G20 Procrastinates
The weekend G20 meeting broke up without any specific decision on how – or even whether – to boost IMF resources with the intention of having extra firepower on standby if Europe needs it. Officials said they would revisit the issue at the next meeting in April, but would first need to see Europe install a larger ‘firewall’. France’s finance minister Baroin has just announced he supports the idea of combining the firepower of the EFSF and the ESM. Meanwhile Germany’s resistance to the same proposal appears to be softening. German Finance Minister Schaeuble said Europe would decide on the issue in March – but implied investors should not hold their breath for an announcement. Although an EU Summit has been called specifically to debate this question on Thursday and Friday this week, Schaeuble said a decision would be made sometime in March, but that ‘March has 31 days’. On Friday, Greece formally launched a debt swap offer to private sector bond holders. The terms are in line with newswire reports earlier last week. Bondholders have until March 8 to decide if they wish to participate, and Greece aims to conclude the PSI transaction by March 12. We doubt participation levels will be sufficient and the bondholders who holdout against the voluntary agreed will be coerced into participating by the invocation of CAC clauses. The S&P 500 closed marginally higher, reaching levels not seen since June 2008. Oil prices continue to march higher too and US Treasury Secretary Geithner, speaking in general terms, said there is a case for tapping the US’ strategic oil reserve in some situations. On Friday, EURUSD traded in a 1.3316-1.3487 range, USDJPY 79.86-81.22.
Click here to read the full report: UBS Morning Adviser Asia
UBS Investment Bank