How long are we going to stay in Lockdown? Macron said at least early December but that doesn't mean anything. More important he said the metric was going down to 5000 cases a day. When will that be? A quick thread to estimate the lockdown duration.
My first estimate is highly scientific: the first lockdown was 2 months, assuming the handling of the disease is a bit better but we started the lockdown a bit later and it's winter soon, 2 months sounds like a decent benchmark again.
The second estimate: let's reverse the incidence curve and see when we were at 5K. The incidence curve is so horrible now that it's hard to see the number, but 5k was basically the end of august, so 2 months again
Slightly more scientific now: let's use the same curve for the changes in R after the first LD (using hospital data) & starting from where we are, i.e. R=1.2. R could go down less quickly (because LD is not as strict) but counterbalancing is that we are more cautious. Here:
Starting from 40k we get to 5k in 56 days. Again, same ballpark estimate.
Let's face it: we'll be out just for Christmas.
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Enough Covid, let's move back to banks. The Spanish CB published a great Financial Stability Report with extremely interesting data - very useful as we approach a possibly new lockdown. A thread.
There is a lot about corporate weaknesses due to Covid - we've all heard about it, so I'll just mention this graph.
Blue is pre-Covid, red & orange are baseline and bad macro scenarios.
In hospi/leisure weak forms employ 70% of the total employment of the sector. Really grim.
The BoS has an interesting model to explain who takes loan moratorium. The bad news is that there is a strong skew towards lower quintiles of revenues etc.
This is not very encouraging for when payment holidays stop
Since I made this thread I get asked often: "what should we do?". (Lockdown? Close schools? Protect the elderly? Nothing?) Usually, there's a strong political or moral angle to the question and I’m lucky I don’t have to make the choices. But I believe there’s another way.
Thread
Some have been discussing ways to reduce R since the beginning of the pandemic (@AdamJKucharski or @gianlucac1 - follow them!) and I believe they are right. This is where we can make progress.
How?
With no public intervention, R is around 3.4. What can we do from there?
I’d like to share two major ideas:
The 1st is Adam’s model on social contacts and attack rates which is a very good approach to estimate how social rules and trace/test/isolate strategies impact R
Last Friday, Macron floated the idea of a new general lockdown in France. Ouch. And because I’m fed up with reading so much garbage and contradictory stuff on Covid, I decided to have a hard look at the French data. A (long but important) thread.
The questions I want to answer:
How bad is the 2nd wave?
How fast is it growing?
Does it affect only young people as some claim?
Is Covid really treated better?
Is the fatality rate really going down?
Can the government stop the 2nd wave quickly enough?
All important questions.
BTW this is French data but I suspect the data looks the same all over Western Europe, with time lags.
Something weird is happening on Metro Bank. They just announced a 20.2% capital + MREL ratio, which is below requirement but we kind of knew they would be below requirements.
So that's not what is odd. The CET1 capital ratio is much more intriguing. Quick thread
They did not disclose their Q3 CET1 ratio. But in Q2 their MREL ratio was 21.3% so it went down 110bps. Afaik there was no repayment of Tier 2 or SNP debt (I wish!) and RWAs are fairly stable. So the only logical conclusion is that CET1 went down 110bps QoQ - would be a big drop
How is it possible? It would imply a big loss. Always possible, but in only one Q? And not mentioning it in the trading update, which only says that "The macroeconomic scenarios applied to the measurement of ECL at H1 remain appropriate", would be reckless.