KeNo's Housing and Economic Portal: Monday June 15 Housing and Economic stories

TOP STORIES:

China Said to Double Local Bond-Swap to Defuse Debt Bomb - (www.bloomberg.com) China has granted another 1 trillion yuan ($161 billion) quota to provinces to swap high-interest debt into low-cost bonds, doubling the previous amount, according to people familiar with the matter. The increase comes as the first stage of the bond swap is under way. Commercial banks have been buying such bonds after the central bank flooded the interbank market with cheap funds. The Ministry of Finance didn’t immediately reply to a fax seeking comment on the enlarged quota. The expansion will help the government cut risks from a record surge in borrowing that local authorities took on to fund a glut of investment projects. The process -- which includes inducements for banks to buy new, longer-maturity, lower yielding bonds -- is alleviating a funding crunch among provinces that had threatened to deepen the economy’s slowdown. Local-government obligations may have reached 25 trillion yuan, bigger than the size of the German economy, according to estimates from Mizuho Securities Asia Ltd. That compares with the figure of 17.9 trillion yuan as of June 30, 2013 given by the National Audit Office.

Creditors' offer prompts anger, dismay in Greece - (www.reuters.com) Lawmakers from Greece's ruling Syriza party reacted with dismay and fury on Thursday to a package of reforms creditors offered Prime Minister Alexis Tsipras in return for cash, with one senior party official calling it a "murderous" proposal. Opposition to the plan was voiced by lawmakers on both the hardline left as well as more moderate voices in the party, like Labour Minister Panos Skourletis, who said Greeks could be sure that no agreement that adds burdens on them would be signed. The starkly negative reaction points to a growing risk of an outright revolt within the radical leftist party, which could prompt Prime Minister Alexis Tsipras to resort to early elections to overcome divisions should he accept the deal.

For bonds, crowds are more dangerous than Draghi - (www.reuters.com) Mario Draghi is relaxed about the excitement in the bond market. The European Central Bank president simply says higher volatility is here to stay. His press conference comment helped stoke a sharp increase in euro zone sovereign bond yields on Wednesday. But he was only stating the obvious. These days, the real hazard for bond investors is being part of too big a herd. The latest bout of volatility actually started on Tuesday. In two days, the yield on 10-year German debt climbed 36 basis points, the biggest rise in that short a time since 1998. The rise for comparable Italian and Spanish yields was 24 and 20 basis points respectively. But bond volatility is hardly exclusive to the euro zone. On May 11, 10-year U.S. bonds rose by 13 basis points, almost two-thirds more than Italian or Spanish ones climbed that day. A positive euro zone inflation reading and the prospect of a rate increase from the U.S. Federal Reserve may perhaps explain some of the sharp movements. But such developments cannot justify the scale of moves in assets which used to be safe and stolid.

California Set For A 10-Cent Gas Tax Hike - (www.zerohedge.com) When gas prices tumbled in late 2014 and early 2015, many states quietly considered, and some proposed, to take advantage of the "gas savings" and quietly institute a tax surcharge to fill up empty state coffers: after all it is much easier to implement price increases when the prevailing prices are lower than recent benchmark levels. So now that gas prices have resumed their climb in the footsteps of the price of crude oil, many assumed such "tax" proposals would quickly disappear, especially since all the speculation about a gas savings-driven spending surge by the US middle class turned out to be bogus. It turns out such assumptions would be incorrect. According to the Hill, California is now officially considering increasing the amount of money drivers in their state will have to pay at the pump to help pay for transportation projects as federal road funding dries up. Legislation has been in introduced in the California state Senate that would increase the state’s approximately 47 cents-per-gallon gas tax by 10 cents.

German Bonds Shown No Respite Extending Worst Euro-Era Decline - (www.bloomberg.com) German 10-year bonds fell, extending a decline that pushed them to their worst two days in the euro’s history, as Europe found itself at the epicenter of a rout in global fixed income. “There’s no respite,” said Piet Lammens, head of research at KBC Bank NV in Brussels. Bunds “continue to fall quite sharply. It’s still early days but it’s clear now that the sentiment has clearly gone away in the bund market.” Global debt securities slumped this week after data Tuesday showed inflation in the euro region is picking up and European Central Bank President Mario Draghi said a day later that markets must get used to periods of higher volatility. DoubleLine Capital’s Jeffrey Gundlach, who said in April he was considering making an amplified bet against German debt, predicted Wednesday that yields will rise to 125 basis points. Spanish, Italian and French bonds also slumped.

OTHER STORIES:

Bond-market Carnage Triggers Selloff In U.S. Stock Futures – (www.nasdaq.com)