KeNo's Housing and Economic Portal: Tuesday June 20 2017 Housing and Economic stories

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This Toxic Trifecta for Auto Loans is Fueling #Carmageddon - (www.wolfstreet.com) Subprime Auto-Loan Backed Securities from 2015 on track to be Worst Ever. Institutional investors that manage other people’s money grabbed subprime auto-loan backed securities because of their slightly higher yields. These bonds are backed by subprime auto loans that have been sliced and diced and repackaged and stamped with high credit ratings. But those issued in 2015 may end up the worst performing ever in the history of auto-loan securitizations, Fitch warned. And then there are those issued in 2016. They haven’t had time to curdle. The 2015 vintage that Fitch rates is now experiencing cumulative net losses projected to reach 15%, exceeding the peak loss rates during the Financial Crisis.

Puerto Ricans Vote for U.S. Statehood with 97% of the Vote, But Turnout was a Mere 23% - (www.mishtalk.com) By an overwhelming margin, Puerto Ricans Vote for Statehood. But the vote is nonbinding, and only 23% bothered to vote. “According to early results on a government website, statehood drew 97% of support with more than 90% of votes counted Sunday afternoon, but less than one in four voters participated in the plebiscite as opponents called for a boycott. Polls closed at 3 p.m. Sunday. The vote was spearheaded by the territory’s governor, Ricardo Rosselló, who has pushed for statehood as a way to help improve the island’s economy, which is weighed down by debts of more than $73 billion. In May, Mr. Rosselló declared what amounts to the largest-ever municipal bankruptcy in the U.S. that placed Puerto Rico under court protection. Congress would need to authorize a new state. Mr. Rosselló recently signed into law a measure creating a commission to press U.S. lawmakers for admission. On Sunday evening, he said he would visit Washington, D.C. to formally notify Congress and the White House of the results.

Qatar Is Running Out Of Dollars - (www.zerohedge.com) "We have no dollars because there is no shipment or transportation from the United Arab Emirates. There is no stock," said a dealer at the Qatar-UAE Exchange House in Doha's City Center mall. "The shipment is blocked from the UAE." While the Saudi-led campaign to starve Qatar's citizens may end up short of the target, with both Turkey and Iran volunteering to provide needed staples to the isolated Gulf nation while local entrepreneurs have started a cow paradropping campaign to offset the decline in milk imports, a more pressing problem has emerged: Qatar's financial system is running out of dollars. As Bloomberg reports, several Qatari banks have boosted interest rates on dollar deposits to shore up liquidity as the Saudi-led campaign to isolate the gas-rich Arab state intensifies. To boost their hard currency reserves, Qatar banks are now offering a premium of as much as 100 basis points over LIBOR to attract dollars from regional banks, some 80 bps higher compared to the rate they offered prior to last week's crisis. A similar picture is visible on the 3-Month QIBOR, or Qatar Interbank Rate, which has surged to 2.3% as of Tuesday.

Subprime Auto Bonds From 2015 May End Up Worst Ever, Fitch Says - (www.bloomberg.com) Subprime auto bonds issued in 2015 are by one key measure on track to become the worst performing in the history of car-loan securitizations, according to Fitch Ratings. This group of securities is experiencing cumulative net losses at a rate projected to reach 15 percent, which is higher even than for bonds in the 2007, Fitch analysts Hylton Heard and John Bella Jr. wrote in a report Thursday. "The 2015 vintage has been prone to high loss severity from a weaker wholesale market and little-to-no equity in loan contracts at default due to extended-term lending, a trend which was not as apparent in the recessionary vintages," said the analysts, referring to lenders’ stretching out repayment terms on subprime loans, sometimes to over six years, to lower borrowers’ monthly payment. That becomes riskier in the tail end of the loan, after the car has mostly depreciated and borrowers may be left owing large balances.

Bond Market Doomsayers Sound Alarm as Margin of Safety Vanishes - (www.bloomberg.com) Look around the $14 trillion U.S. Treasury market, and you’d be hard-pressed to find anything to suggest investors are even remotely concerned about the possibility of a selloff. Bond yields keep falling day after day, bullish bets have soared and volatility has all but vanished. At the same time, traders foresee inflation subdued for decades and seem to have bought into the idea the Federal Reserve will take its time to trim its crisis-era bond investments. To Binky Chadha, that’s a recipe for disaster. Chadha, the chief global strategist at Deutsche Bank’s U.S. securities unit, is part of a group of die-hard bond bears who say Treasuries have become unhinged from reality and yields have nowhere to go but up. Like many before him, he points to all the obvious signs investors seem to be ignoring: higher benchmark interest rates, wage pressures that will lead to faster inflation, worsening budget deficits that will result in more debt issuance.

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