Monday May 18 Housing and Economic stories

TOP STORIES:

Puerto Rico faces battle to avoid default - (www.ft.com) Puerto Rico faces a hot, sticky and tense summer, as the Caribbean island battles to salvage a deal with hedge funds that would keep it financed for another year and avoid a messy default and restructuring. Whether it can dodge that fate has never been more uncertain. The US territory was forced to turn to hedge funds to fund itself a year ago, after a fiscal crisis and a barrage of credit rating agency downgrades caused its traditional investor base — staid US municipal bond funds unused to the whiff of danger — to flee in droves in 2013-14. The hedge funds, led by a creditors committee including Davidson Kempner, Monarch and Fir Tree, bought a big chunk of a $3.5bn bond issue last year, and had struck a tentative agreement to back another debt sale as long as Puerto Rico overhauled and increased its sales tax regime.

Mind The $76 Trillion Global Bond Bubble----Even The ‘Experts' Are Getting Scared - (www.davidstockmanscontracorner.com) The global bond bubble has ballooned to more than 76 trillion dollars, and interest rates have never been lower in modern history.  In fact, 25 percent of all government bonds in Europe actually have a negative rate of return at this point.  There is literally nowhere for the bond market to go except for the other direction, and when this bull market turns into a bear it will create chaos and financial devastation all over the planet. In a recent piece entitled “A Sense Of Ending“, bond guru Bill Gross admitted that the 35 year bull market in bonds that has made him and those that have invested with him so wealthy is now coming to an end…

Rio Tinto Warns More Iron Ore Miners Face Pain After Price Slide - (www.bloomberg.com) More than 160 million metric tons of iron ore will exit the market this year as the price slump forces high-cost miners to idle capacity, according to the chief executive officer of the world’s second-biggest producer. “This year we have a forecast that 85 million tons will leave the market and a further 80 million tons are at risk,” Rio Tinto Group CEO Sam Walsh told reporters today in Perth. “At risk means that they are high cost and unless they achieve extraordinary things they are at risk and will exit the market.” The price of iron ore, used to make steel, has tumbled 44 percent in the past year and touched a decade-long low of $47.08 a metric ton on April 2 amid a supply expansion and uncertain demand in China, the biggest buyer. The slump has already forced smaller producers such as Atlas Iron Ltd., African Minerals Ltd. and London Mining Plc, to shutter mines.

Bonds Extend Tumble as Spain, France Sell Debt Into Market Slump - (www.bloomberg.com) German government bonds extended losses into an eighth day amid a slump that has helped wipe $436 billion off the global fixed-income market in the past week. The selloff in European sovereign securities deepened on Thursday after French and Spanish debt sales added 13 billion euros ($14.7 billion) of supply into the market. The global rout expanded around the world, infecting Japan as investors returned from a three-day holiday, Australia, where bonds are suffering the longest stretch of losses in 15 years, and Poland, where the government canceled an auction of local-currency securities. “The move is brutal,” said Richard McGuire, head of European rates strategy at Rabobank International in London. “A shift in sentiment and fundamentals may have triggered it. Valuations in bond markets were at extreme levels.”

Eurozone bonds dumped: analysts' reaction - (www.ft.com) As investors ditched European government bonds on Thursday, accelerating a sell-off that has been picking up pace in recent days, here's a round-up of what strategists make of the move. Kerry Craig, global market strategist, J.P. Morgan Asset Management, said concerns over liquidity and changing expectations over the path of inflation in the eurozone are likely at play. He says: There are technical factors at play and liquidity is becoming an increasing concern in many segments of the fixed income market. Remember that concerns about liquidity in US high-yield markets in October of 2014 saw yields jump after US Federal Reserve Chair Janet Yellen warned of lofty valuations. There are other factors to consider too. The recent move in government bond yields could be a sign of investors re-assessing the inflation outlook for the eurozone and demanding a higher yield to be compensated for higher expected inflation in the future.

OTHER STORIES:

Greece defies euro zone on pension, labor reform - (www.reuters.com)
German Finance Minister says hopes not high on Greece for Monday euro group - (www.reuters.com)
Bonds Drop With Stocks, Metals to Extend $2 Trillion Global Loss - (www.bloomberg.com)

China’s Stocks Cap Biggest Three-Day Retreat in Almost Two Years - (www.bloomberg.com)
Emerging Stocks Head for Worst Drop in Six Weeks on China Slump - (www.bloomberg.com)
Greece Faces Pending Deadline as ECB Eyes Haircut Option  - (www.bloomberg.com)
UK Election 2015: Millions begin casting their votes - (www.bbc.com)
U.K. Votes in Unprecedented Election With Outcome Elusive - (www.bloomberg.com)
Britain goes to the polls in neck-and-neck contest that promises frantic political scrambling - (www.washingtonpost.com)