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

Monday, November 23, 2015

Tuesday November 24 Housing and Economic stories

Borrowers Face Crunch as Fed Supercharges Dollar Funding Costs - (www.bloomberg.com) A crunch is developing in international funding markets. The cost to convert local currency payments in the euro area, U.K. and Japan into dollars has jumped amid speculation the Federal Reserve will raise interest rates in December. With other major central banks set to hold, or even loosen, monetary policy, the projected policy divergence is supercharging the usual year-end uptick in demand for dollar funding. “Now that for once this year the Fed is all on the same page, it is giving investors confidence that the Fed really is going to be moving rates,” said Paresh Upadhyaya, director of currency strategy in Boston at Pioneer Investments, which oversaw about $250 billion as of June 30. “This theme -- that everyone latched on to at the start of the year, monetary policy divergence, is giving people greater confidence that this time we are actually seeing it. Therefore it’s not surprising to see the demand for dollar funding is increasing.”

Negative Interest Rates the New Normal Next Time Economies Slump - (www.bloomberg.com) The report from once-uncharted monetary territory: there’s little to be scared of. Now that Sweden and Switzerland have shown that negative benchmark interest rates don’t necessarily result in flights to cash, asset bubbles or banking strains, the global giants of central banking may be more willing to embrace sub-zero borrowing costs the next time their economies slide. “There’s a very real chance unorthodoxy becomes the new orthodoxy,” said Alan Ruskin, global head of Group-of-10 currency strategy at Deutsche Bank AG in New York. While financial markets are focused on the Federal Reserve’s looming rate increase, policy makers and economists are already changing their attitude toward negative rates.

Puerto Rico Likely to Default on Some GDB Debt, Moody's Says Puerto Rico is likely to default on at least a portion of Government Development Bank bond payments due Dec. 1 with the commonwealth’s cash crunch worsening, according to Moody’s Investors Service. The GDB, which lends to the island and its localities, faces a $354 million principal and interest payment at the start of the month, just as the bank projects it may run out of available cash, according to Puerto Rico’s Nov. 6 financial report. The commonwealth expects to post a negative cash balance this month and next. A default “would be consistent with our expectation that the commonwealth will be forced to miss debt service payments in favor of providing essential government services because of its increasingly weak liquidity position,” Genevieve Nolan, a Moody’s analyst, wrote in a Nov. 11 report.

Greece Comes to a Standstill as Unions Turn Against Tsipras- (www.bloomberg.com) As Greek workers took to the streets in protest on Thursday, Alexis Tsipras was for the first time on the other side of the divide. Unions -- a key support base for the prime minister’s Syriza party -- chanted in rallies held in Athens the same slogans Tsipras once used against opponents. Doctors and pharmacists joined port workers, civil servants and Athens metro staff in Greece’s first general strike since he took office in January, bringing the country to a standstill for 24 hours. As many as 20,000 protesters gathered in central Athens while a small group of anarchists at the tail of the demonstration threw petrol bombs at police officers at around 1:30 pm local time, a police spokesman said, requesting anonymity in line with policy. The police responded with tear gas and stun grenades.

Commodities Rout Resumes as Dollar Gains; U.S. Stocks Retreat - (www.bloomberg.com) The stronger dollar and a persistent slump in demand from China rekindled a selloff in commodities, while Mario Draghi’s signal that he’s concerned about global growth weighed on equities from Europe to America. Copper fell to the lowest level since 2009 and oil slid through $42 a barrel as the Bloomberg Commodity Index sank to the lowest since 1999. The dollar approached a six-month high versus the euro, while the Standard & Poor’s 500 Index headed for its sixth loss in seven days as resource producers tumbled. European equities slid as the outlook for earnings worsened. Divergent signals on monetary policy continued to dominate financial markets, as the European Central Bank president’s comments that he may step up stimulus measures boosted bonds and weakened the euro. Federal Reserve Bank of St. Louis President James Bullard said near-zero rates are no longer needed. A mixed picture on China’seconomy did little to alleviate concern that demand for resources would continue to wane.

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