skip to main |
skip to sidebar
Brazil
Burns Pimco to Investec as $134 Billion Bond Bet Unravels - (www.bloomberg.com) For
the foreign investors who’ve been pouring money into Brazilian bonds, their
timing could hardly have been worse. Lured by interest rates north of 12
percent, they boosted holdings of the nation’s local-currency debt to a record
432 billion reais ($134 billion) in January. That’s an increase of 29 percent
from the year earlier, the government said last month. Pacific Investment
Management Co. and Investec Plc are the two biggest overseas investors in
Brazil’s fixed-rate bonds, data compiled by Bloomberg show. The investment has
so far backfired. The notes have lost 17 percent in dollars this year -- more
than triple that of emerging markets tracked by JPMorgan Chase & Co. -- as
the real sinks, the economy stalls and a graft investigation erodes confidence
in the government. Even if overseas investors hedged the currency’s 18 percent
plunge in 2015, they would have still lost money.
No
Risk Too Big as Traders Plot Escape From Negative Yields - (www.bloomberg.com) In the negative-yield vortex that is the
European bond market, investors are discovering just what lengths they’re
willing to go to generate returns. Norway’s $870 billion sovereign wealth fund
said this month that it added Nigeria and lifted its share of lower-rated
company debt to the highest since at least 2006. Allianz SE, Europe’s biggest
insurer, is shifting from German bunds to bulk up on mortgages. JPMorgan Asset
Management is buying speculative-grade corporate debt to boost returns. With
the European Central Bank’s fight against deflation pushing yields on almost a
third of the euro area’s $6.26 trillion of government bonds below zero, even
the most risk-averse investors are taking chances on assets and regions that
few would have considered just months ago. That’s exposing more clients to the
inevitable trade-off that comes with the lure of higher returns: the likelihood
of deeper losses.
Oil
Sands Tested as Today’s Rout Is Far Cry From Wildcat Years - (www.bloomberg.com) The
collapse in the market for Canada’s heavy crude below $30 a barrel last week is
hammering home a harsh reality for the nation’s oil-sands producers: There’s no
one to save them this time. Unlike previous market crashes that were relatively
short-lived, the combination of persistent oversupplies and weakening demand
are dealing a severe setback to what’s been one of the biggest growth stories
in global energy markets. Oil-sands companies such as Suncor Energy Inc.
already have been rethinking major developments that can require more than C$10
billion ($8 billion) in investment. Now even existing projects are barely
covering costs or in a losing position. “This is a major test of the industry,”
said John Stephenson, chief executive officer of Stephenson & Co. in
Toronto, a money management firm. “It’s going to be sustained, it’s going to be
ugly and it’s going to go on longer than people think.” Long a resource
investor, Stephenson is right now shorting energy stocks as he bets on more
price pain.
Norway
on Bubble Watch as Anxiety Over Oil Plunge Recedes - (www.bloomberg.com) The
central bank governor of western Europe’s biggest crude producer is becoming
less concerned over the plunge in oil prices. Threats from Norway’s hot housing
market have trumped anxiety that forced Governor Oeystein Olsen, 63, to deliver
a surprise rate cut in December, when oil sank to about $63. That rate
reduction has helped mitigate risks of an oil-induced crisis, as evidence in
the real economy shows, he said. “We could now be characterized as leaning
slightly against the wind,” he said in a March 20 interview in his Oslo office,
a day after unexpectedly keeping rates unchanged. “The former risk hasn’t
disappeared, but a few months have passed and we have not seen a more severe
downturn.” Olsen’s decision to keep rates unchanged stunned markets, and sent
the krone down as much as 3 percent. It was particularly surprising since oil
as slid 14 percent since the December meeting and as central banks across
Europe have kick-started massive stimulus programs.
Texas
Landmen Left Out of Work as Oil Patch Boom Times Go Bust - (www.bloomberg.com) Thousands
of Texans who prowled county courthouses, poring over dusty deeds and maps to
cash in on the biggest oil boom in decades, are seeing their work go bust. Land
managers, or landmen as they’re known, are part of a once dying oil patch
profession resurrected when production soared. With the price of crude close to
a six-year low at about $47 a barrel, less than half what it was nine months
ago, they’re among the first to be hit by an energy-industry rout cascading through
the economy. “Almost all the landmen I know have had to take either a serious
pay cut, or are working part time or laid off,” said Gates Mueller, 29, an
independent landman in San Antonio who lost his job in December.
