Greek borrowing costs imperil budget plans – WSJ

WSJ reports the high interest rates Greece must pay to borrow money are threatening the county’s ambitions to cut its deficit, raising again the specter it may need external aid. Many in Europe breathed a sigh of relief last week when Greece successfully sold €5 billion ($6.85 billion) in government bonds in an auction that saw investors clamoring for the debt. The sale was seen as a key test: The country needs to borrow about €54 billion this year. But debt buyers are demanding higher premiums than officials in Athens anticipated when they planned the 2010 budget, and when they proposed to European Union authorities in January a plan to trim last year’s €30 billion budget gap by €9 billion this year. Indeed, Greece’s filings with the EU rest on assumptions implying that this year and next the country will pay an average interest rate of about 4.7% on its new debt. That figure is consistent with the rates paid on existing Greek bonds, mostly issued in better times. But in last week’s auction, Greece had to pay 6.25% for a 10-year loan—about three percentage points above what Germany pays for similar debt. 

…While the bond vigilantes are alive and well in Greece they are apparently asleep everywhere else.  As the story below describes, credit liquidity has rebounded significantly from the veritable seize up in January and February, which in turn has facilitated an equity market recovery….

Credit market springs to life – WSJ

WSJ reports companies are aggressively borrowing in the debt markets once again—a sign of renewed confidence in the world economy following recent fears that struggling European countries could have difficulty financing their budget deficits. In the U.S., bond sales by companies such as Bank of America Corp. and GMAC Financial Services are on pace to conclude their busiest week since the beginning of the year. In Europe, borrowing by companies so far in March is already more than 60% of February’s totals. “It tells us that financial liquidity is very much on the rise,” said John Lonski, chief economist at Moody’s Investors Service. “No longer do corporations suffer from a dearth of liquidity. This puts them in a better position to take advantage of opportunities that arise.” So far in 2010, U.S. corporations have issued $195.2 billion of debt, excluding government-guaranteed bonds, according to data provider Dealogic, up from $166.8 billion during the same period in 2009.

…In fact, credit investors are so desperate for product it seems anything with a yield will do, as evidenced by the story below….

Buyers scramble for California bonds – LA Times

LA Times reports robust investor demand allowed California on Thursday to increase the size of a bond offering to $2.5 billion from $2 billion. The tax-free general-obligation bonds, which will fund voter-approved infrastructure projects, attracted orders totaling $1.38 billion from individual investors Tuesday and Wednesday. With just $620 million of the original $2-billion deal left, the state took in $3.3 billion in orders from institutional investors Thursday. To fill more of those orders, Treasurer Bill Lockyer raised the deal to $2.5 billion.

Dow Jones reported: “The average hedge fund lagged behind the nearly 3% return of the Standard & Poor’s 500 Stock Index return in February. The hedge funds that beat the market tended to be multi-strategy, according to both hedge fund databases and fund managers’ letters to investors. Daniel Loeb’s Third Point Offshore fund was up 3.2% for February and 6.9% for the year through February, according to HSBC Private Bank; the fund is multi-strategy.”

Panelists, speakers and sponsors are invited to contact the organizers by sending an email to: info@goldennetworking.com

In the current environment investors are increasingly allocating more resources to hedge fund due diligence. Necessarily, hedge funds are similarly required to dedicate commensurate increased resources towards responding to these due diligence requests. Accompanying these increased resource allocations, there seems to be a new willingness on the part of the hedge funds to demonstrate transparency – particularly in regards to operations.

Investors typically turn to a hedge fund’s documentation to demonstrate this. While data collection, review and analysis is a core part of any operational due diligence review, there is often a dangerous misconception at times during the due diligence process that the more documentation an investor collects, the more robust the due diligence. This broad assumption tends to sacrifices information quality for total page count. Hedge fund’s themselves may also fall prey to this notion by attempting to drown investors in documents, not all of which may be relevant to the investor due diligence process. When a hedge fund doesn’t know when to say when to information requests, in some cases this can be representative of operational risks of equal weight to those imputed to a fund which does not provide such a detailed level of transparency to being with.

