Thursday July 18 Housing and Economic stories

TOP STORIES:

Why China's Economy May Be Heading for a Crash - (www.cnbc.com) China's central bank sent global markets reeling when it attempted tighten credit and rein in the country's shadow banking system. But the consequences of China's credit binge may just be getting started, and experts say there could be more pain to come for the world's second-largest economy. "We've been seeing tightening since the end of last year," said Leland Miller, China Beige Book International president. "This is not a spur of the moment decision by the central bank." Leland said the higher interbank lending rates are an indicator of a tension in the system. "The credit transition mechanism is broken and until that's fixed, there will be no happy endings in China," he said.

Europe ‘Shocked’ by Spiegel Report of NSA Wiretappings - (www.bloomberg.com) European politicians greeted a report of U.S. wiretappings of European Union buildings with caution and concern, demanding explanations and speaking of a possible souring of transatlantic relations. “I am deeply worried and shocked,” European Parliament President Martin Schulz said late yesterday in an e-mailed statement. “If the allegations prove to be true, it would be an extremely serious matter which will have a severe impact on EU-U.S. relations.” Schulz said he had demanded a clarification from the U.S. after German magazine Der Spiegel said the National Security Agency had wiretapped diplomatic mission buildings in Washington and New York, infiltrated computer networks and described the 27-nation bloc as a “target.”

EU Accuses 13 Investment Banks of Hampering CDS Competition - (www.bloomberg.com) Thirteen of the world’s biggest investment banks were accused by the European Union of colluding to curb competition in the $10 trillion credit derivatives industry. The EU sent a complaint, or statement of objections, to 13 banks, data provider Markit Group Ltd. and the International Swaps & Derivatives Association over allegations they sought “to prevent exchanges from entering the credit derivatives business between 2006 and 2009,” the European Commission said. The probe is one of several by the Brussels-based commission into the financial industry, including whether banks colluded to manipulate U.K. and European benchmark interest rates. Joaquin Almunia, the EU antitrust chief, said he’s seeking to settle the probes into Libor and Euribor with some of the same banks in the CDS case by the end of the year.

Mortgage Bonds Drop Up to 22% in June as Some 2013 Gains Erased - (www.bloomberg.com) U.S. home-loan bonds without government backing tumbled last month to leave several types of the debt trading at their lowest prices of the year. Declines reached almost 22 percent in June among certain subprime-mortgage securities, according to a June 28 report by Bank of America Corp. While returns remain positive this year among subprime-backed bonds, including gains of 12.5 percent for those notes, losses in 2013 for other non-agency securities are as high as 4 percent and bonds tied to mortgages known as prime-jumbo and Alt-A loans now trade below values at the end of last year, according to the report and data from Barclays Plc. The debt is slumping, after soaring earlier this year, as concern that the Federal Reserve will curb its bond buying roils credit markets and boosts interest rates. Investors are also finding trading more difficult after an $8.7 billion sale of holdings by Lloyds Banking Group Plc in May that was the largest of its type since at least 2010 bloated dealer inventories.

ETF Investors Are Caught by Surprise as Prices Diverge - (www.bloomberg.com) David Blain, a financial adviser in New Bern, North Carolina, likes exchange-traded funds so much he’s put all his clients’ money in them. He also thinks individual investors trading ETFs on their own may be in for surprises when markets come under stress. Share prices for dozens of ETFs last month strayed to their biggest discounts in a year against the published value of their holdings, or net-asset values, as investors fled stocks and bonds around the world. The price of the $362 million iShares MSCI Philippines Investable Market Index Fund swung from a 4.7 percent premium to a 6.1 percent discount and back to a 2 percent premium in the space of nine trading days through June 25.  “I don’t think most people have any clue that the prices they’re paying or selling at can veer significantly from NAV,” Blain, who manages $75 million, said in an interview.

OTHER STORIES:

Mursi not consulted by army, says plans own path - (www.reuters.com)

Germany Says 'Cold War' Behavior by U.S. Would Be Unacceptable - (www.reuters.com)
Millions flood Egypt streets to demand Mursi quit - (www.reuters.com)

CMBS Sales to Be Cut in Half as Rates Rise, Bank of America Says - (www.bloomberg.com)

Nowhere to Hide in Worst Bond Losses Since 2008: Credit Markets - (www.bloomberg.com)

France, Finland Quarrel Over EU-U.S. Trade Amid Spying Charges - (www.bloomberg.com)
Egypt army gives Mursi 48 hours to compromise in crisis - (www.reuters.com)
Numbers Go Missing From China Factory Report Without Explanation - (www.bloomberg.com)
Euro zone joblessness at record high in May, June inflation up - (www.reuters.com)

'Unprecedented' $80 Billion Pulled From Bond Funds - (www.cnbc.com)