Citywire printed articles sponsored by:
View the article online at http://citywire.co.uk/wealth-manager/article/a654923
The big payback: making money from LTRO exits
by David Campbell on Feb 04, 2013 at 09:24
If pressures did not subside, ‘it would be open to the ECB to react by cutting its official interest rates’, according to Monument Securities analyst Stephen Lewis.
‘There would then merely be a change in the spread between official and market rates, with market rates gravitating back to levels at which they stood prior to the LTRO repayment.
‘Since the ECB aims to maintain accommodative monetary conditions, it may well be expected to take such action on its own lending rates, if the need arises.’
More broadly, the emphasis on bank access to markets illustrates what some – in particular the ECB – are calling a bottoming in the credit cycle. While the transmission to the real economy remains tentative to non-existent, the onward chain is no longer being blocked by weak bank balance sheets.
RBS, for instance, reported at the end of the year that it had been able to reduce its ‘non-core’ book of potentially dubious credit assets from £258 billion in 2008 to £65 billion at the end of Q3 2012.
‘It has allowed them to recover on mark-to-market terms far better than they ever could have envisioned,’ said Barnes. ‘Banks have had so much opportunity to be made whole.’
He added that the recent falls in the most competitive consumer saving rates to fresh historic lows illustrate their increased flexibility in the cost of capital.
While not a screaming buy, subordinated lower-tier long-maturity financial debt remain at fair value, said Barnes, versus an otherwise overpriced market.
News sponsored by:
Subscribe to Wealth Manager to get the inside track on your rivals' moves
Keep up to date with how your peers are allocating their clients' assets by subscribing to Wealth Manager magazine.
Today's top headlines
More about this:
Look up the funds
Look up the shares
Look up the fund managers
Aberdeen Live supplement: Fundamentals point to ongoing flows and solid returns from EMD
After a record year for inflows and market-leading performance in 2012, emerging market debt has taken a large step towards the mainstream. Our recent debate covers the outlook for the asset class this year and where opportunities can be found.
On the road
on May 21, 2013 at 14:06