KeNo's Housing and Economic Portal: Thursday March 22 Housing and Economic stories

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TOP STORIES:

Municipal-Bond Defaults Doubled in the Past Two Years, Moody’s Report Says - (www.bloomberg.com) The rate of U.S. municipal bond defaults doubled in the past two years relative to the average from 1970 to 2009 amid the lingering effects of the recession, Moody’s Investors Service said. Defaults rose to 5.5 per year in 2010 and 2011, from 2.7 in the previous 39 years, the company said in a study of bonds it rates. While the majority of defaults were in health care and multifamily housing, more failures the past two years came from smaller cities struggling to sustain services and obligations including pensions and salaries, Moody’s said in a report released today. “While we expect the vast majority of municipal issuers to continue to pay their debts, we also expect a very small but growing number of general government issuers to default on their bonded debts,” Anne Van Praagh, Moody’s chief credit officer for public finance, said in a statement.

Fears grow for $45bn utility as hedges near expiry - (www.ft.com) The world’s biggest private equity deal is facing rising financial pressure during the next two years with the expiry of contracts that underpinned the takeover of utility TXU. Investors in the $45bn buyout of the company, now known as Energy Future Holdings, fear a sharp drop in revenue as hedges that protected it from a fall in natural gas prices that are used to determine electricity charges in its home state of Texas progressively expire by 2014. Since the deal was signed, the US energy industry has been transformed by the application of new drilling techniques to huge deposits of natural gas locked in shale rock formations from Texas to Pennsylvania.

As IMF stumps for funds, a Republican backlash brews over Europe - (www.washingtonpost.com) In the wake of the 2008 financial crisis, the Obama administration helped negotiate a plan to give emerging economic powers increased say at the International Monetary Fund, while also having them contribute more to an enlarged pot of money for the fund. But a brewing election year fight with congressional Republicans has put that plan in doubt and could restrict the IMF’s finances at a time when agency officials say they need a substantial boost to protect the world economy. The dispute centers on Republican opposition to increasing the United States’ financial contributions to the agency, reflecting anger over IMF rescue programs in Europe that some GOP lawmakers argue have become too expensive and have put U.S. taxpayers at risk. The cost to the United States of the European rescue programs is debatable. Some of the money provided to the IMF is in the form of loans on which the United States earns interest.

Young Adults See Their Pay Decline - (online.wsj.com) Young people entering the job market are taking the brunt of the downward pressure on wages caused by high unemployment, according to a new analysis of pay trends. In data compiled for a coming report, the Economic Policy Institute, a center-left think tank in Washington, found that the average inflation-adjusted hourly wage for male college graduates aged 23 to 29 dropped 11% over the past decade to $21.68 in 2011. For female college graduates of the same age, the average wage is down 7.6% to $18.80. "New college graduates have been losing ground for 10 years," said Lawrence Mishel, president of the institute, which derived the figures from regular government wage surveys. The drop in average wages for young adults is in contrast to U.S. government figures showing that average inflation-adjusted hourly wages for production and nonsupervisory workers of all ages and education levels are up 3% from a decade ago.

Investors With 58% of Greek Bonds Agree to Swap - (www.bloomberg.com) Investors with at least 58 percent of the Greek bonds eligible for the nation’s debt swap have so far indicated they’ll participate, putting the country on the verge of the biggest sovereign restructuring in history. Greece’s largest banks, most of the country’s pension funds, and more than 30 European banks and insurers including BNP Paribas (BNP) SA, Commerzbank AG (CBK) andAssicurazioni Generali SpA (G) have agreed to the offer. That brings the total to at least 120 billion euros ($157 billion), based on data compiled by Bloomberg from company reports and government statements. The goal of the exchange is to reduce the 206 billion euros of privately held Greek debt by 53.5 percent and turn the tide against the debt crisis that has roiled Europe for more than two years. The government said it will use collective action clauses to force holders of Greek-law bonds into the swap if the so- called private sector involvement falls short and it gets sufficient approval from investors to change the bonds’ terms.