ECB and Bank of England are collectively pushing for asset backed securities to make a return to the market, according to a draft paper that they have seen. Currently the ‘knee-jerk’ rules that were brought into effect just after the credit crunch have all but wiped out the practice of bundling loans, securitizing them and selling them off. The Banks argue that this is the best way to free up banks’ capital and lending, but in order to “revitalize any publicly distributed asset backed security issuance on any meaning full scale would require concerted policy action in various fields, involving a range of official entities” which could be tricky, as often the right hand doesn’t talk to the left. Politicians will also be skeptical about reintroducing something that was universally blamed for the credit crunch on their watch.
The US is getting a hard time from other members of the G20 after their persistent delays in ratifying changes to the structure and funding of the IMF. The US is the only member of the G20 that hasn’t given the changes the green light and as such Joe Hockey, the Australian treasurer and current G20 Chairman, has said that the remaining 19 members “must look at ways to ensure the resources of the IMF are adequate to meet all needs into the future”, hinting at circumventing the US in this decision, as their approval of the process is still locked in a Congressional stalemate, to the detriment of the rest of the world.
Today’s calendar is fairly sparse. UK construction output and US producer prices being the events of note. JP Morgan earnings are out today, but that’s the only big hitter to take note of. Whether the markets fancy putting any long positions back onto their books ahead of the weekend remains to be seen, but if we’re following Asia’s lead, that certainly won’t be the case.