Greece
Faces Decisive Week as Tsipras Is Set to Meet Merkel - (www.bloomberg.com)
Noyer
Suggests ECB Can Allow More Emergency Liquidity for Greece - (www.bloomberg.com)
Yemen
foes square off as fears of war, Saudi-Iran rivalry grow - (www.reuters.com)
Greek
PM wrote to Merkel warning of 'impossible' debt obligation - (www.reuters.com)
Sales
of Existing U.S. Homes Fall Short of 5 Million Pace - (www.bloomberg.com)
China
Internet Company Yielding 18% Shows Default Risks Brewing - (www.bloomberg.com)
Dizzying
Pre-IPO Tech Values Spurred by Rush of Hedge-Fund Money - (www.bloomberg.com)
Why
China Wants its Yuan to Be the World’s 5th Reserve Currency - (www.bloomberg.com)
Brazil
Analysts Boost 2015 CPI, Cut GDP for 12th Straight Week - (www.bloomberg.com)
Oil
Rigs Fall for the 15th Straight Week and Twitter Nails it Again - (www.bloomberg.com) U.S.
oil rigs fell for the 15th straight week. Estimates gathered from Twitter
guessed it perfectly. Drillers idled 41 oil rigs (excluding gas rigs),
dropping the number to 825, Baker Hughes reported on Friday. The total
oil rig count is down 49 percent since October, an unprecedented
retreat that has eliminated thousands jobs in the drilling industry. The
median forecast from a Bloomberg survey of 12 #RigCountGuesses on Twitter was
for a decline of 41. But production isn't slowing yet, and new efficiencies in
U.S. drilling and pumping may make raw numbers of rigs in the field
misleading. The U.S. will pump 9.3 million barrels a day this year, the most
since 1972, despite the fewest rigs in the field in almost four years,
according to the Energy Information Administration.
Greek
Coffers Running Empty Bring ‘Accident’ Threat Closer - (www.bloomberg.com) With
Greece’s coffers emptying and payments looming, Prime Minister Alexis Tsipras’s
government is in a tight race to avoid a financial day of reckoning after
receiving a “final political push” from his EU partners. While Tsipras may have
bought some time after yesterday’s European Union summit in Brussels, he
acknowledges Greece is facing “liquidity pressure”, without revealing how much
money is left in the bank. The country’s cash shortfall is projected to hit 3.5
billion euros ($3.7 billion) in March, according to Bloomberg calculations
based on 2015 budget figures.
U.S.
Borrowers Cross Atlantic to Sell Record Amount of Junk Debt - (www.bloomberg.com) U.S.
borrowers have sold a record amount of junk bonds in Europe this year to take
advantage of investor demand for risky assets. VWR Corp., a laboratory products
supplier, Huntsman Corp., Infor Inc. and IMS Health Holdings Inc. raised 1.43
billion euros ($1.53 billion) of high-yield debt this week, according to data
compiled by Bloomberg. The issuance boosted 2015 sales to 3.28 billion euros,
the busiest start to a year since the single currency was introduced in 1999. American
companies are capitalizing on demand from investors who’ve seen yields quashed
as the European Central Bank purchases bonds as part of its quantitative easing
program. Bondholders are taking on more risk as yields on government securities
from Austria to Finland turn negative and investment-grade notes pay record-low
premiums.
Biotech
Has Surged Massively Since Warning From the Fed - (www.bloomberg.com) Investors
are kicking themselves if they listened to Fed Chair Janet Yellen and the Board
of Governors last July and sold their biotech stocks. As Bespoke
Investment Group points out,
the Nasdaq Biotech index is up well over 40 percent since Yellen's
valuation comments. Here is what the Fed said in its Monetary Policy Report on July 15: "Nevertheless, valuation
metrics in some sectors do appear substantially stretched—particularly
those for smaller firms in the social
media and biotechnology industries, despite a notable downturn
in equity prices for such firms early in the year. Moreover, implied
volatility for the overall S&P 500 index, as calculated
from option prices, has declined in recent months to low levels last
recorded in the mid-1990s and mid-2000s, reflecting improved
market sentiment and, perhaps, the influence of ‘reach for yield’ behavior
by some investors."
