Thursday December 31 Housing and Economic stories

TOP STORIES:

US oil breaks below $36 on EIA data; Fed in focus - (www.cnbc.com)  Brent was last down $1.25 at $37.20 a barrel. On Tuesday, the contract closed up 53 cents in its first gain in eight days. Analysts are watching for any test of Brent's December 2008 low of $36.20, with a break below that level taking the benchmark to levels not seen since 2004. West Texas Intermediate crude futures were down $1.56 at $35.79 per barrel, after rising more than $1 on Tuesday. WTI was supported by looming changes to legislation that are expected to enable exports of U.S. crude oil. "This data is decidedly bearish as crude stocks now sit at record levels for this time of year and just off the all-time high," said Chris Jarvis, an analyst at energy consultancy Caprock Risk Management in Frederick, Maryland.

Here's What 7 Years at Zero Rates Have Looked Like - (www.bloomberg.com) The Federal Reserve is expected to raise interest rates on Wednesday, exactly seven years after the central bank cut them to almost zero in response to the deepest recession in the post-World War II era. As this unprecedented era of easy monetary policy closes, here's a walk through seven years at zero to highlight the obstacles that policy makers navigated to restore labor-market health and enable liftoff.  Fed officials lowered the federal funds rate into a 0 to 0.25 percent range in December 2008 as the nation's economic state deteriorated and the collapse of Lehman Brothers sent shock-waves through global financial markets. The Fed "will employ all available tools to promote the resumption of sustainable economic growth and to preserve price stability," officials said in their post-meeting statement.  

Brazilian Stocks Decline Most in World on Credit Downgrade Fears - (www.bloomberg.com) Brazil’s stocks fell the most among major global benchmarks on concern the country may be cut to junk by a second credit-rating company because of government plans to loosen its fiscal policy. Finance Minister Joaquim Levy and President Dilma Rousseff have already agreed that he will leave the government after the president decided to reduce the target for a budget surplus before interest payments in 2016, Valor Economico columnist Claudia Safatle wrote in the newspaper. Moody’s Investors Service has said it may cut Brazil to junk, following a similar decision by Standard and Poor’s in September. "The possibility of a downgrade has been scaring investors for a long time as the market watches Brazil’s situation deteriorate day after day," Paulo Henrique Amantea, an analyst at brokerage H.H. Picchioni, said from Belo Horizonte. "There are no prospects for improvements in sight. No way a investor will put money here with so many uncertainties."

Yields on junkiest US bonds breach 18% - (www.ft.com) It may be known as junk, but there is a reason bankers like to market speculative bonds as high-yield. The yield on the lowest rated slices of US corporate debt — those rated triple C or lower by one of the major credit agencies — shot above 18 per cent as investors scrambled out of one of the riskiest parts of the bond market, according to Bank of America Merrill Lynch data. Investors have fled junk bond mutual funds and exchange traded funds at a brisk pace, with fund flows figures published by Lipper showing more than $3.5bn pulled from the two groups in the last week, US capital markets correspondent Eric Platt reports. BlackRock iShares HYG and State Street’s JNK, the two largest high-yield bond ETFs, have recorded outflows of $749m and $897m since the month began, according to FactSet. The wider US high yield market has also shuddered after a wave of redemptions hit three funds — forcing two to shutter in the past week — with the yield on the BofA Merrill Lynch high yield index rising above 9 per cent for the first time since October 2011.

Spain’s Biggest Bankruptcy Ever Hits Banks, Mexico, Brazil, Descends into Bitter Farce - (www.wolfstreet.com)  Abengoa, the Spanish renewables giant that once thought it had mastered the dark arts of financialization only to crumble under the weight of its own debt, urgently needs a lifeline. In November, it filed for preliminary protection from creditors. If it doesn’t get a lifeline, it will be go down in history as Spain’s biggest bankruptcy ever. According to the latest accounts, its creditors may have thrown it that lifeline, but barely enough to last through the very inconvenient general elections this Sunday and the holidays, when the government is off. Amazing as it seems for a publicly traded company, there’s still “no official figure for the firm’s total financial liabilities,” Reuters reported, though “separate sources familiar with the matter say they total at least €25 billion.”

OTHER STORIES:

Fed Poised to Mark the End of an Era - (online.wsj.com)
Ghost of September's Delay Haunts the Fed on Eve of Liftoff Decision - (www.bloomberg.com)
Foreigners Sold U.S. Treasuries at Record Pace in October - (www.bloomberg.com)

Fed has new tools to jig rates after first hike in nine years - (www.reuters.com)
China slowdown sinks Asia sentiment to four-year low: Thomson Reuters/INSEAD - (www.reuters.com)
PBOC Helps Make China Junk Bonds More Resilient Than U.S. Peers - (www.bloomberg.com)
Battered, Apologetic and Still Pitching Their Hedge Funds - (www.nytimes.com)