KeNo's Housing and Economic Portal: Tuesday February 24 Housing and Economic stories

TOP STORIES:

Negative rates to shake up financial system - (www.cnbc.com) Falls in European interest rates into negative territory could profoundly affect the workings of the financial system and there is little chance of benchmark borrowing costs rising in the year ahead, top investment managers and strategists have warned. Yields, which move inversely with prices, have this year dropped below zero on a rapidly expanding range of European governments' bonds - and even some corporate bonds. The declines, which are driven by the European Central Bank's "quantitative easing", mean historically low borrowing costs. But senior finance experts interviewed by the Financial Times saw worrying side effects. "This could be the makings of a completely new environment for global bond markets," said Andrew Milligan, head of global strategy at Standard Life Investments, at the FT's debt capital markets conference in London. "If it actually becomes permanent . . . There could be some very significant capital flows."

China's COSCO Dis-Assembles 8 Ships Amid Glut As Baltic Dry Hits Another Record Low - (www.zerohedge.com) You know things are bad in the ship-building business when... amid considerably larger than expected losses, China's COSCO announced that it has dis-assembled 8 vessels in January alone (including 3 bulk carriers) and will be decommissioning and disposing of them as it awaits a "more conducive" environment. It appears that is not coming anytime soon, as The Baltic Dry Index just hit 522 - a new all-time low (down a stunning 53 of the last 55 days). As COSCO explains in its HKSE Statement: The board of directors (the “Board”) of the Company wishes to inform the shareholders of the Company (the “Shareholders”) and potential investors that the Group had disassembled eight vessels (collectively, the “Vessels”), including five container vessels (Hutuo He, Xinhui He, Zhaoqing He, Yangjiang He and Yongding He) and three bulk carriers (Peng Jie, Peng Nian and Peng Cai) from 1 January 2015 to 31 January 2015

Puerto Rico debt worries muni bond market - (www.ft.com) Fresh doubts over Puerto Rico’s ability to meet its debt payments are worrying the $4tn market where US states and municipalities raise capital, casting a shadow on the outlook for muni bonds, the popular tax-exempt securities. Standard & Poor’s last week downgraded the rating on Puerto Rico’s general obligation debt by three notches, citing the island’s declining revenue and a recent district court ruling. A federal judge this month overturned a plan by the island, a US commonwealth, that would have allowed Puerto Rico to put some government agencies into debt restructuring, a move that angered some large debt holders. The judge’s decision and the rating downgrade have hit demand for Puerto Rico’s debt, which hovers around $70bn, and added to pressures on the broader muni market. Yields on Puerto Rico’s 30-year GO debt have risen 36 basis points since the start of the month, to stand at 8.06 per cent on Friday, according to Thomson Reuters MMD. Yields on broad triple A-rated muni bonds with similar maturities also jumped for the same period, climbing 37bp to 2.87 per cent on Friday.

Kaisa Bonds Slip Further Into Distress, Shares Halted - (www.bloomberg.com) Kaisa Group Holdings Ltd.’s dollar bonds slipped further into distressed territory as the trouble developer halted trade in its shares, pending the release of inside information. The company’s $800 million of 8.875 percent notes due 2018 fell 0.8 cents to 60.6 cents on the dollar as of 12:02 p.m. in Hong Kong, yielding 29 percent, according to prices compiled by Bloomberg. Its 10.25 percent 2020 debentures dropped 0.9 cents to 60.9 cents, to yield 24.4 percent. Sunac China Holdings Ltd., another developer based in the northern Chinese city of Tianjin, bought a 49.3 percent stake in Kaisa on Jan. 30 and on Feb. 6, proposed buying the rest of the shares it doesn’t already own at HK$1.80 apiece. Shares in Kaisa rallied 4.3 percent on Friday to close at HK$1.71.

Greece's Postwar Alliances Show Europe Has More at Stake Than Money - (www.bloomberg.com) As Prime Minister Alexis Tsipras focuses on the economic arguments for a new bailout deal for Greece, the country’s strategic importance to the European Union may do as much to persuade Germany to grant him concessions. With war in Syria to the east, the failure of the Libyan state to the south and a nascent cease-fire in Ukraine to the north adding to the perennial tensions between Israel and its neighbors, the value of Greece as a NATO member and its ports on the eastern Mediterranean is rising. “One would be justified to ask whether Europe, the U.S. and NATO could afford the creation of a security vacuum and a black hole in a critical region,” Thanos Dokos, director of the Hellenic Foundation for European and Foreign Policy, an Athens-based research institute, said by e-mail. That may not be “an acceptable loss for an EU with any ambitions to play a meaningful global and regional role,” he said.

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