Monitoring SWF World using SWF Insitute's Newsfeed

Listing of funds and news of what they are up to. News such as Glencore selling convertibles to Blackrock, GIC and Zijin Mining Company, China's third largest copper producer. Incidentally, the bonds they issued were December 2014 and convertible into Glencore shares upon an IPO or “other pre-determined qualifying events".

Markets: P-Notes and Kangaroo Notes (The Basis Swap Story)

Aggressive SocGen has been banned from dealing in ODI (offshore derivative instruments) and P-Notes (participatory notes) in India following an inquiry by SEBI. In 2008, RBI called for ban on issuance of P-Notes, however foreign investors reacted sharply and the stock market almost crashed. For a background to central banking in India please see the RBI's website. In a nutshell, the RBI was set up in response to the Hilton Young Commission (Hilton Young was a British politician who was educated at Eton and University College London). The RBI was also the central bank for Burma but it seceded from the Indian Union in 1937. The RBI however continued to act as the central bank for Burma until Japanese occupation.

And now to the extraordinary rise in "kangaroo bond" issuance amongst stylized banks.

Bloomberg reports the EIB is seeking (update:has sought) assistance with Australian local banks to help it issue kangaroo bonds (AUD notes sold by foreign issuers in Australia). Certainly the currency has been talked about a lot recently, but why would the Luxembourg lender raise money in AUD? The reason is the extraordinary story of the basis swap (an interest rate swap involving the exchange of two floating rate instruments) and EIB is by no means isolated in their desire for kangaroo issuance (other names include KfW and Nordic Investment Bank). EIB's issuance of A$1.5bn will be the largest tranche issued by a kangaroo issuer, with April 2015 maturity (i.e. 5 year).The bonds are priced at Commonwealth government bonds + 83bps. What's the big driver behind all this kangarooing around? The USD-AUD basis swap has been up to 35bps wide for 5 years, making margins paid by the K-issuers look good, relative to LIBOR - and further issuance should stop the widening. The cause of the chasm in the basis swap is due to Ozzie banks raising debt offshore, such as ANZ bank which raised a billion EURs for three years in the Euromarket (57bps over midwaps).

For those that may not remember KfW, they gained the moniker of "Germany's dumbest bank" when they transferred 300 million EUR to Lehman on the day it filed for bankruptcy. But was it so dumb? Could the administrators have demanded that money after taking over Lehman Brothers?
BankingDay is a great information service on how banks fund themselves and new developments in the world of funding.

Power of Now Seeks Healthcare through Foresight

SOA-evangelists TIBCO (aka "TIBX" on the Nasdaq) famous for its "Information Bus", which is nothing but TCP all the way to the bank, acquired Ohio-based Foresight Corporation, a private "transaction solution provider" (think healthcare claims processing) and vendor of EDI (Electronic Document Interchange, often associated with XML) productivity tools. What is the strategic rationale for this deal? One reason seems to be to broaden TIBX's customer base to include healthcare firms (an area that Foresight focuses on). Foresight also sells to many BCBS organizations. Open interest on TIBX's front-month ATM call is around 5.5K. Options trade on a February cycle (Feb, May, August etc).

A Beautiful Place to Study Finance

The Bendheim Center for Finance at Princeton University.

Deja Vu as Chavez Devalues "Bolivar Fuente"

Why were Venezuelans on a shopping spree last weekend? On Friday, the government announced the introduction of a multi-tiered exchange rate. How does it work you may well ask? There will be three rates. The official value of the dollar will be fixed at 2.6 bolivars. This rate will be reserved for essential imports such as medicine and food. Essential goods will be traded at the "oil dollar" pegged at 4.3 bolivars. The third floating rate will be managed by central bank intervention. This rate has previously been known as the parallel rate and currently values the USD at just over 6 bolivars.

Opposers point out this tiered system will make goods more expensive for average citizens while the government's oil export earnings double. Venezuela's currency is the "bolivar fuerte" (Pl. "bolivares fuertes") which has been the new currency since January 2008 (when the ISO code changed from VEB to VEF). The new exchange rate system is effectively a devaluation.

Economist says MBAs are JSEVS ("Jargon-Spewing Economic Vandals")

The Economist has divulged that MBAs are, in its humble opinion, "jargon-spewing economic vandals". The response, says the FT, is to broaden MBAs so they are not trained to think in terms of limiting models with constraining assumptions but in more creative terms. This, it claims, will reduce the number of "shallow, narrow and static thinkers" outputted by business schools i.e. reduce the percentage of JSEVs produced by these programs.

Copycats - The Only Cats Who Know Where AstraZeneca's At

Everyone wants to be a copycat these days. That's why UK-listed healthcare giant AstraZ is taking steps to guard against generic drug makers stealing its pharma-making thunder. It is agreed with Teva a deal that will stop Teva selling copycat versions of heartburn drug Nexium, at least for now. The Nexium patent ceases-to-be in 2014.

American Branding Made in Taiwan (without Tethering or Multitouch)

HTC, the Taiwanese company listed on TAISE:2498, is a handset producer which helped to create Google's latest contribution to the smartphone market, the Nexus One. It is somewhat surprisingly feature-scanty. The device will not support tethering, the use of a mobile phone to supply Internet access to a laptop via Bluetooth or USB cable. It also will not support multitouch (allowing user to interact by placing two or more fingers on the screen). HTC has been described as a white-label handset vendor (a white-label product is one which is produced by one company and rebranded by another). White-label products can extend to ecommerce services (e.g. amazon running the e-store of waterstones).

Greece Downgraded by Fitch, Yields on GBonds Rise!

In Dec09, Fitch (shortly followed by S&P) downgraded Greece's credit rating to BBB+ with negative outlook (the first time in 10 years the country has received a sub-A rating, though still investment grade). Moody's was left with the only A1 rating on Greece's debt. This is a great case study in how the market reacts to a ratings downgrade. Actions: Athens shares fell 6% in response. CMA reported Greece 5yr CDS rose to 226.8 BPS from 209 BPS on Tuesday's NY close (a rise of 17.8bps). 10 yr Greek government bonds fell, yields rose to 5.4%. This also caused the Greek-German 10yr bond yield spread to widen by 4bps to 225bps. Also the Greek finance minister issued mutliple reassurances: "Papaconstantinou (PhD LSE, worked previously at OECD) says Greek banking system not at risk". (STOCKS, BONDS, CREDIT, BOND SPREADS).

Why the concern? What drove the downgrade? The reason is Greece's high levels of debt (forecasted to be 125% of GDP next year). A downgrade is bad for a country - it may make it difficult for the country to raise money in bond markets and through central bank liquidity operations (e.g. through ECB, exchanging sovereign bonds for ECB loans).