Banks
Struggle to Unload Oil Loans - (online.wsj.com)
Citigroup Inc., Goldman Sachs Group Inc.,UBS AG and other large banks face tens
of millions of dollars in losses on loans they made to energy companies last
year, a sign of investor jitters in a sector battered by the oil slump. The banks intended to sell the loans to
investors but have struggled to unload them even after cutting prices, thanks
to a nine-month-long plunge that
has taken Nymex crude futures to their lowest level since 2009. The losses mark a setback for Wall Street,
after global banks earned $31 billion in fees over the past five years by
financing energy-company stock sales, borrowing and mergers-and-acquisition
transactions, according to Dealogic. Wall Street’s losses on the loans could
have a chilling effect on some oil companies’ ability to fund their operations
as investors take a more cautious view of the sector. “We’ve been pretty shy
about dipping back into the energy names,” said Robert Cohen, a
loan-portfolio manager at DoubleLine Capital who passed on some loans Citi was
trying to sell. “We’re taking a wait-and-see attitude.”
A
major US energy company has filed for bankruptcy - (www.businessinsider.com) Quicksilver Resources filed for Chapter 11
bankruptcy protection on Tuesday. In regulatory filings, the energy company
said it had $2.35 billion in debt and $1.2 billion in assets. Management said it
would face a "potential liquidity shortfall" in the first quarter of
2016, for reasons including its mountain of debt and the oil crash, according
to a regulatory filing. "Quicksilver's strategic marketing process
has not produced viable options for asset sales or other alternatives to fully
address the company's liquidity and capital structure issues," CEO Glenn
Darden said in a statement.
"We believe that Chapter 11 provides the flexibility to accomplish an
effective restructuring of Quicksilver for its stakeholders." The oil and
gas company based in Texas does not expect its US or Canada operations to stop,
Darden said.
ECB
Grants Greece Less Emergency Liquidity Than Requested - (www.bloomberg.com) The
European Central Bank raised the maximum amount of emergency liquidity
available to Greek lenders by 400 million euros ($435 million), less than the
Greek central bank requested, people familiar with the decision said. The
increase was approved by the ECB’s Governing Council on Wednesday, the people
said, asking not to be identified as the council meeting was private. Greece
requested about 900 million euros, one of the people said. Greek banks were cut
off from regular ECB funding operations in February, forcing them onto
Emergency Liquidity Assistance from the Greek central bank. The Frankfurt-based
ECB has the power to curb ELA and is reviewing it weekly amid concern that
banks will use it to finance the Greek government and so violate European Union
law.
Greece
pushes utilities to lend government cash - Kathimerini - (www.reuters.com) Greece's
cash-strapped leftist government is pushing major state utility firms to lend
the government cash through short-term repo transactions as it scrambles to
avoid running out of cash, the Kathimerini newspaper reported on Thursday. Prime
Minister Alexis Tsipras's government has already resorted to dipping into the
cash reserves of pension funds through such transactions, officials told
Reuters earlier this month. Kathimerini, citing unnamed sources, said the
government was calling on the main utilities, such as the Athens Water Co
(EYDr.AT) (EYDAP) and the Public Power Company (DEHr.AT), to undertake repo
transactions in which state entities lend money to the Greek debt agency
through a short-term repurchase agreement.
Kathimerini also named the telecoms company OTE (OTEr.AT) as one of
those that Athens could look to for cash, though the Greek state only holds a
10 percent stake in OTE. The company is 40 percent-owned and managed by the
German telecoms giant Deutsche Telekom. PPC, EYDAP and OTE had no immediate
comment.
After
Pillaging Pensions, Greece Raids Utilities To Repay Troika; Bonds Plunge As
Bank Run Accelerates - (www.zerohedge.com) The
new Greek government, instead of seriously contemplating a Plan B outside of
the Eurozone, was busy thinking of new ways to raid its own population
just to repay the "loathed" Troika. In the latest sad indication
of just how truly insolvent Greece is, Reuters also reported that days after raiding its own Pension funds
to repay the IMF (which in turn lent the cash to Ukraine so it could repay
Ukraine's obligations to Gazprom and thus Putin), the Syriza government is
now raiding the major state utility firms to lend the government cash through
short-term repo transactions as it scrambles to avoid running out of cash.
