Tag Archives: Natural science

A Market Meltdown

Financial markets are beholden to the Japanese nuclear situation, and the twists and turns of the story are causing volatility in every corner of the financial market. In fact, if we are facing a nuclear meltdown in Japan, we’re also facing a financial meltdown. Investors woke up this morning to find that the Japanese authorities were still struggling to cool the overheating reactors. Japan’s sovereign CDS was 16 basis points wider at 120, (about the same level as Italy and Saudi Arabia), while the Markit iTraxx Japan was trading around 150 basis points , 15 bp’s wider than yesterday’s close.

“Some market participants were treating the news with caution but not enough to stop spreads rallying in the afternoon.”

Gavan Nolan


After yesterday’s aborted attempt to use military helicopters to drop water on the reactors, the radiation levels were still way too high today, and the Japanese rescue workers had another go at it. But reports suggests, however, that much of the water missed its targets and the radiation levels were rather rising than falling as the efforts to douse the reactors with high-pressure hoses ultimate proved to be ineffective.

Tokyo Electric Power Co (Tepco), the operator of the nuclear plants, saw its spreads widen by nearly 100 bp’s to 390, Thursday.

The seeming lack of progress concerned investors, and I guess it was no surprise to see Japan’s CDS spread spiral upwards.

The chart above shows the recent volatility, reflecting the uncertainty over the eventual costs of the disaster.

I wrote in a post yesterday that Tepco was about to build a new power cable to supply electricity enough to cool down the reactors.

(See: Nuclear Holocaust: All We Need Is A Solar Storm (Or A Crazy Hacker)

Well, I must admit I halted for a second when I read the news report saying that the company was trying to fix the original one, that apparently has been broke for some time… and that didn’t ease the volatility.

Tepco said they would fix the cables that supply electricity to the reactors cooling systems by the end of the day. We’re still waiting for that confirmation.

But according to Gavan Nolan at Markit it “acted as a boon to risky assets across the globe.”

“Some market participants were treating the news with caution but not enough to stop spreads rallying in the afternoon,” he adds.

And Nolan deserves some credit for doing his best to cheer us up, pointing to US Philly FED Index, released today:

“More concrete news came in the form of the Philly Fed index, which posted its strongest reading since January 1984. The index came in at 43.4 in March, up from 35.9 the previous month and confounding expectations of a small decrease,” he concludes his daily summary.

  • Markit iTraxx Europe 101.5bp (-3.5), Markit iTraxx Crossover 403bp (-7.5)
  • Markit iTraxx SovX Western Europe 168bp (-7)
  • Markit iTraxx Senior Financials 152.75bp (-5.75), Markit iTraxx Subordinated Financials 269bp (-9)
  • Sovereigns – Greece 965bp (-19), Spain 220bp (-7), Portugal 503bp (-11), Italy 157bp (-5), Ireland 580bp (-8), Belgium 144bp (-6))
  • Saudi Arabia 130bp (-4), Bahrain 348bp (-6)
  • Japan 110bp (+6)
  • Markit iTraxx Japan 140bp (+5)
  • Tokyo Electric Power Co – 345bp (+50)
  • Markit Bonds – Japan 1.9 Mar 21 106.39 (106.30 yesterday)

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Spinning a Wildfire

At least EU’s commissioner for energy got a bit of a boost Wednesday after saying that he feared a catastrophic event in Japen within hours. The financial markets went – of course – straight into free fall, and Mr. Günther Oettinger and his spin doctors probably made an unofficial speed record in official dèmentis with a contradiction statement within minutes after the first one. But spinning a wildfire is not an easy task.

“The lack of signs of improvement or even stabilisation sent stocks down sharply again and spreads were wider on the day during the afternoon.”

Gavan Nolan


It was perhaps inevitable that there would be a short covering rally at some point this week. Credit markets in Japan had widened dramatically for three days in succession; it would have been no surprise to see a pull back at some stage. And so it proved Wednesday morning when spreads opened tighter.

