Thursday March 16 2017 Housing and Economic stories

TOP STORIES:            

Bond “Carnage” hits Mortgage Rates, Aims at Housing Bubble 2 - (www.wolfstreet.com) “Many fear the Fed is behind the curve. The market is even further behind: This is clearly a dangerous situation.” US government debt took another beating today. As prices fell, yields rose to new multi-year highs. The 10-year Treasury yield rose 5 points to 2.625%, the highest since September 2014, when it just briefly kissed that level. At this pace, the yield will soon double from the record low of 1.36% in July last year. This chart shows the progression of the 10-year Treasury yield since late August (chart via StockCharts.com): When yields were surging maniacally in November and December – broadly called the “bond massacre” or the “bond meltdown” or similar – I pontificated that eventually yields would fall back some, “on the theory that nothing goes to heck in a straight line.” And they did start falling back in mid-December. But that three-month breather has now been totally undone.

Executives Abandon Och-Ziff Following $13 Billion In Withdrawals And An 80% Share Price Decline - (www.zerohedge.com) What is that saying about rats and sinking ships, we forget?  Irrespective, a trio of senior executives from Och-Ziff decided they've had enough fun after their fund lost $13 billion to withdrawals over the past 13 months and their stock tanked roughly 80%. According to Bloomberg, among those departing are Drew Gillanders, a top European equity analyst; James Keith “JK” Brown, a partner and head of investor relations; and Paula Drake, chief compliance officer. Gillanders, who’s based in London, helped manage Och-Ziff’s successful bet on drugmaker Actelion Ltd., which soared when Johnson & Johnson agreed to buy it in January, the people said. Och-Ziff had built a stake worth about 767 million Swiss francs ($761 million), according to a filing on Dec. 24. Gillanders, who used to work for billionaire Steven Cohen when his firm was called SAC Capital Advisors, didn’t respond to repeated calls and emails seeking comment.

Puerto Rico Bonds Decline After Recovery Plan Leaves Less for Paying Debts - (www.bloomberg.com) Puerto Rico general-obligation bonds fell after the federal oversight board approved a financial recovery plan that will cover less than a quarter of the debt payments coming due, underscoring the deep concessions the island plans to seek from investors. The price of securities due in 2035, among the most actively traded, dropped 5 percent to an average of 67.5 cents on the dollar Tuesday to the lowest in two months, according to data compiled by Bloomberg. Those maturing in 2039 slipped to 60.2 cents from 63.8 cents Monday. The decline followed the panel’s approval of a revised proposal from Governor Ricardo Rossello on Monday that lays out a path for closing the territory’s chronic budget deficits. The blueprint leaves an average of less than $800 million annually for debt service over the next decade, a fraction of the more than $3 billion owed each year from 2018 through 2027. The latest figures marked a reduction from what the governor initially proposed to repay.

Janet Yellen walks delicate Fed path on mortgage-backed bonds - (www.ft.com) Janet Yellen is facing questions over how the Federal Reserve will reverse an important part of its crisis recovery effort as housing experts caution the central bank risks rattling the $9tn market for US mortgage-backed bonds. Fed officials have put markets on notice that they are thinking about reducing the central bank’s $1.76tn portfolio of mortgage-backed securities, amassed through its crisis-fighting quantitative easing programme, but have so far provided few details. Ms Yellen faces a delicate communications challenge after Wednesday’s interest rate-setting meeting. Fed policymakers are widely expected to raise interest rates by another quarter point, but investors and analysts are also anxiously awaiting any further clues on what the US central bank plans to do with its $4.5tn balance sheet. Some are concerned that any mis-steps could lead to a re-run of the “taper tantrum” that hammered the bond market in 2013 when the Fed first discussed trimming its quantitative easing programme — an upset that ultimately undermined the US housing recovery.

Hugh Hendry’s zero-carry package - (www.ft.com) The euro-bear manager of CF Eclectica Absolute Macro Fund is sounding as bearish as he’s been, post the crisis that made his name. And we can thank the up-coming French Presidential election for that. Hugh Hendry is not forecasting a Le Pen win. But he does believe that if she did win we’d all be looking at the very real threat of a Euro zone break up. That’s especially so after Brexit, which Hendry compares with Britain’s departure from the gold standard, which set in motion a chain of events at the time that saw three-quarters of gold standard members abandoning the system within two years.

OTHER STORIES:

Dollar Gains, Stocks Slip Before Fed as Oil Slumps: Markets Wrap - (www.bloomberg.com)
White House on Obamacare repeal: 'This is it,' passing another plan will be 'unbelievably difficult' - (www.cnbc.com)
Fed’s Challenge, After Raising Rates, May Be Existential - (www.nytimes.com)

Investors View Junk Bonds as Most Overvalued in A Decade - (www.wsj.com)
Turkey's Erdogan warns Dutch, minister floats economic sanctions - (www.reuters.com)