Market information

Tuesday, July 26, 2011

The U.S. government has a few extra days to reach an agreement on raising the debt limit. Thus far it was assumed that the deadline for an agreement was the 2nd of August, but unexpected high tax revenues have given the U.S. a little more time. On the date of the new deadline, the opinions diverge from August 8 to the end of August.

Meanwhile, U.S. banks take steps to cope with a possible default by the U.S. government. ''While we trust that our lawmakers find a solution, we aim to continue to meet the needs of our customers if no agreement is reached”, said a spokesman for Wells Fargo on Monday. Many banks a likely to get in trouble because they are heavily dependent on U.S. government bonds.

The Central Planning Agency (CPB) in the Netherlands has reported that World trade has increased by 2.3% in May compared to April. This increase reverses the downward trend of the previous month. In April, world trade was down 2.2% from March. Exports from developed countries reached its highest level since the beginning of the crisis. Industrial production also grew, by 0.8%. This was mainly due to the strong recovery of the Japanese economy.

The 6M Euribor rose by 1 base point to 1.83%. The 10Y Swap increased by 2 basis points to 3.27%.

In the attachment below, today’s market data on money and capital market rates as well as other rates are presented. For more history of these rates or other rates feel free to ask: .(JavaScript must be enabled to view this email address).

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Monday, July 25, 2011

The democratic party in the United States has made a proposal to resolve the budget crisis. Fraction leader in the Senate, Harry Reid proposes an austerity plan to cut budget deficits with $ 2.5 trillion in the next 10 years. In exchange for these cutbacks, the government can borrow an extra $ 2.5 trillion. This is sufficient for the period until the end of 2012. Reid's proposal follows on the plan of the Republicans, which proposes an increase of the debt limit by $ 1 trillion. To avoid payment problems, the debt limit has to be increased before the 2nd of August.

President Obama has indicated that a turbulent period in financial markets can be expected because of the difficult negotiations on the U.S. debt limit. "We are reaching a point where markets around the world will wonder whether politics can come to a compromise in the interest of the country," said Bill Daley, chief of staff of the White House. Nevertheless, confidence in a solution is present. Finance Minister Timothy Geithner said a default by the U.S. is unthinkable.

Fitch rating agency has indicated it will give Greece the status of ‘restricted default’ once the restructuring plan by the private sector is finalized. The debt eligible for the restructuring plan will get the status 'default'. Fitch commends the measures as a positive step towards stability in the Eurozone and says it will reconsider the status if the restructuring plan will actually lead to cost reduction for Greece.

The 6M Euribor remained unchanged at 1.82%. The 10Y Swap decreased by 9 basis points to 3.25%.

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Friday, July 22, 2011

Last night the leaders of the euro-zone reached an agreement on the new bail-out plan for Greece. Banks and other bondholders will greatly contribute to the package. The euro countries and the IMF will provide an additional loan of EUR 109 bn. The private sector will contribute EUR 37 bn up to 2014 and profit on a debt-buyback program will provide an additional EUR 12.6 bn to the package.

In the new structure of the European bail-out fund, which currently amounts to EUR 440 bn, the loan repayment scheme for countries like Greece and Portugal is extended from 7.5 to 15 years. Furthermore, the interest rates on the loans are to be reduced. Previously the interest was between 4.5% and 5.8%. The new structure reduces these to 3.5%.

The announcement on the possible solution of the European debt crisis was one of the reasons behind the rise of Wall Street’s stock exchanges yesterday. The Dow Jones index rose by 1.21%, the S&P500 gained 1.35% and the Nasdaq closed 0.72% higher.

The 6M Euribor has increased with 1 basis point to 1.82% and the 10Y Euro Swap has increased 3 basis points to 3.34%.

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Thursday, July 21, 2011

European investors are anticipating the outcome of the European Summit on the Greek debt crisis in Brussels that will take place today. The aim of the summit is to reach a decision about additional support for Greece. France and Germany have pre-discussed the summit in Berlin, because of their disagreement on how banks should contribute to a new support plan for Greece. After this meeting, France and Germany reached a common position, but exact details are not yet known.

As tension for the euro summit rose, Italy’s and Spain’s interest rates declined yesterday. The ten year interest rate of both countries fell below 6%. The German and Dutch interest rates, however, increased by 9 and 6 basis points to 2.76% and 3.12% respectively.

After the U.S. stock exchanges’ positive figures last Tuesday, the exchanges were relatively stable yesterday as investors await the outcome of the summit. The Dow Jones lost 0.12%, the S&P500 closed 0.07% lower and the Nasdaq met a loss of 0.43%.

The 6M Euribor remained the same at 1.81% and the 10Y Euro Swap has increased with 11 basis points to 3.31%.

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Wednesday, July 20, 2011

Banks Van Lanschot and NIBC have made it through the stress test for banks. In a worst case scenario, the so-called core Tier 1 ratio, the measure of financial strength of a bank, for Van Lanschot would amount to 9.7% and 8.8% for NIBC in 2012. This is well above the required 5%. Van Lanschot and NIBC were not part of the group of 90 European banks that were required to undergo the stress test.

President Obama has said to support the efforts of Democratic and Republican senators to devise a new plan for the U.S. national debt. Yesterday he announced during a press conference that some progress has been made in the negotiations. The two parties must submit new arrangements on August 2 about the statutory ceiling of U.S. debt.

Encouraging quarterly results and the statements by President Obama have resulted in positive numbers for the US stock exchanges. The Dow Jones index gained 1.63%, the S&P500 also rose by 1.63% and the Nasdaq met with a gain of 2.22%.

The 6M Euribor has remained the same at 1.81% and the 10Y Euro Swap has increased with 3 basis points to 3.20%.

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