NOONAN'S PLAN TO BURN SOME ANGLO SENIOR BONDHOLDERS SHOCKS MARKETS - There is still no comment from the European Central Bank this morning about Finance Minister Michael Noonan's plans to go to the Commission, the European Central Bank and the International Monetary Fund with a plan to impose significant losses on certain senior bondholders in Anglo Irish Bank and Irish Nationwide Building Society. Minister Noonan made his comments in Washington yesterday after meeting the IMF and the US Treasury Secretary Timothy Geithner. When the news hit the markets last evening the cost of insuring Irish, Portuguese and Greek debt went up.
Hank Calenti, head of bank credit research at SocGen in London, says that Mr Noonan's comments yesterday came as quite a 'shocker' and markets sold off. He says the comments were not well flagged in advance and markets don't like surprises like that. The drip feed of negative news did not help, he added. Mr Calenti says the size of the action is not what is worrying traders, but the action itself and the expectation that it could occur elsewhere now. However, he says that if the ECB does not want the issue to move forward, it will be difficult to do so. He says that even if there is a change at the top of the ECB soon, he is not sure if the plan will be able to move forward.
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MORNING BRIEFS - Iceland has warned Greece and Ireland not to copy its recovery model, even though it managed a return to international debt markets less than three years after letting its banks default on €85 billion. Iceland's finance minister said people should be careful when it comes to comparing Iceland with Greece, Portugal Spain and Ireland. Iceland's success in rebuilding its economy has been contrasted with the plight of euro members by economists including Nobel laureate Paul Krugman. He said Ireland would have been better off using Iceland's 'bankrupting yourself to recovery' model, but the Iceland Finance minister says that advice could be dangerous, as European leaders try to agree on how investors share the cost of a second Greek rescue.
*** One of the governing council members of the European Central Bank, Dutch Central Bank President Nout Wellink, said that the European bail-out fund should be doubled to €1,500 billion if politicians want private sector investors to participate in a second bail-out package for Greece. He told a Dutch newspaper that a new Greek aid package would carry so many uncertainties and risks that a doubling in the bail-out fund would be necessary to take into account the contagion risk for both Ireland and Portugal.
*** US banking giant Citigroup had told its clients that about 360,000 credit cards were affected by a computer hacking attack last month - nearly twice the number previously acknowledged. Citigroup said last night that the security breach had compromised a total of 360,083 North America Citi-branded credit cards, after earlier saying the attack impacted around 210,000 credit card customer accounts - about 1% of its US clientele.
*** On the currency markets this morning, the euro is trading at $1.4096 cents and 87.27 pence sterling.