Oil falls to $55 as Kuwait comments
refocus on oversupply - (www.reuters.com)
Tsipras
Heads to Summit as Merkel Tries to Defuse Greek Crisis - (www.bloomberg.com)
EU
to tell Greece time, patience running out - (www.reuters.com)
Merkel
Says No Quick Solution to Greek Financing Crunch - (www.bloomberg.com)
Swiss
central bank slashes growth, inflation outlook; eyes on franc - (www.reuters.com)
ECB
Prepares For Grexit, Anticipates 95% Loss On Greek Debt - (www.zerohedge.com) Dear Greek readers: the writing is now on the
wall, and it is in very clear 48-point, double bold, and underlined font:
when the ECB "leaks" that it is modelling a Grexit, something Draghi lied about over and over in 2012 and directly in our
face too,
take it seriously, because it is time to start planning about what happens on
"the day after." And incidentally to all those curious what the fair
value of peripheral European bonds is excluding ECB backstops, the ECB has
a handy back of the envelope calculation: a 95% loss. Which also is the
punchline, because while the ECB is making it very clear what happens next in
the case of a "Graccident", it has yet to provide an explanation how
it will resolve the billions of Greek debt held on its own balance sheet which are about to be "marked-to-default"...
IMF
Considers Greece Its Most Unhelpful Client Ever
- (www.bloomberg.com) International
Monetary Fund officials told their euro-area colleagues that Greece is the most
unhelpful country the organization has dealt with in its 70-year history,
according to two people familiar with the talks. In a short and bad-tempered
conference call on Tuesday, officials from the IMF, the European Central Bank
and the European Commission complained that Greek officials aren’t adhering to
a bailout extension deal reached in February or cooperating with creditors,
said the people, who asked not to be identified because the call was private.
The IMF’s press office had no immediate comment on the discussions. German
finance officials said trying to persuade the Greek government to draw up a
rigorous economic policy program is like riding a dead horse, the people said,
while the IMF team said Greece’s attitude to its official creditors was
unacceptable. The German Finance Ministry didn’t respond to multiple requests
seeking comment.
ECB's
Celebration of Its New $1.4 Billion Tower Is Spoiled by Protesters
- (www.bloomberg.com) Anti-austerity
protesters seeking to spoil the inauguration of the European Central Bank’s new
headquarters in Frankfurt’s east end set vehicles alight, erected barricades
and left a trail of destruction across the city. Police deployed water cannons
to restore calm and keep the demonstrators at bay in the area surrounding the
1.3 billion-euro ($1.4 billion) tower, after setting up barbed wire and road
blocks. “European unity is being strained,” ECB President Mario Draghi said at
the inauguration ceremony on Wednesday. “The ECB has become a focal point for
those frustrated with this situation. This may not be a fair charge -- our
action has been aimed precisely at cushioning the shocks suffered by the
economy -- but as the central bank of the whole euro area, we must listen very
carefully.”
A 21-year-old who's refusing to pay back her
student loans compares her cause to Rosa Parks' fight - (www.businessinsider.com) Mallory Heiney, a 21-year-old former
student of the now-defunct Everest College, is
part of a group of students refusing to pay back their student loans. Heiney
wrote an op-ed article in The Washington
Post in
which she described the lies Everest allegedly told her as well as the
insufficient education she says she received. Heiney called Everest a
"debt trap." When she explained to her adviser that she couldn't
afford student-loan payments while in school, she was assured she could defer
the payments on her $24,000 in student loans until post-graduation, according
to her article. That ended up being untrue, she said. Heiney said she was on
the hook to start paying interest payments on her loans two months into her
program.
MARK CUBAN: Forgiving $1 trillion in student debt
is 'the worst thing we could do' - (www.businessinsider.com) While the closing of Sweet Briar College
last week caught many people in higher education by surprise, some saw it as a sign of an inevitable college
implosion. For years, entrepreneur and billionaire investor Mark Cuban has warned of a
"student-loan bubble" created by skyrocketing tuition and fueled by
an endless supply of student loans. A radical solution to the student-loan
problem would be to forgive all student
debt, as a viral essay by Robert Applebaum proposed six
years ago. However, Cuban thinks massive student-loan
forgiveness would just make the bubble keep expanding. "Forgiving
the debt is the worst thing you can do, because all it does is bail out the
universities," Cuban said.
