Ever wondered why NRE deposit rates were freed?

Just have a look at the credit deposit ratio chart. It's the highest in 35 years.

ECB bought another 13.3 bill euros

The European Central Bank says it spent euro13.3 billion ($18.7 billion) last week ending sep 4 purchasing government bonds in an attempt to keep the continent's debt crisis from pushing Italy and Spain into financial collapse.

Via Salon.com

Now the total amount of purchases by ECB amounts to 130 billion euros. With 22bil, 14 bil, 6 bil, 13.3 bil in four weeks it has now spent 55 bil euros (increasing the amount spent by 70%) in a matter of four weeks. Note that ECB started buying bonds in the market around 13 months ago!

At this rate the bailout fund of 440 bil euros will get exhausted in 28 weeks!! not counting the collateral that it needs to hold and the fact the bond yields are still rising even with purchases. If adjusted the money will last for only few months.

Greece - 91% chance of default

Credit-default swaps on Greek government debt surged to a record, signaling a 91 percent chance the nation will fail to meet debt commitments, after its economy shrank more than previously reported.

Five-year contracts on the country’s sovereign bonds jumped 196 basis points to 3,001 basis points, at 3:45 p.m. in London, according to CMA, which is owned by CME Group Inc. and compiles prices quoted by dealers in the privately negotiated market.

Via Bloomberg

Does that remaining 9% really matter especially with today's fractional reserve systems used by financial institutions all over the world not only Greece.

Swiss Franc pegged to euro

The Swiss National Bank devalued the franc, pledging to buy "unlimited quantities" of foreign currencies to force down its value. The SNB warned that it would no longer allow one Swiss franc to be worth more than €0.83 – equivalent to SFr1.20 to the euro – having watched the two currencies move closer to parity as Switzerland became a "safe haven" from the ravages of the eurozone crisis.

Via Guardian

Another safe heaven lost. Gold is slowly becoming the safest asset against currency devaluations and money printing all over the world.

Greek one year bonds at 70% yield

Talks over new bailout funds for Greece were suspended Friday amid disagreements over how to fill a government-deficit gap that once again is veering off track, raising doubts about the country's future access to finance and triggering renewed nervousness in financial markets across Europe.

The suspension pushed yields on Greek government debt to levels indicating that investors see a default by Athens soon as a near certainty: Interest rates on one-year paper blew out past 70% and two-year yields rose close to 50%.

Via Wall Street Journal

Debt forgiveness annoucement is now just a formality.

Everonn troubles

The shadows lengthened over troubled education firm Everonn Education Ltd on Friday after chairman Jamshed J. Irani resigned days after the arrest of co-founder and managing director (MD) P. Kishore in an alleged bribery and tax evasion case by the Central Bureau of Investigation (CBI).

Via Livemint

Usually such investigations lead to larger troubles within. Better safe than to be sorry latter.

ECB might have stopped buying bonds

Bowing to the pressure from various corners on what it can do and cannot do, ECB may have stopped its bond purchases as yields of Italy and Spain started rising beyond their usual 5% yield last couple of weeks. The current yields on 10 year bonds are as follows

Italy - 5.28%
Spain - 5.12%

Greece two yields has now skyrocketed to 47% while 10 year bond is trading at 18%

Interesting times ahead in the next couple of weeks

IMF priority lender status for Greece in trouble

IMF is worried about its priority creditor status

"The use of collateral, a concession to win Finland’s backing for 109 billion euros ($155 billion) of loans pledged by euro leaders in July, would deny the IMF priority creditor status and violate Greek bondholders’

Via Bloomberg.com

The trigger point for euro crisis may come up on 07th Sep when Germany votes on the rescue fund.

India fiscal deficit is 55% of expected in just 4 months

The central government's fiscal deficit surged more than two-fold to Rs 2.2 lakh crore during the first four months of the current fiscal, on account of low revenue realisation and higher expenditure.

Fiscal deficit, the gap between overall expenditure and receipts, in the first four months of the financial year is almost 55% of the Budget estimate of Rs 4.12 lakh crore for 2011-12, as per the latest data of the Controller General of Accounts (CGA).

Via Moneycontrol

When you have very high expectations about what you can achieve, you tend to fall into much deeper s*!t. Another example above.

ECB bought another 6 bil euros of bonds

The European Central Bank says it spent euro6.65 billion ($9.64 billion) last week purchasing government bonds in an attempt to keep the continent's debt crisis from pushing Italy and Spain into financial collapse.

Via Salon.com

Now the total amount of purchases by ECB amounts to 116 billion euros. With 22bil second week, 14 bil third week, 6 bil fourth week of August it has now spent 42 bil euros (increasing the amount spent by 70%) in a matter of three weeks. Note that ECB started buying bonds in the market around 13 months ago!

Greece forced to tap emergency fund

Raoul Ruparel of Open Europe told The Telegraph: "The activation of the so-called ELA (Emergency Liquidity Assistance) looks to be the last stand for Greek banks and suggests they are running alarmingly short of quality collateral usually used to obtain funding."

He added: "This kicks off another huge round of nearly worthless assets being shifted from the books of private banks onto books backed by taxpayers. Combined with the purchases of Spanish and Italian bonds, the already questionable balance sheet of the euro system is looking increasingly risky."

Via Telegraph

Looks like Greek situation is getting excited again after the second bailout in July 2011

Russian Central bank to offer gold backed loans

Russia's central bank will offer gold-backed loans for up to 90 days at an interest rate of 7 percent, it said in a statement on Friday, expanding its lending facilities for dealing with any future liquidity crunch in the banking system.

