比往常减少。 但是，一月份的贸易顺差却出乎意料的高达95亿美金。 依照如此的速度, 中国2006年的总体贸易顺差没有理由比去年减缓。与此同时，也没有迹象表明2006年的外国直接投资规模将减小。 至于投机性外币”热钱” 的输入，自去年七月份的人民币汇制改革后虽然已见冷却,但此类输入却远没有消失。
以上种种因素预示着中国外储总量将在2006年内继续以现有或更高速度增长。西方各金融机构对06年底中国外储总量的预测大多在一万到一万二千亿美金之间。
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