See full report from Corgentum

Construction of the site will provide 750 jobs for two years and 70 permanent jobs once the plant is up and running. The plant will produce two principal products – a Renewable Transport Fuel (RTF), Ethanol, and a high protein animal feed, Distillers Dried Grains and Solids (DDGS).

Since Future Fuels LLP was launched at the end of February, it has raised a further £10 million from UK high net worth individuals take up the first ever chance to invest in the British Renewable Transport Fuel (RTF) Market.

Future Fuels has also announces today the signing of a 15 year off-take agreement for its CO2 by-product with a major gas supplier to the food and drinks market. The agreement follows the previous announcement of Heads of Agreement signings with a major global investment bank for the purchase of the first ten years of RTF production and with a global animal feeds business to purchase the high protein animal feed by-product across the same period. Unusually, all products for the first 10 years of the plant’s operating life are under take-or-pay contracts before the plant has been built, netting a combined forecast income of over £1.5 billion.

The Future Fuels partnership expects to provide its investors returns of over 30% per annum over a five to seven year period. It will be raising £40m equity, of which it has already secured over £15m (including a £3m investment from Future Capital Partners itself), and there will be a minimum investment of £50,000. A trade sale or IPO is targeted within 5 years of commissioning of the plant.

Tim Levy, CEO at Future Capital Partners said:

“The Future Fuels is gathering momentum. This is a well thought out investment proposition put together by proven partners who have built and operated commercially functioning plants using proven technologies. EU environmental targets mean, simply, that everyday motorists will require the gas in their tanks to be blended with a greater proportion of bio-ethanol by 2016-2017. This is one of only three production plants in the UK. It is a growth industry for Britain and one we can be good at.

“As well as being very proud of the positive environmental and social effects the project will have, it is the investment opportunity itself that is truly exciting. It is a chance to capitalise on a non-correlated, niche investment of huge potential and at the same time benefiting from the risk controls we have placed around the partnership. Moreover, by securing off take agreements for the plant’s produce, we have done a great deal to ensure the project’s long term success. For the first time, Future Fuels will give UK investors the chance to take advantage of the next decade’s most lucrative investment.”

The partnership will target sophisticated retail investors and high net worth individuals via the intermediary market. FCP’s opportunities are sourced through UK wealth managers, high-end IFA’s, accountants and private banks.

EU and UK directives* have indicated that by 2020 13% (estimated at 23 billion litres) of all the Europe’s petrol fuel must come from renewable sources. Currently, just 2 billion litres (or 3.5%) of the Europe’s petrol fuel comes from renewable sources, meaning that the petrol based Renewable Transport sector is set to grow more than ten-fold in the next decade.

Notably, the fuels produced will help to reduce the UK’s reliance on imported oil in transportation and will cut carbon emissions, when compared to the use of oil in transport fuels, by over 50%. In the case of this project, this is the equivalent of removing over 60,000 cars from the road every year. This has been peer reviewed and validated by Imperial College, one of the leading academic research centres globally for climate change and sustainable renewable transport fuels. This independent verification ensures that the project is significantly environmentally beneficial.

FCP is undertaking the project with Vireol, which will operate the completed plant. The Partnership will own, provide finance for and construct the site. Once completed, the Partnership will lease the plant to Vireol.

BE ADVISED: The video you are about the witness may cause temporary confusion mixed with bewilderment.  It may sound like Jim is speaking a language you cannot identify; rest assured the language is English.  However, he is using an archaic form of the language not usually seen on traditional financial news networks. The linguistic root he utilizes centers around truth and clarity. The side effects are similar to those associated with the inhalation of  air infused with increased oxygen. Your vision will become acute and your understanding of the world around you more coherent, which will of course cause some dizziness. After viewing, the operation of heavy machinery is not recommended.

 To view this video, please click here.

Securities regulators have agreed to an IOSCO-endorsed approach for hedge fund disclosure to assist in determining systemic risks regarding private pools of capital. The template, which is attached, was developed by the Task Force on Unregulated Entities following requests from the Financial Stability Board, as well as from IOSCO members. SEC Commissioner Kathleen Casey, Chair of the IOSCO Technical Committee, said that the disclosure template is designed to develop a comparable and consistent set of data to be collected from local hedge fund managers and advisers to monitor systemic risks and prevent gaps in regulatory reporting requirements. The Commissioner recognizes that the legislative process is ongoing in many jurisdictions and their outcomes could further influence the information needed to monitor systemic risk in the hedge fund sector.

