Detroit
Puts $1.1 Trillion of G.O.’s Under Scrutiny: Muni Credit - (www.bloomberg.com) Detroit’s bankruptcy has some investors fretting that
the case will set a precedent for $1.1 trillion of U.S. general obligations.
That hasn’t kept the debt from beating revenue bonds for the first time since
2010. A federal judge last week approved the city’s record $18 billion Chapter
9 filing and said its pensions can be cut in bankruptcy. Detroit’s emergency
manager has sought concessions from creditors, including retirees and holders
of $369 million of general obligations that the city had promised to repay using
its unlimited taxing power. The potential for losses on Detroit G.O.s means
investors may now demand extra yield on obligations of localities struggling to
balance budgets, said portfolio managers at T. Rowe Price Group Inc. and UBS
Global Asset Management. Even with the prospect of added scrutiny, general
obligations are outperforming revenue-backed munis in 2013, Bank of America
Merrill Lynch data show. The bonds, the safest part of the municipal universe,
are benefiting as investors favor their shorter maturities amid mounting bets
that a growing economy will drive interest
rates
higher.
JPMorgan
China Hiring Probe Spreads to Five More Banks, NYT Says - (www.bloomberg.com) Goldman
Sachs Group Inc. and Deutsche Bank AG are among five Wall Street
firms in addition to JPMorgan Chase & Co. whose hiring practices
in China are being probed by U.S. regulators, the New York Times reported. Citigroup
Inc., Morgan Stanley and Zurich-based Credit Suisse Group AG also are
facing Securities and Exchange Commission investigations, which are at an early
stage, the newspaper said yesterday, citing interviews with people briefed on
the matter. JPMorgan recently gave authorities spreadsheets and e-mails
detailing the firm’s Sons and Daughters hiring program, according to the Times.
U.S. authorities are examining whether JPMorgan violated anti-bribery laws by
hiring the children and other relatives of well-connected politicians and
clients in China in exchange for having business steered to the firm, a person
with knowledge of the investigation said in August. Bloomberg News reported
that month that a probe of JPMorgan had uncovered an internal spreadsheet that
linked appointments to specific deals.
Russia
Backs Off Ukraine Union After Lenin Statue Falls - (www.bloomberg.com) Russia
cast doubt that Ukraine may soon join its customs bloc, a plan that has sparked
the ex-Soviet republic’s biggest protests in almost a decade and fueled calls
for President Viktor Yanukovych to resign. Riot police and
stick-wielding protesters squared off in central Kiev a day after a group of
youths tore down a statue of Vladimir Lenin in the biggest rallies since
the 2004 Orange Revolution yesterday. Angry over Yanukovych’s snub of an EU
pact in favor of bolstering Russian ties, activists have vowed to stay until
the government quits, while Russia said that joining its rival customs union
could take years.
California
Tollway Sells $2 Billion Bond to Avoid Default - (www.bloomberg.com) The
operator of three toll roads in California’s Orange County is selling $2.3 billion in
bonds to refund debt as revenue trails projections. The Foothill/Eastern
Transportation Corridor Agency, which runs 36 miles (58 kilometers) of roads in
California’s third-most-populous county, joins issuers nationwide selling a
combined $11 billion of debt this week. California’s largest toll-road system is
borrowing to refinance bonds and extend maturities and tolls by 13 years, to
2053. It requested state permission to do so in 2012, and got clearance in
October. California Treasurer Bill Lockyer’s Debt and Investment Advisory
Commission said in July that the agency might default on $2.4 billion of debt
unless it reduced annual payments by lengthening maturities. Revenue from the
roads fell short of projectionsthe past six years as commuters chose free
highways amid a drop in housing values that disproportionately hurt inland
suburbs.
Jumbos
Surge 34% With Record ARMs Belying ’08 Anxiety: Mortgages - (www.bloomberg.com) Jim
Pietrocini has joined the jumbo adjustable-rate mortgage party. In early
December, he refinanced his 4,600-square-foot Carlsbad, California, home that
overlooks the Pacific Ocean. Pietrocini, a computer software consultant, couldn’t resist the deal on the
jumbo, a loan exceeding the limit the government will buy. His $744,000
mortgage at 3.5 percent, which adjusts annually after seven years, will save
him almost $8,000 a year compared with a fixed rate loan at 5 percent. “I have
two kids who are teenagers who probably will be gone in seven years,” said
Pietrocini, 55. “My wife and I don’t need all this space for ourselves, so
we’re probably going to downsize before the loan adjusts.”
Banks
Poised to Reduce Rate-Swap Trading as Revenue Seen Reduced - (www.bloomberg.com)
Analysis: Deep discounts sound warning for U.S. retail profits - (www.reuters.com)
Analysis: Deep discounts sound warning for U.S. retail profits - (www.reuters.com)
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