A group of scientists have calculated a formula with the end product showing that today is the most depressing day of the year; Blue Monday if I may. This equation includes anything from temperature fluctuations to salary but mainly it falls on one thing: debt, a handy observation given this weekend’s mutterings.

We expect the government to lay out plans today on a second round of High St bank recapitalisation with some notable changes since round 1. The first round of funding came with a 12.5% coupon to be repaid to the state regardless of profit. Most banks have said that this was a penalty that they were not able to stomach and that saving cash for the coupon repayment was stifling efforts to lend and increase liquidity. This fund injection will come with a coupon rate of around 5% we believe. We may also hear plans for setting up a ‘bad bank’; a haven for toxic debt that can be cleared from bank’s balance sheets.

The market should love this, it’s Christmas in January, deck the halls with eurodollar. Combined with the Obama inauguration the market should take on a nice risk acceptance air and we would expect equity markets to rise with USD, JPY and CHF weaker. This is not the beginning of the end however and as US corporate earnings season continues market participants will be reminded that the problems are not just the financial sector’s. GBP may enjoy a couple of good days this week but it will be a topsy turvy period.

There is absolutely no data today, something to be glad for I guess, so the reaction to the government’s plans will be easy to read.

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