Japan’s sovereign CDS spreads were 11bp tighter at 105 basis points, reversing much of the widening of Tuesday.

The Nikkei was up over 5%, while the Markit iTraxx Japan index closed at 135 bp’s, 17 bp’s tighter than yesterday.

“Bid/ask spreads of 10bp were an improvement on the 15bp seen yesterday, though they were still considerably higher than the usual 1bp. Liquidity remains impaired,” credit analyst Gavan Nolan at Markit Credit Research points out in his daily summary.

A relatively bullish FOMC statement late yesterday added to the positive sentiment. he adds.

“The economy is on a “firmer footing” and the recent inflationary pressures will be ”transitory”, according to the Fed,” he writes.

But the rally soon lost momentum.

The impact of the nuclear accident in Fukushima is still uncertain, and there are now concerns over all six of the reactors at the plant.

A plan to use helicopters to cool the reactors had to be cancelled due to the high radiation levels.

“The lack of signs of improvement or even stabilisation sent stocks down sharply again and spreads were wider on the day during the afternoon,” Gavan Nolan explain.


And the incendiary comments from EU energy commissioner. Günther Oettinger, that the situation was “out of control” didn’t help- at all!

Nor did the press release a few minutes later, trying to explain that the EU commissioner only had expressed his feelings of fear, and not stating any kind of facts.

Well, looking at the chart of Tokyo Electric’s 5-years CDS it seems clear that Mr.  Oettinger’s  feelings is highly correlate with the reality of the situation.

Japan wasn’t the only factor feeding risk aversion. Bahrain has been overshadowed by events in Japan but the deteriorating public order situation there has potential ramifications for global markets. Saudi troops moved in on Monday – at the request of the Bahraini government – and the authorities declared martial law yesterday. Troops used force today to drive protesters out of Pearl Square in Manama, the heart of the anti-government movement.

“Oil crept up from $107 to $111 a barrel today, a reminder that events in the Middle East can affect global growth,” Nolan notes.

European sovereigns continued to hold up relatively well, though there was one notable laggard, according to Markit.

Portugal was downgraded to A3 from A1 and left on negative outlook by Moody’s, the agency citing the “subdued growth prospects” of the Iberian sovereign.

This didn’t come as a shock to market participants, and the downgrade only brought Moody’s into line with S&P.

The country’s auction of 12-month T-bills, however, had a far greater effect on sentiment.

The EUR1 billion debt sale was met with relatively tepid demand, the bid-to-cover ratio of 2.2 significantly less that the 3.1 achieved at the last auction held only two weeks ago.

The yield was also considerably higher at 4.331% compared to 4.057%.

“The positive effects of the EU summit are still lingering but it hasn’t quashed talk of a bailout. Investors are all too aware that the sovereign has sizeable refinancing needs over the next two months,” Nolan concludes.


  • * Markit iTraxx Europe 105bp (+1), Markit iTraxx Crossover 410bp (+4)
    * Markit iTraxx SovX Western Europe 175bp (-5)
    * Markit iTraxx Senior Financials 158bp (-2), Markit iTraxx Subordinated Financials 278bp (-1.5)
    * Sovereigns – Greece 985bp (-5), Spain 227bp (-12), Portugal 513bp (+7), Italy 160bp (-4), Ireland 588bp (-20), Belgium 150bp (-4)
    * Saudi Arabia 133bp (0), Bahrain 351bp (-6)
    * Japan 115bp (-1)
    * Markit iTraxx Japan 148bp (-5)
    * Tokyo Electric Power Co – 345bp (-21)
    * Reinsurers – Swiss Re 125bp (-1), Munich Re 76bp (-1), Hannover Re 135bp (+2)
    * Utilities – RWE 87bp (0), EON 85bp (+2), EnBW 85bp (-2), VATFAL 69bp (-1)
    * Markit Evaluated Bonds – RWE Fin BV 6.5 2021 asset swap spread 95bp (0), EON Int Fin 5.75 2020 asw 129bp (0)

