Credit derivatives volume still growing

http://www.isda.org/press/press041807ms2006.html

http://www.bankofengland.co.uk/monetarypolicy/pdf/cpiletter070417.pdf

http://www.hm-treasury.gov.uk/media/FEE/3D/chxresponse_170407.pdf

I am confident that inflation will not return to 2% unless rates are raised significantly

Not entirely unexpected - to me it seems that the Bank were trying to keep CPI as close to 3% as possible without breaching it rather than aim for their official 2% target. RPI is now at 4.8%.

http://www.statistics.gov.uk/pdfdir/cpinr0407.pdf

http://www.statistics.gov.uk/pdfdir/cpi0407.pdf

http://www.bloomberg.com/apps/news?pid=20601087&sid=ahFq3UK672s8&refer=home

The minutes of the April meeting will be out tomorrow - I would be surprised if people are now not losing faith with the ability of the MPC to make the tough decisions when necessary.

Of course, real inflation is much greater than 3.1%, but we are stuck with this measure for the time being. I calculated my inflation and it was substantially more than the headline rate.

http://www.telegraph.co.uk/money/graphics/2007/03/31/YourInflationMar07.xls

The pound is very close to 2 dollars

and Betfair are showing an almost guaranteed interest rate rise next month

Squeal like a pig! I recently watched the film for the first time

http://www.imdb.com/title/tt0068473/

and wondered where it was filmed. I once canoed down the Ardeche for 30km

http://www.ardeche-canoe.com/ardeche.htm

although the river was nowhere near as fierce as the one in Deliverance. I read in the Sunday Times last week how you can canoe the Deliverance trail

http://driving.timesonline.co.uk/tol/life_and_style/driving/features/article1622615.ece

but make sure you watch out for the banjo players

http://www.youtube.com/watch?v=GdzThgveHwQ

CVC's attempt to buy J Sainsbury appears to be over

http://news.independent.co.uk/business/news/article2442076.ece

with the 5Y CDS spread trading at  ~45 bps, down from its peak of ~130 bps, but still above the spread of ~25bps 6 months ago.

However, as can be seen from the chart below, the share price hasn't decreased by as much. If it mirrored the CDS spread, i would expect it to return to below £5.00.

Two things to note:

• Usually share prices and CDS spreads move in opposite directions - if a company is in trouble the shares go down as the perception is that the company is worth less and the CDS spreads increase because there is more likelihood of default. A leveraged buyout is different. The CDS spreads increase because the buyout will be financed using debt, making the company more risky, and the share price usually increase because the potential bidder tends to offer more than the market value to tempt people to buy into the offer
• In common with several other entities (Nokia being one that springs to mind), Sainsbury does not have any unsecured debt outstanding

http://ftalphaville.ft.com/blog/2007/04/11/3757/cds-report-market-awaits-cvcs-next-move-on-sainsbury/

I used to hold SBRY when it paid a good yield (around 6%) but sold it when the dividend cut was announced. If I were to attempt to make money from my above beliefs, I would either

• Go short on SBRY stock
• If I was worried about a buyout still happening (and assuming I could trade CDS as a private investor), I would buy CDS protection as a hedge.

Six times salary mortgages are now being offered

http://www.telegraph.co.uk/global/main.jhtml?view=DETAILS&grid=&xml=/global/2007/04/11/nhomes11.xml

UPDATE: Nine times!

http://www.cambridge-news.co.uk/news/region_wide/2007/04/12/c35ac683-f9d5-459d-84f4-d7150f641794.lpf

UPDATE: Ten times!

http://business.timesonline.co.uk/tol/business/money/mortgages/article1654078.ece

the old 3.5 times salary rules is deemed old hat - good job the credit assessment is much more sophisticated. Until the banks start tightening their lending criteria and/or the MPC raise real interest rates (currently <1% with RPI inflation at 4.6%), the boom shows no sign of abating, although the bust is sure to come at some point. The long term interest rate mean is around 7%, and nothing says rates won't exceed the long term mean.

The chart above is using CPI -a measurement that even the BOE governor is unhappy with (unlike RPI, CPI excludes mortgage payments)

http://www.telegraph.co.uk/money/main.jhtml?xml=/money/2006/11/01/cnbank01.xml

http://ftalphaville.ft.com/blog/2007/04/11/3730/insurers-launch-%E2%80%98london-flood%E2%80%99-bond/

This helps them to offset some of their risk if Canary Wharf and surrounding areas are flooded. In theory the Barrier should protect us for a few more years

http://en.wikipedia.org/wiki/Thames_Barrier

although a combination of a spring tide and severe storm similar to 1953 could breach the barrier and flood defences

There has been a book written about a fictional flooding

http://www.floodlondon.com/floodtb.htm

http://www.amazon.co.uk/exec/obidos/ASIN/0099429691/floodlondonco-21

and the pre-barrier original

http://www.amazon.co.uk/Deluge-Richard-Doyle/dp/0330252577/ref=sr_1_1/026-9670453-0954038?ie=UTF8&s=books&qid=1176373493&sr=1-1

and there was a documentary on BBC2 a few weeks ago

http://www.discoverychannel.com.au/perfect_disaster/mega_flood/index.shtml

This has been updated since the last post (note that I tried to update the original post's date but this caused Dasblog to crash - duplicate GUID)

http://www.noelwatson.com/blog/PermaLink,guid,5e315cea-4633-4924-9563-69cbfb3dfb0c.aspx

http://www.markit.com/news/Markit-LCDS-Report.pdf

Markit processed $750 million worth of trades in Q4 2006 compared to the previous quarter - I wonder how much of this increase is due to more people using the Markit platform and how much is due to the market itself growing.

There is an upcoming Loan CDS conference - I might pop along to this