Thursday October 8 Housing and Economic stories

TOP STORIES:

U.S. Junk Bond Rout Pushes Yields Past 8% as Treasuries Gain - (www.bloomberg.com) Bond bulls are piling into Treasuries as turmoil in junk bonds pushes investors into the safety of lower-yielding government debt. Diminished demand for energy companies spurred losses in speculative-grade debt, pushing the yield on an index of U.S. high-yield corporate obligations above 8 percent. U.S. government securities rose Monday and junk bonds extended losses as Glencore Plc, the miner and commodity trader, plunged to a record and oil prices fell. The yield of 8.01 percent reached Sept. 25 on the junk-bond index was only surpassed once in the past four years, in August, based on Bloomberg World Bond Indexes. Investors are seeking a haven after the Federal Reserve refrained from raising interest rates Sept. 17, citing international risks to the economy. Turmoil in Chinese markets stoked a global market rout amid concern that economic growth is slowing.

Glencore Shares Plunge as Debt Fears Rattle Investors - (online.wsj.com)  Investors pounded shares of Glencore PLC on Monday, sending the giant miner and trader down nearly 30% to a new all-time low amid fresh concerns that persistently low commodity prices will cripple its debt-laden balance sheet. The Swiss company’s stock has collapsed in recent months despite a series of moves designed to bolster investor confidence and ease its debt burden. The company’s stock closed at 69 pence on the London Stock Exchange—down from 97 pence in the morning and down 87% from its splashy initial public offering at 530 pence in 2011. The problems have raised questions about whether what Glencore says is its biggest strength—its blend of mining and trading operations—is actually a fundamental flaw. Chief Executive Ivan Glasenberg engineered a $29 billion deal in 2013 to buy Xstrata, the largest merger in the mining industry’s history and a tie up that transformed Glencore from a trader into one of the world’s mining titan.

Icahn warns of potential looming catastrophe – (www.cnbc.com) Danger ahead—that's the warning from Carl Icahn in a video coming Tuesday. The activist says low rates caused bubbles in art, real estate and high-yield bonds—with potentially dramatic consequences. "It's like giving somebody medicine and this medicine is being given and given and given and we don't know what's going to happen - you don't know how bad it's going to be. We do know when we did it a few years ago it caused a catastrophe, it caused '08. Where do you draw the line?" In a telephone interview, Icahn said he's "more hedged now than I've been in years." "The Fed may have backed itself into a corner. They should have absolutely raised rates six months ago," adding it's difficult now because of global concerns.

Another Chinese SOE Flirts With Default as Broker Calls It Early - (www.bloomberg.com) A brokerage report Friday saying the parent of China National Erzhong Group Co. won’t pay bond interest due today is prompting speculation over whether the smelting equipment maker will become China’s second state-owned company to default on onshore bonds. Analysts from China International Capital Corp. said the firm’s controlling shareholder China National Machinery Industry Corp. agreed with bondholders not to pay interest on 1 billion yuan ($157 million) of 2017 notes and a 2015 debenture from unit China Erzhong Group Deyang Heavy Industries Co., without saying where it got the information. While interest on the 2017 notes is due Monday, not everyone’s rushing to make a call. “It’s uncertain if it’s time to call it a default because there is no official statement about whether China National Machinery will pay the interest,” said Zhang Li, a bond analyst at Guotai Junan Securities Co. “If it won’t pay the interest, it will be a default. But even if it’s a default, we should focus more on the fact that investors will get all the principal back.”

'FX liquidity is getting worse' - Deutsche Bank - (www.ft.com)  It's getting harder to get currencies trades done, according to new analysis by Deutsche Bank. Looking at liquidity, measured by the interplay between average weekly trading volumes and realised market volatility (ie, how much exchange rates shake about), "there has been a further deterioration in eight of the 12 most commonly-traded G10 pairs," says Oliver Harvey, a macro strategist at the bank. Trading in the euro is particularly tricky, he points out. [Liquidity in the euro against] the dollar and the yen is] seeing the largest declines, further evidence of how painful euro funding unwinds have been for investors. Liquidity in [the euro against the dollar] is closing in on the lowest levels save after the Lehman bankruptcy. Alternative measures of liquidity, such as the gap between bid and ask prices for currencies, paints a similar picture, Mr Harvey added. Trading volumes are generally heading south too.

OTHER STORIES:

China Stocks Fall to Two-Week Low on Slumping Industrial Profits - (www.bloomberg.com)
Fed saying yes to rate hike but Congress may say no - (www.cnbc.com)

U.S. Stock Futures Drop After Health Rout as Dollar Holds Ground - (www.bloomberg.com)
The Fed speaks, and investors scratch their heads - (www.cnbc.com)

Asian Stocks Swing Before China Data; Japanese Shares Retreat - (www.bloomberg.com)
Catalan independence parties win control of regional parliament - (www.reuters.com)
Catalan Separatists Close to Majority of Votes, Exit Poll Shows - (www.bloomberg.com)

Fed's Williams calls for rate hike this year - (www.cnbc.com)