Wednesday July 6 2016 Housing and Economic stories

TOP STORIES:

What the Heck is Happening to Junk Bonds? - (www.wolfstreet.com) Retail investors have difficulties buying junk bonds. Retail brokers usually sell only investment grade bonds. And that may be a good thing because each bond issue is a treacherous contract full of pitfalls and landmines that even specialists fall into or step on and often end up buying what they didn’t think they were buying. That can cause some painful surprises when the bonds default, which is a significant probability with low-rated junk bonds. So retail investors have to make do with junk-bond mutual funds and ETFs. They give their money to institutional investors who then buy the actual bonds. Those funds have done well too over the period: for example, the high-yield bond ETF HYG has risen 12.6%, though it remains 11% off its recent high in June 2014. But over the last three weeks bond-fund investors have soured on this gamble and have yanked their money out. During the week ended June 29, $1.63 billion were pulled out of junk-bond funds, according to LCD of S&P Capital IQ. It was the third weekly outflow in a row. All three of them combined totaled $4.2 billion ($3.62 billion from mutual funds and $581 million from ETFs):

Deutsche Bank poses greatest risk to system: IMF - (www.marketwatch.com) Deutsche Bank AG is the riskiest financial institution in the world as a potential source of external shocks to the financial system, according to the International Monetary Fund. "Among the G-SIBs (globally systemically important banks), Deutsche Bank appears to be the most important net contributor to systemic risks, followed by HSBC and Credit Suisse," the IMF said in its Financial Sector Assessment Program. The institution also said the German banking system poses a higher degree of possible outward contagion compared with the risks it poses internally.

Equity deals sag to four-year low, Brexit seen shrinking volumes: TR data - (www.reuters.com) Global equity capital markets activity has sunk to a four-year low in 2016 according to quarterly ThomsonReuters data, although bankers and investors said that while Brexit could dent volumes it would not sink the market. The value of worldwide equity capital markets (ECM) activity has almost halved so far this year compared with the same period in 2015 as geopolitical uncertainty, the prospect of a U.S. rate rise and global growth concerns bite. Levels were down 46.5 percent at $280.8 billion, according to quarterly data from Thomson Reuters.

Bullish Sheen on Oil Markets Wears off - (www.wolfstreet.com) A month ago, fires raged in Alberta, militants attacked oil fields in the Niger Delta, U.S. shale production was plummeting – and oil prices were capping off a spectacular rally, rising more than 80 percent in three months. But by the end of June and early July, the bullish sheen on the oil markets is wearing off. In May, Canadian oil producers had to shutter facilities and evacuate workers. The entire city of Fort McMurray was abandoned for weeks. Canada saw production plunge by more than 1 million barrels per day (mb/d), taking huge volumes off of the global market. Nigeria also contributed to the market tightening. The Niger Delta Avengers were on a rampage a few weeks ago, successfully pulling off attack after attack, blowing up pipelines, platforms, and oil wells. The companies they targeted were household names – Chevron, Shell, Eni. The Niger Delta Avengers threatened to take Nigeria’s oil production to “zero.” 

"EU Wants An Empire" - Brussels Plans To Expand Into Middle East, Africa - (www.zerohedge.com)  The latest EU foreign policy document, titled “A Global Strategy for the European Union’s Foreign And Security Policy“, calls for an extension of the Union's influence in regions as far as Central Asia and Central Africa. It also outlines “gradual synchronisation and mutual adaptation” between different member states’ individual defence strategies. The executive summary of the document reads: It is in the interests of our citizens to invest in the resilience of states and societies to the east stretching into Central Asia, and to the south down to Central Africa. Under the current EU enlargement policy, a credible accession process grounded in strict and fair conditionality is vital to enhance the resilience of countries in the Western Balkans and of Turkey. Under the European Neighbourhood Policy (ENP), many people wish to build closer relations with the Union: our enduring power of attraction can spur transformation in these countries.

OTHER STORIES:

Soros Says Brexit Has ‘Unleashed’ a Financial-Markets Crisis - (www.bloomberg.com)
Italy may have to recapitalize weak banks directly after stress tests: government source
Follow the rules on banks, EU tells Italy, Brexit no excus - (www.reuters.com)
Brexit Hastens Structured Product Losses for Yen Speculators - (www.bloomberg.com)

Pound at Risk of Falling in Reserve-Currency Ranks After Brexit - (www.bloomberg.com)
Ex-London mayor Johnson abruptly quits race to be prime minister - (www.reuters.com)

Yuan Heads for Worst Quarter on Record as Outflows Seen Rising - (www.bloomberg.com)