Betfair Official Blog

All eyes on Carlyle for a change

Daily View - 14th March

So markets are back at the 5700 level once again, which appears to be pretty much the base level these days. Since falling out of bed last summer, the 5600 to 5800 region for the FTSE 100 has proved to be the 'buying' area for shorter to medium term traders, but the recoveries are getting harder to achieve. Investors are beginning to buckle under the combined weight of the cost of funds and the incessant drip, drip, drip of negative news flow.

With speculation still rife across the pond that a major investment bank is in trouble, there are rumours that the real reason for the sudden injection of funds by the Fed was not only an attempt to free up liquidity in the money markets, but also an emergency back up for the company in difficulties. Highly geared hedge funds will be adding pressure on the investment banks' balance sheets, as the possibility of forced heavy asset disposals into a market with no buyers, will call into question the margin levels required for even high quality bonds.

Most hedge funds deposit their bond/equity/commodity assets with the banks that lend them the money as collateral. In general this is normally considered adequate, as the hedge funds have substantial assets themselves which are also deposited with the lending banks. Carlyle's woes will be worrying credit officers across the city this morning and we can expect continued pressure on non-government yields for the time being. Fortunately for the bulk of the investment world, the troubles in the mortgage/bond arena have still to be felt on the wider economic situation in the UK and in Europe.

Today actually sees the markets open almost unchanged from yesterdays close across the board. The FTSE is now at 5700-5701, up a smidgeon, Dax at 6492-6494 down a smidgeon, Gold just pausing for breath below the 1000 level having managed the briefest of pips above the magic number yesterday afternoon, and Oil consolidating well above 100 with Brent unchanged this morning at 107.36-107.41. The temptation to be bearish is almost overwhelming but even in bad times there are always some sharp corrections.