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Tuesday, February 23, 2010


Case/Shiller Home Prices fall but meet estimates
Housing prices fall 3.1% vs a year ago. House prices are now at 2003 price levels

Asian markets end mixed as Shanghai slides, Hong Kong rises
Concern about a boost in share supply weighed on China's financial stocks Tuesday, while investors bought into property developers in Hong Kong, boosting the Hang Seng. Japan's Nikkei 225 gave up 0.5%, China's Shanghai Composite slid 0.9% and Australia's S&P/ASX 200 closed flat. Hong Kong's Hang Seng Index rose 1.2%, Taiwan's Taiex added 0.5% and South Korea's Kospi Composite edged up 0.1%. India's Sensex and Singapore's Straits Times Index were up 0.5% in afternoon trading. The Wall Street Journal (23 Feb.)

Report: N.Y. Fed kept AIG memo on CDOs secret for more than a year
The Federal Reserve Bank of New York prevented for more than a year the release of a document showing how Goldman Sachs packaged mortgage collateralized debt obligations and then bought insurance against their default from American International Group, Bloomberg Markets reported. When Goldman's CDOs went bad, the insurance that the bank, as well as Societe Generale, bought pushed AIG to the verge of collapse, leading to a bailout by the U.S. government, according to Bloomberg's report. Bloomberg (23 Feb.)

Analysis: Investors are poised to get burned in bond market
Investors continue to pour money into bond mutual funds, prompting a warning from analysts about a looming interest rate trap. Many investors appear to think that interest rates will be kept low because of subdued inflation and high unemployment in the U.S. "These people, they're investing in bonds because they wanted yield," said Thomas Atteberry, a money manager at First Pacific Advisors. "The money-market fund wasn't giving them anything, and so they went into corporate, government, mortgage, some high-yield, that whole gamut." Reuters (22 Feb.)

Banks restructure troubled loans to buy time
As pressure from the commercial real estate sector mounts, banks are restructuring loans to buy time for borrowers, which might help the lenders avoid larger losses. However, the problem is expected to re-emerge down the line. "Asset quality appears to have stabilized, but we just don't know the impact of all these restructured loans," said banking analyst Paul Miller of FBR Capital Markets. "This could mean problems persist for longer than investors expect." MarketWatch (2/22)

State, federal debt puts additional pressure on credit market
The U.S. government is engaged in its largest series of Treasury auctions ever, and states are issuing bonds to support spending. These moves are putting additional pressure on the credit market while credit availability remains at a premium. "Clearly the government is not the 800-pound gorilla -- it's the 8,000-pound gorilla in the credit markets nowadays," said Mike Larson, an analyst at Weiss Research. "These numbers are just so mind-boggling. Really, what's going on is you have intractable debt and deficit problems in the country that neither side wants to tackle in a meaningful way, so the market is doing it for them." CNBC (2/22)

Analysis: Underwater borrowers who walk away slow housing recovery
People with relatively solid credit histories who are capable of meeting their payments but who walk away from homes that are worth less than what they owe on the mortgage are playing a growing role in the financial crisis, Aline van Duyn writes in a Financial Times analysis piece. "These are all states where many of the mortgage holders are educated people and it is easy to connect the dots and conclude that these people are deciding it is no longer worth paying a mortgage if they are under water," said Ivy Zelman, a housing market analyst. Zelman predicts housing prices in the U.S. could fall another 10% before bottoming out. Financial Times (tiered subscription model) (2/22)

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