Tag Archives: Christian Vits

German Economy Grew at Fastest Pace in Two Decades

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It’s been a long two decades, and 3.6% growth coming out of a 4.7% slump, slowing to 2% this year, isn’t anything to brag about.

And with the German dependency on exporting to the rest of Europe they’ll likely support continued ECB funding assistance.

The austerity measures, which make euro ‘harder to get’, combined with ECB funding assistance, which addresses default risk, also continue to fundamentally support a stronger euro.

And higher crude prices, which make dollars ‘easier to get’ off shore, work to both weaken the dollar and weaken US domestic demand.

German Economy Grew at Fastest Pace in Two Decades

By Christian Vits

Jan. 12 (Bloomberg) — Germany enjoyed its fastest economic expansion in two decades last year as booming exports spurred hiring and consumer spending.

Gross domestic product jumped 3.6 percent, the most since data for a reunified Germany began in 1992, after slumping 4.7 percent in 2009, the Federal Statistics Office in Wiesbaden said today. The figure was in line with the median forecast in a Bloomberg News survey of 28 economists. GDP probably rose 0.5 percent in the fourth quarter from the third, the statistics office said. The official fourth-quarter report is due on Feb. 15.

The Bundesbank expects Europe’s largest economy to expand 2 percent this year and 1.5 percent in 2012 as the sovereign debt crisis damps demand in the euro area, its main export market.

Germany’s Continental AG, the second-biggest tire maker in Europe, yesterday reported sales and earnings that beat its 2010 goals.

“The growth momentum continued into the first quarter and current forecasts might turn out to be too pessimistic,” said Klaus Baader, co-chief euro-area economist at Societe Generale in London. “The German economy will likely have returned to its pre-crisis level in the third quarter.”

The euro traded at $1.3032 at 10:13 a.m. in Frankfurt, up from $1.3005 before the GDP report.

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Weber Says ECB Monetary Policy Increasingly Effective

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They wouldn’t dare give the rising budget deficits any credit.

Weber Says ECB Monetary Policy Increasingly Effective

by Christian Vits

May 18 (Bloomberg) — European Central Bank Governing
Council member Axel Weber said the bank’s monetary policy is
increasingly stabilizing the economy.

“Monetary policy is contributing significantly to the
stabilization of the economy and its effectiveness is
increasing,” Weber, who heads Germany’s Bundesbank, said in a
speech in Dusseldorf today. After a “massive” reduction of the
ECB’s benchmark interest rate, the present level of 1 percent
“is appropriate in the current environment,” he said.

In additional to cutting its key rate by 3.25 percentage
points since early October, the ECB has announced it will buy 60
billion euros ($81 billion) of covered bonds and extend the
maturities in its unlimited refinancing operations to 12 months.

Weber said providing banks with as much money as the need
is “of particular importance” and extending the maturities of
the loans “certainly will push the yield curve even lower.”
The plan to buy covered bonds is in line with the ECB’s strategy
of supporting the banking channel, he said.


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ECB expected to cut rates 50 bps today

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ECB to Cut Rates as Slump Calls for `Radical Action’

by Christian Vits

Nov. 6 (Bloomberg) — The European Central Bank will cut interest rates for the second time in less than a month today as the region’s economy suffers its worst slump in 15 years, economists said.

“It’s time for radical action,” said Ken Wattret, an economist at BNP Paribas SA in London. “This is a very severe economic downturn, interest rates should come down a long way.”

Obviously they still haven’t figured out lower rates will make matters worse, as lower rates cut government interest payments (it’s a spending cut) which removes income paid to the private sectors.

The only aspect that might help is the hope that the lower rates drive the currency lower. This is one of those ‘be careful what you wish for’ conditions.

First, with falling aggregate demand around the world, export growth will be problematic even with the lower real wages that come from a lower currency.

Second, a falling currency raises import prices and reduces real terms of trade, particularly for a large energy importer like the eurozone.

Third, anything that weakens the economy and lowers standards of living is socially dangerous.

Fourth, the problems of USD debt including USD losses growing as a % of euro based capital and income that have been driving the euro down remain and the risk of an acceleration of this process increases as the eurozone economies weaken.


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Eurozone coming apart

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RLPC- European secondary loan prices breach 70 pct

By Zaina Espana

The low secondary loan prices reflect heavy forced selling by stressed investors that has also weighed on the battered LevX index of leveraged loan credit default swaps.

Around three billion euros of forced sales have flooded the thin and illiquid European secondary loan market in the last two weeks, several traders said.

The sales started with Icelandic banks’ portfolio sales and other European banks followed, but a portfolio sale from Sankaty last week marked a new phase of the selloff as managers of credit-driven collateralised loan obligation (CLO) vehicles started to throw in the towel, traders said.

Traders said Sankaty, the credit affiliate of private equity firm Bain Capital, put a $342 million portfolio of leveraged loans up for sale last Wednesday and fund manager Highland Capital followed in the United States with a $641 million portfolio of U.S. and European names.

Average bids on Europe’s top 40 leveraged loans have lost 225 basis points from last Friday’s level of 71.01 percent of face value to 68.76 on Monday, RLPC data shows.

While this madness continues, watch for results due out soon:

ECB Offers Banks Unlimited Dollars to Boost Lending (Update1)

By Christian Vits

(Bloomberg)- The European Central Bank offered banks unlimited amounts of dollars in two new tenders today as it steps up efforts to get financial institutions lending to each other again.

The Frankfurt-based central bank offered banks funds for 28 days via a currency swap in which it lends dollars against euros. In a separate tender with the same maturity, the ECB offered dollars against collateral at a fixed rate of 2.11 percent. In both cases it will fill all bids. Results will be published at 11 a.m. The loans start on Oct. 23 and mature Nov. 20.


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