Via Reuters

Gold is gaining importance day by day

Jeremy grantham's Aug letter

I am not an expert in euro finance by a wide margin. But I know one thing. Forget the debt for a second: the current uncompetitiveness of Greece, Ireland, Portugal, Spain, and Italy did not occur quickly. It took 10 long and obvious years. They had to work at it. The cure was always going to cause a lot of pain and threaten the well-being of the euro - Jeremy Grantham

Full Letter

Predictions

Although i seemed to have got it right this time when i was reasonably clear that we hit the top in Nov 2010 courtesy the following article i have written on 26th June 2011 - i did not happen to make a ruppee in the market using this? My money is not where my mouth is in this case - a lesson learnt.

Did we peak in Nov 2010?

Difficult days ahead - RBI

The Reserve Bank today warned of difficult days ahead, saying inflation will remain at elevated levels for some more time while the economic growth rate will moderate in the current fiscal.

Via Moneycontrol

Although RBI has been wrong a number of times as i have quoted here the above seems to be real scenario playing out currently unless there is a crisis or a semi crisis.

Japan's rating is cut by Moody's

Moody's Investors Service today lowered the Government of Japan's rating to Aa3 from Aa2, concluding the rating review that began on May 31. The outlook is stable.

The rating downgrade is prompted by large budget deficits and the build-up in Japanese government debt since the 2009 global recession. Several factors make it difficult for Japan to slow the growth of debt-to-GDP and thus drive this rating action.

Via Moodys

Aa2 is equivalent to the rating AA in terms of S&P

AAA: Moody judges obligations rated AAA to be the highest quality, with the "smallest degree of risk".
AA (AA1, AA2, AA3): Moody judges obligations rated AA to be high quality, with "very low credit risk", but "their susceptibility to long-term risks appears somewhat greater". (AA+, AA and AA- in S&P)
A (A1, A2, A3): Moody judges obligations rated A as "upper-medium grade", subject to "low credit risk", but that have elements "present that suggest a susceptibility to impairment over the long term". (A+, A and A- in S&P)

Via wikipedia

ECB buys another 14 bil european bonds

ECB has again intervened in the markets last to buy 14 billion Euros worth of bonds of Italy and Spain. Its combined total buying since last is now 110 billion euros. This is the reason why Spain and Italy's bond yields are consistently at 5% while Portugal and Ireland's yields are consistently at 10%.

Via fxstreet

Earlier post: ECB buys 96 billion euros worth of bonds

Farmland prices are setting records

Farmland prices are setting records and farmer incomes have been buoyed by exports and biofuels, easing the pain of some rough summer weather from drought, floods and fires.

The Chicago Federal Reserve Bank on Wednesday said farmland prices in the Midwest in the second quarter were up 17 percent from a year ago -- the biggest jump in 34 years.

Via Reuters

Jim Rogers, Micheal Burry prove themselves right once again.

India's debt increased by 5.9% in Q1 2011

Recently our Finance minister is getting worried about our fiscal situation not because we are spending more than we have budgeted this year but the revenue collection has fallen short of projection drastically.

Revenues: Our countries revenue for the year 2011-12 has been budgeted at around 8 trillion (lakh crore) so for the first quarter apr-jun 2011 we should have earned around 2 trillion (lakh crore), but in reality the revenues are only around 0.9 trillion (lakh crore), falling short by almost 53% in Q1 2011.

Expenditure: Our countries expenditure for the year 2011-12 has been budgeted at around 13 trillion (lakh crore) so for the first quarter apr-jun 2011 we should have spent around 3.1 trillion (lakh crore), but in reality we have been prudent enough to spend only 2.6 trillion (lakh crore) Q1 2011 which is 16% less than expected.

Fiscal Deficit: Even though we are prudent on spending since our revenues have fallen drastically our fiscal deficit which is expected to be 1.3 trillion (lakh crore) for the entire year is now 0.7 trillion (lakh crore) for the first quarter itself

Debt: India's public debt which is around 29.75 trillion (lakh crore) in 2010 already rose by 5.9% in first quarter to 31.49 trillion (lakh crore), thereby increasing our interest payment costs every year.

The reason for the above situation is that we had a windfall last year from the 3G spectrum sale, but this year there is no such silver bullet atleast for now.

What it means for you and me? Each one of us (1210 million population) has a debt of 26000 rupees and we need to pay an interest of 2158/- every year. Seems less until we acknowledge that we still have 41% of the population earning less than 56 rupees a day and we have only 3.3 crore (33 million) tax payers who have to share the burden.

Source: RBI, Contify Banking

Finland's backdoor deal with Greece

Greece was pursuing a private deal with Finland in which Greece promised to collateralize Finnish contributions, in essence eliminating Finland's contribution to the Greek Bailout round. As Kathimerini reported, "Greece and Finland agreed on Tuesday to virtually cancel the latter’s participation in the former’s second bailout package"

Finland’s share in the 109-billion-euro package amounts to about 1 billion, which Helsinki will pay to Greece but Athens will repay it through a new loan contract to be signed for this purpose and which will be valid for the next 25 years (likely to be the maturing period of the new loans, too).

This means in practice that Finland’s contribution to the new package will be returned in full and deposited in a special account to be created by the Finnish government. End result is that everyone else has immediately come demanding the same treatment: first the Austrians, next the Dutch, and last the Slovenians.

And what happens if Finland backtracks on its collateral demand: will it back out of the Greek bailout as well? Or, if Finland digs in, and all the non-German countries follow suit, will Germany say Enough and tell Europe (and China) to fix its own problems?

Via Zero Hedge

Seems like entire Europe wants only Germany to pay for this mess and the integrity of Europe as a single entity is again in question