The template is not a comprehensive list of all types of information and data that regulators might want, and regulators in each country are not restricted from requiring additional information within their own jurisdiction.

Pursuant to the IOSCO approach, hedge funds would disclose the principals, registered address, number of employees, number of funds, name of compliance officer, overseas offices, regulatory status, related affiliates, equity owners, relevant information about the financial health of the asset management company including, if applicable, any guarantees or agreements with parent companies. The fund should also disclose its key service providers, including, custodians, auditor, and fund administrator.

The funds would also disclose recent performance details and recent investor redemptions, as well as group wide assets under management. Product exposures also need to be disclosed. Disclosure for securities positions would include, the value of long and short positions in equities, corporate bonds, sovereign bonds, and securitized credit products and other structured products. Disclosure for derivatives positions would include, the long and short credit default swaps positions and other derivatives. There would also be disclosure of derivative clearing mechanisms, whether they are central counterparties or bilateral.

Finally, hedge funds would also be required to disclose net credit counterparty risk, identifying primary counterparties and identities and locations of those counterparties. Funds would also disclose the extent of rehypothecation, the percentage of net equity rehypothecated and contractual limits to rehypothecation.

It remains to be seen whether and to what extent any legislation that ultimately is passed by the U.S. Congress will include these requirements, or whether such legislation will permit, require or prohibit the Securities and Exchange Commission from adopting the IOSCO approach by rulemaking.

New Greek €5 Billion 10 Year Bond Prices At 300 Over Midswaps, 326 bps Over 2020 Bund, Comes With 6.25% Coupon 

        Greek debt chief says bids for 10-year bond at EUR14 bln – DJ

DJ reports the Greek government’s offering of 10-year bonds has attracted EUR14 billion in bids, and will close soon, the head of the country’s debt management agency said. In the wake of a new package of austerity measures announced Wednesday, the government earlier launched an offering of 10-year bonds through a group of lead managers that comprises Barclays Capital, HSBC Holdings, National Bank of Greece, Nomura and Piraeus Bank. “The bond offering is going very well, beyond expectations,” said Petros Christodoulou. The government aims to raise EUR5 billion through the offering, but it appears to be heavily oversubscribed. After launch, Greece cut price guidance on the EUR5 billion, 300 basis points over mid-swaps from 310 basis points… “The bidding so far shows that confidence has returned to the Greek bond market,” a senior government official said. “It is a very good development. Everyone is breathing easier now.”

Guest post from Bill H.. His take on the CDS market is dead on and thought provoking, enjoy…

Credit default swap lunacy!

Dubai, Greece and the rest of the PIIGS, now Britain and next the U.S.. Speculators are pushing currencies and sovereign bonds and yields higher and lower almost at will using the CDS (credit default swaps) market. These rocket scientists hedge and or speculate (even attack) currencies with these CDS products and go to sleep at night with a clear conscience. They sleep tight each night not caring what destruction they have caused real people and the real economy and take mistaken solace that if say Greece were to fail “they are hedged”.

I am going to tell you that NO ONE with any CDS product is hedged against anything! First you must understand that if sovereigns begin to default, there will be no end until the last, biggest and most egregious financial entity falls (the U.S. Treasury). These CDS products look good on the books but who can afford to lose and make the winners whole? What currency do you get paid in if you win? My point here is the “counter party risk”. The only way a CDS product could be secure and iron clad is if it were written by a Gold depository and payable in Gold which has been authenticated, assayed and audited as to purity and it actually being there for payment.

We hear that CDS spreads widen for this country or that one. We have even heard this about the U.S. from time to time. But think about how stupid it would be to “insure” against a U.S. default with ANY paper product issued by ANY issuer. When the U.S. finally goes whether it be through default or hyperinflation, the Dollar will ultimately “go away”. So what if you were right? Are you getting paid in Dollars that became worthless? Isn’t this what you were insuring against in the first place? So you win but you receive bazillions of pieces of the very same paper you were insuring against and thus YOU LOSE?

