The Banking and Strategy Initiative

Chillin' out till it needs to be funded

Morgan Stanley and Greece again – No Deal!

A feeling of ennui this bold was not in line of sight in the same month of 2008 as regulators and aspecial appointees as well as Bank CEOs were faced witha much larger question while ‘choosing’ what will go down and how they will stay out of the morass. $200 bln of aid and $200 bln of capital later, the banks are still waiting on the crisis to get over as new Capital rules require another $100 bln bank capital in the US and maybe $400 bln in Europe. SocGen and BNP exposure to Morgan Stanley seelingly grossed in Jan 2011 at $39 bln is still nearly $25 bln and the counterparties, even if not French banks are suspected to be unable to pay till Morgan Stanley details the hedges and their counterparties ( Peter Thal Larssen, Breakingviews)  amongother ways to get out, sell off that stash and thus that they are holding it yet sems maybe they did not have any buyers and much like Lehman, without buyers may pay pennies to the dollar.

30 year Treasuries below 3 % and 10 year Treasuries below 2% cannot compete with CDS now almost all ruling near 500 bps including Morgan Stanley and Greece. Even India , growing slowly and surely has CDS reaching near default categories at 350 bps, while Greece and Portugal continue at 1150 bps, only ones ruling at rates near their credit rating. As mentioned by commentators last week, Italian and Spanish spreads could easily digest at least 2 more downgrades to near BA2

Greek Budget sneak peeks seem to necessitate a near 50% voluntary haircut on rollovers by banks instead of the 21% agreed. Deficit targets and contraction have been managed by Ireland but one has to make sure the contraction does not manage to increase its liabilities in proportion and that will be a Damocles sword hanging over any government

With China manufacturing PMI and that iun the us managing an over 50 score the ISM no. will also be a key to watch out for tonight as fears of a US recession seem far fetched despite the slowdown and the banks’ implosion unto themselves

 

Morgan Stanley's office on Times Square

Image via Wikipedia

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