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Nuclear Holocaust: All We Need Is A Solar Storm (Or A Crazy Hacker)

The severity of the nuclear threath from collapsing reactors in Japan is perhaps bigger than than most of us can imagine. Just a few hours ago, Tokyo Electric Power Co informed of a reactor containment vessel that may have been breached at the Fukushima Dai-Ichi power plant, increasing Japan’s nuclear crisis and the risks of radioactive leaks. An emergency power cable is now being buildt to supply the reactors cooling system with more electricity. What do you think will happen if we at this moment should be hit by a massive solar storm, as predicted by NASA could happen at any time?

“If you get enough cold water inside you may stop the generation of steam and then life will get easier. Until then it is a bitch.”

Robert Kelley


Clouds of steam rose from the reactor buildings following a fire at Dai-Ichi’s No. 4 reactor this morning. Radiation levels at the No. 4 reactor hampered efforts to confirm whether the fire had been extinguished, a day after a similar blaze at the same structure, Bloomberg reports. And as long as there is steam coming out it will carry radioactive particles and gases with it.

“If you get enough cold water inside you may stop the generation of steam and then life will get easier. Until then it is a bitch,” says Robert Kelley, a nuclear engineer based in Vienna.

Exposed to air, the fuel bundles could chemically react with moisture, catch fire and spread radiation into the atmosphere, according to physicist Edwin Lyman, with the Union of Concerned Scientists in Cambridge, Massachusetts.

Spent fuel is pretty hot and so it is stored under water to keep it cool,” Kelley says, who worked for 30 years at the U.S. Energy Department.

“If the water leaks or boils away, then the fuel is exposed,” then after burning, the uranium corrodes and releases cesium, contaminating the area, he explain.

A Tokyo Electric worker at the Fukushima nuclear plant is being treated for radiation exposure, the Japanese nuclear safety agency says.

Tokyo Electric says it hasn’t decided whether to bring workers back after the utility evacuated 750 of its 800 employees following yesterday morning’s blast.

The nuclear maintaince company,Tepco,  is now building a power cable to supply electricity to the plant’s cooling systems, according to spokesman Daisuke Hirose.

The systems were knocked out by the March 11 earthquake and tsunami.

The Yomiuri newspaper reported earlier today that if the plan succeeds, the company may be able to stabilize its reactors.

Hirose says there is no timetable for completion.

This video is just in; it seems like a new fire has erupted at the Fukushima Dai-Ichi power plant:

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Based on this information, it seems pretty clear that the only thing that keeps a global nuclear horror scenario from happening is a a stable supply of electricity.

And that fact should also be a cause of great consern.

A Black(Out) Swan

A national electrical grid is at the moment one of the most vunerable infrastrutures there is.

With the worlds first cyber weapon – Stuxnet – released online (at least partly) and available to everyone, any idiot of a hacker with medium computer skills are able to cut the power in large areas for an unknown amount of time.

Most nuclear plants have diesel generators that can provide electricity for a limited time – but still; limited.

However, there’s an even more scary possibillity.

According to NASA and several other scientist, is the activity of the Sun building up power to release one of its most powerful solare flare eruptions in more than 100 years.

Some says the effect of a solar storm like this will have the power of 100 million H-bombs, and NASA have been warning for the last two years that this might knock out communication satelites and; electrical grids.

The scientist are not sure when this megastorm will hit the earth, but they’re sure that it will, potentially leaving us without electricity for many months.

It can happen in the next five minutes – it can happen five years from now.

Thousands of  nuclear power plants all over the world could be facing a simultaniously meltdown.

I really don’t like the way this is going…

 

Solar Activity Over the Last 12 Months

Go to the ECOLOGY section to get the latest data on solar activity, using the solar widget from Wolfram Research.

 

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