Oh I see…you insured against a U.S. default and will get paid in Euros. This makes all kinds of sense since a U.S. default certainly won’t submarine Europe. This logic works forwards, backwards or in either direction! What I am saying here is that once ANY sovereign default occurs, IT”S OVER! EVERYTHING paper goes boom and in a puff of smoke so does ALL the “supposed” value. EVERYTHING paper blows away and ONLY assets that you can touch, feel and actually USE (manufacturing, farmland, mining) will have or retain value!

THE only true hedge against ANY sovereign default is either Gold or Silver, period. Gold and Silver are real money and will accrue ALL of the “printed” monies’ value over the years. This is a difficult concept to understand but all the fiats that have ever been printed in the past and present really had no value other than “confidence” value. Each Dollar, Pound, Yen, Euro etc. that has come into existence will “spill” its value into the metals upon its demise. I can’t believe that no one has yet (other than Jim Sinclair) publicly explained the stupidity employed in the “CDS protection” scheme.

Credit default swaps are not protection, they are nuclear land mines scattered across the land that will go off in succession after the first one is tripped. OR as Mr. Sinclair says, they will print to oblivion and wipe out all paper values through hyperinflation. Either way if you have wealth tied up in metal or mining shares, you will win in the end. Have you ever wondered why there is no such animal as a credit default swap on physical Gold? Could this be because Gold cannot default? Taking a leap forward, when everything else is defaulting (including and especially CDS products), doesn’t it make sense that fear capital will seek that that cannot default? Now that’s simple logic! Regards, Bill H.

We at RCM have carried the precious metals torch for quite some time. We have explained on countless occasions via this blog, via radio interviews and through one on one conversations, that prodigious fiat currency creation around the world will lead to one unassailably predictable outcome: Higher Gold and Silver prices.   

We have not wavered from our stance despite, at times, an overwhelming din that spews forth from the chorus of naysayers and neophytes. However, we are not so arrogant as to avoid the necessary and important process of challenging our own beliefs. We continue to question our own conviction by analyzing the behavior of Gold and Silver vs. the US$, Euro, GBP and other currencies.

The results of this analysis from the past two weeks are in and the prognosis remains bullish with an increased likelihood of  ’wildly’. We have often stated that the true inflection point for Gold will come when it rises in price vs. all currencies at the same time. Well, in true Shakespearean fashion,  I say to the Caesars of today, beware the Ides of March….

Gold Surges With DXY Positive For The Day

No, you are not reading that chart wrong. Gold just surged to near two month highs, hitting $1130/oz, or $12 higher, even as the dollar is green for the day. The fiat currency inferno is picking up, as traders refuse to keep their money in anything but gold or dollars – proof of tungsten gold counterfeiting is not helping the gold shorts. From the 2010 lows, the currency devaluation “safety trade” has been Gold and the USD, in a ratio of 5-1!

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Meet The New Regime: Gold And Dollar Coincident  

For all those who expect to see a strong dollar result in lower gold prices: our condolences. Gold is now as much a flight-to-safety target, as the the ra(p/b)idly devaluable dollar (and all other fiat currencies), as has been repeatedly observed on Zero Hedge. The chart below demonstrates that over the past three weeks, not only has dollar strength resulted in gold strength, it has resulted in gold strength at a 6X multiple.

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Another Record For Euro-Denominated Gold  

As the euro is plunging (and dollar by implication surging) with gold yet again flat and looking like it may turn positive for the day, gold denominated in euros just hit another all time record of €827.

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In ancient Rome the government clipped coins to devalue the currency.  Nero, in 64 CE, was the first to come up with the idea to actually debase coins by reducing their content. Today, currency debasement has become an art form as evidenced by the story below. For our society, will the outcome of such debasement mirror that of Rome?….

US Dollar Money Supply Is Underreported

March 1, 2010 – As the financial crisis has unfolded over the last two years, the Federal Reserve has been responding in a variety of unprecedented ways.  Therefore, it is logical to assume that these never-before-used actions have altered long-established ways of viewing things.  One area that has been impacted is the US dollar money supply.

The quantity of dollars in circulation is being underreported by relying upon the traditional and now outdated definitions used to calculate M1 and M2.  These ‘Ms’ are calculated and reported by the Federal Reserve based on the following guidelines that identify the several different forms of dollar currency used in commerce:

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