Relevant economics of the past week (for intermediaries)

- Tesco, the world's third-biggest retailer by sales, has priced the initial public offering of its Thailand property fund at Bt10.4 per unit, at the top of an indicative range, according to people involved in the deal, the FT reports. The IPO is set to raise Bt18.4bn ($602m), which would make it Thailand's largest property fund and its biggest offering since Rayong Refinery's $710m listing in 2006.

- UK manufacturing performance was 'good in parts' in February. The Purchasing Managers' Index (PMI) survey of UK manufacturing showed that the sector expanded for the second month in a row, but the rate of growth slowed. Factory production increased, leading to a rise in employment, but this is due to work on backlogs rather than new orders. Less good news is that UK domestic demand is still low and the boost from better exports to
Asia and the US has been offset by poor Eurozone demand for UK goods. News on prices wasn't good either. The surge in oil prices caused input prices to rise at their fastest monthly rate in over 19 years.

- UK housing market data were stronger. The price of a typical house in the UK increased by 0.6%m/m in February, which brought the annual rate of growth up to 0.9%. This may seem at odds with the current difficult
economic conditions, but it concurs with other recent data. Mortgage approvals for house purchases reached their highest level in more than two years in January, up 36%y/y. Some of this is due to particularly weak levels
in January 2011, but the improvement in prices and approvals is more likely
due to activity brought forward to beat the end of the stamp duty concession later this month.

- Eurozone banks were eager to take up the ECB's second dose of long-term funding. 800 banks took advantage of the ECB's liquidity operation, compared with 523 in December, as collateral rules were loosened.
The move has reduced tensions on bond yields in the most vulnerable countries. But it's unlikely ECB Chairman Mario Draghi will offer another dose. He is eager for banks to begin to operate 'normally' again by borrowing from each other. Jitters about bank solvencies in the face of the sovereign debt problems are preventing this happening at the moment.

- Inflation increased and Eurozone unemployment reached a record high rising 10.7% in January. Spain is suffering with an unemployment rate of 22.3% and a youth unemployment rate just under 50%. And Eurozone
inflation rose to 2.7% in February up from 2.6% in January. Oil is the main culprit as prices rise because of increased political tensions in the Middle East. This remains as another threat to economic recovery, in the Euro and globally.

- Savills expands list of property lenders - Savills today names 21 active "bigger ticket" property lenders, an increase of two in the last six months. The firm said the named lenders had completed at least three deals of more than £30m over the last six months or were well advanced in doing so. The four new entries to the list are AIG, Citigroup, Deutsche Postbank and Lloyds Banking Group, while Aareal and Eurohypo have disappeared.
Savills' list includes all the UK clearing banks (Barclays, HSBC, Lloyds and RBS), eight German banks and five insurance companies, AIG, Aviva, Axa, MetLife and M&G Investments. Other emerging insurance or life companies are Canada Life and Legal & General. William Newsom, Savills' UK head of valuation, said: "There is no shortage of organisations seeking to provide both senior debt and mezzanine. However, the real issues are firstly that lenders are very selective, and, secondly, tighter lending terms. "Of the lenders listed, they are looking to provide finance to selected borrowers with track record, secured against good quality commercial investment
properties, let to strong tenants on long term leases in good locations, preferably located inside the M25." Savills confirmed that loan to values had fallen over the past eight months and interest rate margins had increased by 100 basis points to 325 basis points for prime investment. Loan-to-value ratios against prime investment are around 55-60% with some banks having difficulty lending above 50%. Savills also identifies a further 50 senior debt providers, who are active at the small and medium-sized ends of the spectrum, and 30 providers of mezzanine finance. "The number of lenders in the market is encouraging to see, but the further reduction in loan to value ratios means that borrowers may increasingly access the mezzanine market in order to bridge the funding gap," Newsom added. The 21 bigger ticket lenders are: AIG, Aviva, Axa, Barclays Bank, Bayern LB, Citigroup, Deka Bank, Deutsche Bank, Deutsche Hypo, Deutsche Pfandbriefbank, Deutsche Postbank, Helaba, HSBC, ING REF, Landesbank Berlin, Lloyds Banking Group, Met Life, M&G Investments, Royal Bank of Scotland, Santander

- UK regulators and global banks are discussing a potentially far-reaching overhaul of the calculation and regulation of interbank lending rates, amid claims that the benchmark for $350tn contracts worldwide may have been subject to manipulation

- Lloyds Banking Group is lining up its second loan sale in the space of six months, PropertyWeek.com can reveal, with a £600m portfolio being put together. A sale would come on the back of the successful disposal
of £923m of loans to Lone Star in December, the Project Royal portfolio. Lloyds has not yet given the final green light to the sale, but is understood to be working with adviser JP Morgan Cazenove, which handled the
Royal sale, to decide which loans to put into the portfolio, in a process some in the market are calling Project Launcelot. A sale would be part of the range of options being considered by Lloyds to reduce its property
exposure. It is understood that this portfolio will eventually total around £600m, and that the loans will have similar characteristics to those in the Royal portfolio, where the average lot size was around £4m, and the loans
were secured against office, retail and industrial properties around the country. If the Launcelot portfolio does come to market, it will likely be bought by one of the large US private equity firms which have raised tens of
billions of dollars of equity to buy loan packages. The final two bidders on Project Royal were Lone Star and Cerberus Capital Management, both of which are looking to step up their European distressed loan acquisitions.
Blackstone has also recently set up a new division, Blackstone Real Estate Debt Advisers, to manage the £1.4bn Isobel portfolio in which it bought a stake from Royal Bank of Scotland last year, alongside other loan portfolios
Blackstone is looking to buy. It is expected that Launcelot will be the last UK loan portfolio sale undertaken by Lloyds in the medium term, because it will then have exhausted the type of loan which can be packaged up and sold. Loans that can be sold in a portfolio need to have a certain characteristic, such as no change of control covenants and minimal swap liabilities. Lloyds has a portfolio of more than £21bn of loans that are managed by its business support unit, headed by Richard Dakin, that need to be restructured or sold. Last year Lloyds achieved the difficult task of reducing its property exposure by £13.5bn to £68bn while at the same time nearly halving its losses on property to £1.3bn. This process was partly due to loan sales like Royal. Lloyds sees the Royal sale as a success, having sold the portfolio completely, without providing vendor finance, at a discount of around 40% in a process that took roughly six months. But it is thought that it is not wedded to the idea of a loan portfolio sale, having used other workout strategies in the past three years such as putting together portfolios of
assets for sale, and setting up platforms to asset manage properties over the longer term.