Currency
swings cost U.S. corporates $18.66 bln in Q4 - study - (www.reuters.com) Foreign
exchange swings cost North American corporates $18.66 billion in revenue in the
fourth quarter, according to a report by currency risk management consulting
firm FiREapps. Total negative currency impact rose more than four-fold in the
fourth quarter from the previous quarter, and was the biggest since the height
of the euro crisis, according to the report. FiREapps analyzes currency effects
on quarterly earnings of 846 North American companies, a subset of the Fortune
2000 companies that generate at least 15 percent of international revenue in
two or more currencies. (bit.ly/1O1vOgS)
Earnings per share of North American corporates were hurt by $0.06 on an
average, nearly double the 2013-2014 average and the highest since FiREapps
began measuring the impact of currency swings.
[Gilbert] Greece's
Euro Exit Seems Inevitable - (www.bloomberg.com)
Greece's money troubles resemble a game of pass
the parcel, where each successive participant rips another sheet of wrapping
paper off the box -- which turns out to be empty when the final recipient
reaches the core. With time and money running out, a successful endgame seems even less likely than it did a week or a month ago. It's increasingly
obvious that the government's election promises are incompatible with the
economic demands of its euro partners. Something's got to give. The current
money-go-round is unsustainable. Euro-region taxpayers fund their governments,
which in turn bankroll the European Central Bank. Cash from the ECB's Emergency
Liquidity Scheme flows to the Greek banks; they buy treasury bills from their
government, which uses the proceeds to … repay its International Monetary Fund
debts! No wonder a recent poll by German broadcaster ZDF shows 52 percent ofGermans say they want Greece out of the euro, up from 41 percent last month.
Wall
Street Lobby: White House Fudged Report On Retirement Savings - (www.dailycaller.com) The
White House altered a report to justify a new Obama administration rule
regulating investment advisers, according to a major lobbying organization for
the securities industry. The White House Council on Economic Advisers issued a
recent report alleging that consumers spend an unnecessary $17 billion on
counsel from retirement investment advisers because there are no rules in place
to guard against hidden fees. The White House is trying to roll out a new
regulation through the Department of Labor to correct that perceived problem. But
the Securities Industry and Financial Markets Association (SIFMA) said that the
new rule would actually create higher costs for consumers by forcing retirees
to switch from paying their advisers on a case-by-case basis to arrangements
that would pay them in regular intervals.
America's
biggest European allies just dealt a blow to US foreign policy - (www.businessinsider.com)
Germany, France and Italy said on Tuesday they
had agreed to join a new China-led Asian investment bank after close ally
Britain defied U.S. pressure to become a founder member of a venture seen in
Washington as a rival to the World Bank. The concerted move to participate in
Beijing's flagship economic outreach project was a diplomatic blow for the
United States, reflecting European eagerness to partner with China's
fast-growing economy, the second largest in the world. It comes amid prickly
trade negotiations between Brussels and Washington, and at a time when EU and
Asian governments are frustrated that the U.S. Congress has held up a reform of
voting rights in the International Monetary Fund due to give China and other
emerging economies more say in global economic governance. A map highlighting
members of the Asian Infrastructure Investment Bank. German Finance Minister
Wolfgang Schaeuble said Europe's biggest economy, a major trade partner with
Beijing, would be a founding member of the Asian Infrastructure Investment
Bank.
Wall
Street Poised For Another Revenue Bloodbath After Harbinger Jefferies Reports
56% Fixed Income Plunge - (www.zerohedge.com) What
Jefferies is best known for among Wall Street shareholders is that, by still
reporting a Nov. 30 fiscal year end, 1 month ahead of everyone else, it
provides an invaluable glimpse into the fortunes of its Wall Street peers with
a 4 week advance notice, especially when it comes to its bread and butter:
fixed income trading (recall that CEO Rich Handler was a Drexel bond trader
when the firm blew up). The result, just like last quarter, was
a disaster and indicative of nothing short of a trading bloodbath on Wall
Street in the past three months of trading. The bottom line, and what everyone
who is awaiting the latest FICC numbers from the balance of the banks will be
focusing on, is the 56% drop in Q1 revenue from fixed-income trading, down
to $126 million from $286 million a year ago.
