Thursday February 18 2016 Housing and Economic stories

TOP STORIES:

Hedge Funds Bet on Risks in U.S. Blue-Chip Debt - (online.wsj.com) Hedge funds are betting the next bond sector to crack will be the $4.5 trillion market for the safest U.S. corporate debt. New York’s Perry Capital has placed a $1 billion wager against investment-grade bonds issued by 10 companies it thinks are especially susceptible to an economic downdraft, rising interest rates or are on the wrong side of change in their industries, people familiar with the matter said. The bet and others like it reflect a belief that this year’s economic uncertainty and market turbulence are evidence of deeper problems that won’t be confined to vulnerable areas such as energy and junk bonds.

Chesapeake Energy Craters 40% on Restructuring Report - (www.bloomberg.com) Chesapeake Energy Corp., the U.S. natural gas driller that’s been slashing jobs and investor payouts to conserve dwindling cash flows, lost half its value after a report that it hired restructuring attorneys. The shares dropped a record 51 percent after Debtwire reported that Chesapeake retained Kirkland & Ellis to help restructure a $9.8 billion debt load. The plunge triggered three circuit-breaker halts during the first half hour of trading and extended Chesapeake’s 12-month loss to about 93 percent. The free fall wiped out $838 million in market value in the first hour of trading on Monday. Burdened with a debt load eight times larger than its market value, Chesapeake has been canceling drilling projects, trimming its workforce and closing offices to slow the rate at which it burns through cash. 

Greek Bank Woes Intensify in 2016 as Shares Sink by Half: Chart - (www.bloomberg.com) Greek banks have plunged by more than 55 percent this year, as uncertainty over yet another stalled bailout review weighs on the country’s economic recovery prospects. That’s bad news for investors including Wilbur Ross, Fairfax Financial Holdings Ltd. and Paulson & Co., which participated in share-capital increases of Greek banks in late 2015.

Gloom gathers around European bank shares and CDS - (www.ft.com) European financial stocks are getting hammered and signs of nerves in debt markets are rising sharply as the gloom surrounding European banks and global financials more broadly continues to intensify. Since the start of the year, European banking stocks have been rocked by a heavy sell-off that has intensified since the start of February, writes Joel Lewin. None of the fresh wave of selling stems from new news, but the list of negatives is long. Fears surrounding non-performing loans and other deep-rooted issues in the Italian banking sector have driven nerves, while a slew of weak earnings from large banks such as Credit Suisse and Deutsche Bank have added to concerns. Weak growth provides an unsupportive backdrop, as does the possibility of more deeply negative benchmark interest rates.

Deutsche Bank's Woes Threaten CoCo Coupons, CreditSights Says - (www.bloomberg.com)  Deutsche Bank AG may struggle to pay coupons on its riskiest bonds next year if operating results disappoint or litigation costs are higher than expected, according to analysts at CreditSights Inc. Bonds and stock of Germany’s largest bank have plunged this year, with the shares shedding 39 percent of their value and its contingent convertible bonds -- known as CoCos, or additional Tier 1 securities -- turning in a similar performance. The cost of protecting the company’s subordinated debt from default for five years using credit-default swaps has more than doubled since the end of 2015, rising to 438 basis points, a four-year high, from 187.

OTHER STORIES:

Merkel Voices 'Outrage' Over Syrian Offensive and Russian Airstrikes - (www.bloomberg.com)
The Magic Formula That Powered Japanese Stocks Is Falling Apart - (www.bloomberg.com)
Holding Back China's Capital Flight ‘Dam’ Is Key - (www.bloomberg.com)

Iran wants euro payment for new, outstanding oil sales - (www.reuters.com)
Emerging-Market Central Banks Battle Capital Flight - (online.wsj.com)
Through the past, darkly, for Europe’s central bankers - (www.ft.com)
Erdogan: US Should Choose Between Turkey, Kurdish Forces - (abcnews.go.com)