KeNo's Housing and Economic Portal: Tuesday December 29 Housing and Economic stories

TOP STORIES:

Dubai Developers `Strangle' Supply to Stem Price Drop, CBRE Says - (www.bloomberg.com) Dubai developers halted delivery of about a quarter of the properties set for completion this year, bolstering apartment rents but failing to stop a 16 percent price decline, according to CBRE Group Inc. Single-family home rents declined 4 percent compared with a 14 percent drop in values, Matthew Green, head of U.A.E. research at CBRE, said at a conference today. Apartment rents were unchanged. Out of 20,000 homes CBRE estimated were ready for completion this year, 14,000 were brought to the market, Green said. The supply squeeze and growing leasing demand is maintaining a gap between rents and values. While some developers purposely delayed completion, some projects were held back by the approvals process or buyers who failed to make payments, CBRE said.

Wells Fargo warns of ‘stresses’ in its energy portfolio - (www.ft.com) The head of corporate banking at Wells Fargo, the biggest bank in the world by market capitalisation, has warned of "stresses" in its energy portfolio, as the ongoing slump in the price of oil begins to weigh heavily on servicers and producers. Kyle Hranicky, who spent nine years at the helm of the Houston-based Wells Fargo Energy Group before rising to head the corporate banking division in May, said that the bank had been in discussions with clients for several months about preserving cash and cutting borrowing limits. "Some have liquidity to survive the cycle but others will be under significant stress and may be forced to sell assets or recapitalise," he said. "We've been in the energy business for over 30 years, so we're comfortable with cycles. But this one feels deeper and broader and could last longer."

Lucidus Has Liquidated $900 Million Credit Funds, Plans to Shut – (www.bloomberg.com) Lucidus Capital Partners, a high-yield credit fund founded in 2009 by former employees of Bruce Kovner’s Caxton Associates, has liquidated its entire portfolio and plans to return the $900 million it has under management to investors next month, according to a statement Monday from the London-based company. “The fund has exited all investments,” Chief Executive Officer Christon Burrows and Chief Investment Officer Geoffrey Sherry said in the statement obtained by Bloomberg. “We would like to thank our investors and counterparties for their support over the years." A redemption notice from a significant investor in October triggered Lucidus’s decision to start winding down the portfolio and shedding staff, according to a person familiar with the fund’s operations, who asked not to be identified speaking about internal deliberations.

Investors See More Carnage as Third Avenue Spurs Contagion Risk - (www.bloomberg.com) Top bond managers are predicting more carnage for high-yield investors amid a market rout that forced at least three credit funds in the past week to wind down. Lucidus Capital Partners, a high-yield fund founded in 2009 by former employees of Bruce Kovner’s Caxton Associates, said Monday it has liquidated its entire portfolio and plans to return the $900 million it has under management to investors next month. Funds run by Third Avenue Management and Stone Lion Capital Partners have stopped returning cash to investors, after clients sought to pull too much money. “It could get pretty ugly this week,” Michael Contopoulos, high-yield strategist at Bank of America Corp., said in an interview with Bloomberg TV’s Stephanie Ruhle. “The most recent sell-off has not been fundamentally driven,” he said, citing constrained dealer balance sheets as a factor.

Why junk bonds won't spark new crisis: BlackRock - (www.cnbc.com) As the drop in high-yield, or junk, bonds, claimed its biggest victim since the 2008 financial crisis, BlackRock's Peter Fisher said Monday he does not see the risky end of the corporate fixed income market sinking the overall U.S. economy like the bust in subprime mortgages did during the Great Recession. "[The junk bond drop] may feel like it for corporate CFOs, but I don't think it's systemic for GDP in the same way," Fisher told CNBC's "Squawk Box," in the wake of Third Avenue Management's decision, announced Thursday, to block further investor redemptions from its near $1 billion high-yield Focused Credit Fund, which was being liquidated. A day later, on Friday, Stone Lion Capital Partners, a $1.3 billion hedge fund specializing in distressed debt, suspended redemptions in its oldest fund, which like Third Avenue has been hit by companies defaulting on their obligations.

The problem with junk bonds is way bigger than oil - (www.cnbc.com) The troubles in the high-yield bond market have been closely linked to crude oil's slide. But this conventional wisdom doesn't withstand a peek under the hood of the most popular way to play so-called junk bonds. Taking the popular iShares high-yield ETF (HYG) as a proxy for the space, one finds that there just isn't a gigantic amount of energy bonds contained therein. The energy sector's weighting in the ETF is only 11.4 percent. That makes energy the fourth-most-prominent sector in the product; communications is No. 1, with more than double the weighting. In terms of simple numbers, only 16.4 percent of the bonds in the sector are energy bonds.

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