Money Market Turning (Imperceptibly)

October 3rd, 2008 12:39 pm | by John Jansen |

My money market source has actually spoken some optimistic thoughts today. He said that he does not wish to overstate the case or suggest that investors are about to have a sudden change of heart.But he did state that the tenor of the conversation with big money clients shifted today and rather than the clouds they are seeing the gentle rays of the sun.

Specifically, he cites two money manager trades in which the investor extended to the two month sector. Those trades have been virtually non existent lately.

What has motivated the change of tone amongst clients? He mentioned the move by the Irish government to stand behind the debt of Irish banks. That should prompt an upgrade to AAA of the short maturity debt of Irish banks and that upgrade, if it occurs, will attract some buyers.

There is a meeting of central bankers in Paris this weekend. They will probably split their time between drinking good wine and discussing systemic risk. He suspects that some type of agreement can be forged at that meeting or if one is not crafted that at least some general framework will emerge.

Finally, the US Congress is set to approve the bailout legislation and that will place the full power of the US government behind an effort to unclog the frozen credit market.

Once again there is a small change in motion but my former colleague reiterates that the steps taken today are the smallest baby steps in a lengthy marathon.

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  1. One Response to “Money Market Turning (Imperceptibly)”

  2. By Michael on Oct 3, 2008 | Reply

    I believe the following is one of the reasons US government was in a rush
    to pass package

    ISDA®
    INTERNATIONAL SWAPS AND DERIVATIVES ASSOCIATION, INC.

    NEWS RELEASE

    For Immediate Release, Tuesday, September 30, 2008

    For More Information, Please Contact:

    Louise Marshall, ISDA New York, +1 212-901-6014, lmarshall@isda.org

    Cesaltine Gregorio, ISDA New York, +1 212-901-6019, cgregorio@isda.org

    Donna Chan, ISDA Hong Kong, +852 2200 5906, dchan@isda.org

    ISDA LAUNCHES FANNIE MAE AND FREDDIE MAC PROTOCOL

    Key Dates for Other Protocols Announced

    NEW YORK, Tuesday, September 30, 2008 – The International Swaps and Derivatives Association, Inc. (ISDA) today announced the launch of the 2008 Fannie Mae and Freddie Mac CDS Protocol.

    The purpose of the Protocol is to offer market participants an efficient way to settle credit derivative transactions referencing Federal National Mortgage Association (Fannie Mae) and Federal Home Loan Mortgage Corporation (Freddie Mac), the two US government sponsored entities (GSEs) that were placed in conservatorship on Sunday, September 7.

    “ISDA’s protocol mechanism is playing an important role in ensuring stability in the credit derivatives industry by helping to provide participants with an efficient and reliable settlement process in the event of a reference entity default,” said Robert Pickel, Executive Director and Chief Executive Officer, ISDA. “The success of these efforts reflects the industry’s ability and determination to continue to strengthen the infrastructure for privately negotiated derivatives.”

    The Protocol, which is open until October 2, offers institutions the ability to amend their documentation for various credit derivatives transactions in order to utilize an auction scheduled for October 6, 2008 to determine the final price for certain Fannie Mae and Freddie Mac obligations. Markit and Creditex will administer the auction.

    The 2008 Fannie Mae and Freddie Mac CDS Protocol is open to ISDA members and non-members alike.

    A complete list of deliverable obligations that are included in the Protocol and a list of adherents to date are available at http://www.isda.org. The text of the Protocol and form of adherence letter, guidance on the mechanics of the Protocol, and answers to frequently asked questions are also available on the Association’s website. Details on the auction are included in the Protocol.

    ISDA also announced key dates for other Protocols. The adherence period for the Tembec Protocol ended on September 26 and the auction date is scheduled for October 2. The adherence period for the Lehman Brothers Holdings Protocol will open on October 6 and run until October 8. A first list of deliverable obligations for the Lehman Brothers Holdings Protocol is available on the ISDA website, the deadline for submitting additional obligations is Wednesday, October 1. The auction date is scheduled for October 10. A protocol for Washington Mutual is tentatively scheduled to open on October 14 and run until October 17, with a tentative auction date of October 23.

    About ISDA

    ISDA, which represents participants in the privately negotiated derivatives industry, is among the world’s largest global financial trade associations as measured by number of member firms. ISDA was chartered in 1985, and today has approximately 850 member institutions from 56 countries on six continents. These members include most of the world’s major institutions that deal in privately negotiated derivatives, as well as many of the businesses, governmental entities and other end users that rely on over-the-counter derivatives to manage efficiently the financial market risks inherent in their core economic activities. Information about ISDA and its activities is available on the Association’s web site: http://www.isda.org.

    ®ISDA is a registered trademark of the International Swaps & Derivatives Association, Inc.

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