Today is an especially interesting day.
US equities, led by the financials, are getting absolutely hammered, the longer Treasury bonds are down, dollar and gold and oil are up. The dollar strength may be more of a sign of euro weakness.
Royal Bank of Scotland and State Street Bank seem to have shaken up the confidence of the Asian and Mideast investors, and pehaps the continental Europeans.
We'll know more as the week progresses.
Bloomberg
State Street Falls Most Since 1984 on Bond Losses
By Christopher Condon
Jan. 20 (Bloomberg) -- State Street Corp., the world’s largest money manager for institutions, fell the most since 1984 in New York trading after unrealized bond losses almost doubled and analysts said the company may have to raise capital.
Unrealized losses on State Street’s fixed-income investments rose to $6.3 billion at Dec. 31 from $3.3 billion at Sept. 30, the result of falling values throughout the credit markets, the company said today in a statement. State Street also incurred $528 million in costs to prop up money funds and write down the value of investments on its portfolio...
Unrealized losses on assets held in conduits increased to $3.6 billion from $2.2 billion. The filing also revealed that the company had purchased $2.5 billion securities from the stable-asset funds...
State Street said that the net asset value of another group of unregistered funds had fallen as low as 91 cents a share on Dec. 31. These funds, which invest cash collateral that State Street customers receive in return for lending out their securities, also seek to maintain a net asset value of $1 a share, though they are not required to do so.
The average value of these funds at Dec. 31 was 95.5 cents a share, State Street said in the filing, with a substantial portion of the decline occurring during the fourth quarter. Total assets in the affected funds have fallen to $113 billion on Dec. 31, from $178 billion a year earlier.
State Street has continued to sell and redeem shares of these funds at $1 a share, it said in the filing. The funds can wait until the securities mature and they receive full face value from the borrower, rather than selling the holdings in the market at a loss.
The Jan. 16 filing said that continuing to sell and redeem shares at $1 may prevent State Street from passing on the losses later to shareholders if the value of the securities in the fund don’t recover.
The company also set aside $200 million to cover losses stemming from indemnification obligations on $1 billion in repurchase agreements that State Street clients purchased from Lehman Brothers Holdings Inc. The investment bank filed for bankruptcy protection Sept. 15.
