KeNo's Housing and Economic Portal: Wednesday July 20 Housing and Economic stories

Tuesday, July 19, 2011

Wednesday July 20 Housing and Economic stories

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TOP STORIES:

Moody’s warns of second rescue for Portugal - (www.ft.com) Portugal could require a second, Greek-style bailout involving private investors, Moody’s ratings agency has warned as it downgraded the struggling country to “junk” on fears it will struggle to meet its current targets and will remain unable to borrow from the bond markets for some time. Moody’s downgraded Portugal by four notches to Ba2 from Baa1 – equivalent to double B from triple B plus at other agencies – and warned of the “increasing probability” that Portugal would not be able to tap the markets at sustainable rates for some time after 2013. The agency left in place its negative outlook, signalling further downgrades were possible. “Such a scenario would necessitate further rounds of official financing, and this may require the participation of existing investors in proportion to the size of their holdings of debt that will become due,” the agency added

Portugal Cut to Junk by Moody’s Roils Spain, Italy Bonds as Risk Remains - (www.bloomberg.com) Portugal’s downgrade to junk status and wrangling over the role of investors in a new Greek bailout package fueled concern about the solvency of the region’s high- debt nations, sending their bonds tumbling. The extra yield investors demand to hold Portugal’s 10-year bonds over German bunds surged 148 basis points to a euro-era record 949 after Moody’s slashed yesterday its credit rating four levels to Ba2, below investment grade. The yield on Italy’s 10-year bond reached the highest in almost three years, while Ireland’s 2-year yield topped 15 percent for the first time. “It’s a reminder that the sovereign debt crisis does not end with Greece and that risks remain with other nations in addition to Greece,” said Gary Pollack, who helps oversee $12 billion as head of fixed-income trading at Deutsche Bank AG’s Private Wealth Management unit in New York.

Greek Banks Ready for Debt Rollover - (www.bloomberg.com) Greek banks are willing to roll over their government bonds as part of a European Union aid plan, Finance Minister Evangelos Venizelos said, as debt-holders meet in Paris today to discuss their role in rescuing the country. “The Greek banks are ready to participate,” Venizelos said yesterday in an interview with Bloomberg Television in Athens. “We must respect absolutely the voluntary character of this procedure. This is very sensitive and I give a very crystal clear answer on this topic.” EU leaders are insisting private investors contribute to a new aid package for Greece after last year’s 110 billion-euro ($159 billion) rescue failed to stop the spread of Europe’s debt crisis. Participation by Greek banks and pensions funds is key to the success of a plan for investors to roll over as much as 30 billion euros of maturing bonds into longer-term securities.

Bank of America $8.5 billion mortgage pact challenged - (www.reuters.com) A group of bondholders plans to challenge Bank of America Corp's $8.5 billion settlement with holders in soured mortgage-backed securities, saying it may be unfair to other bond investors. In court papers filed on Tuesday in New York State Supreme Court in Manhattan, 11 companies sharing the name Walnut Place said they had "serious concerns about the secret, non-adversarial, and conflicted way in which the proposed settlement was negotiated and about the fairness of the terms." Bank of America on June 29 announced the settlement with 22 institutional investors including BlackRock Inc, MetLife Inc, Allianz SE's Pacific Investment Management Co and the Federal Reserve Bank of New York. That accord was part of $20 billion of mortgage-related charges that the bank said it would take, hoping to resolve much of the liability from its $2.5 billion purchase in 2008 of mortgage lender Countrywide Financial Corp.

Minnesota at Impasse Days Into Government Shutdown - (www.cnbc.com) Minnesota's Democratic Governor Mark Dayton and Republican legislative leaders failed to break a budget impasse Tuesday, five days into a state government shutdown. Trying to bridge the divide, former Vice President Walter Mondale and former Minnesota Republican Governor Arne Carlson stepped in to announce an unofficial bipartisan panel they hope will come up with an acceptable budget plan by Friday. Dayton and the leaders of the Republican-controlled legislature failed to reach a deal to close a $5 billion, two-year budget deficit by the start of the new fiscal year on July 1, leading to the first government shutdown since 2005. More than 20,000 of Minnesota's 36,000 state employees have been furloughed in the shutdown, leaving numerous departments at bare-bones staffing. Prisons, state police patrols and nursing and veterans homes have been maintained. Dayton met with Republican House Speaker Kurt Zellers and Republican Senate Majority Leader Amy Koch in the governor's office on Tuesday in a meeting he described as constructive.