Tuesday January 26 2016 Housing and Economic stories

TOP STORIES:

Deutsche Bank Said to Probe Sales of Subprime Auto Securities - (www.bloomberg.com) Deutsche Bank AG officials are reviewing whether some employees exaggerated demand as they marketed new securities backed by risky auto loans, potentially suppressing yields for investors, according to a person with knowledge of the matter. The bank has looked at communications between the employees and investors to determine whether such marketing practices were normal salesmanship or if they crossed a line, said the person, who asked not to be named because the matter is private. The lender has also looked at whether preferential treatment in the allocation of the bonds may have improperly given the biggest investors a leg up over smaller firms, the person said. The bank’s inquiry comes as the U.S. Securities and Exchange Commission expands an industrywide crackdown on trading and sales practices in markets where mortgages, auto loans and other debt are bundled into securities.

Credit-Fear Gauge Jumps Above 100 for First Time in Three Years - (www.bloomberg.com) The cost to protect against defaults by North American investment-grade companies soared to a three-year high as concern lingered over falling commodity prices and financial-market turmoil triggered by China. The Standard & Poor’s 500 Index was poised for its lowest close since September, halting a global equities rally. The Bloomberg Commodities Index on Tuesday fell to the lowest level since at least 1991 on sluggish demand from developing nations. The benchmark rebounded by 0.3 percent at 3:16 p.m. on Wednesday in New York. While Chinese exports unexpectedly expanded in December in local-currency terms, the world’s second-largest economy is expected to report the slowest annual expansion since 1990 next week.

Goldman Sachs to shed up to 10 percent of its sales, fixed income team: WSJ - (www.reuters.com) Goldman Sachs Group Inc. is planning to shed up to 10 percent of its sales and fixed income trading jobs later in the quarter, the Wall Street Journal reported on Wednesday, citing sources. This workforce reduction, which is higher than the bank's usual 5 percent annual cuts, is expected to affect not more than 250 people, the Journal said on Wednesday. The bank, which is set to report its fourth-quarter results next week, is preparing for steeper cuts this year within its debt, currencies and commodities division, the newspaper added.

Creditors Accuse Portugal Of "Unfair, Populist Short-Cut" In €2 Billion Bank Bail-In - (www.zerohedge.com) Two weeks ago, The Bank of Portugal shocked markets by bailing in senior Novo Banco bondholders. Novo Banco was the “good” bank forged from the ashes of Banco Espirito Santo which had to be bailed out by the state in August of 2014. The idea was to sell Novo Banco to pay for the cost of the bailout, but the auction process eventually floundered amid turmoil in Chinese markets (at least two of the potential bidders were Chinese) and uncertainty about whether this “good” bank would in fact need more capital given the elevated level of NPLs already on its books. In November, the ECB told Novo it woudl indeed need to raise some €1.4 billion in fresh capital which the bank initially said would come from asset sales. A little over a month later, Portugal’s central bank essentially just gave up. On December 29, the bank announced it was transferring €2 billion in NB senior notes back to Banco Espirito Santo which, like a ghost skyscraper in China, is set for demolition. In other words, Novo Banco plugged the €1.4 billion hole by essentially declaring €2 billion in bonds null and void. 

Shandong Shanshui Says Bond Payment Unlikely as Dispute Deepens - (www.bloomberg.com) Shandong Shanshui Cement Group Ltd., the main operating arm of China Shanshui Cement Group Ltd., said it’s unlikely to make payment on a three-year yuan bond due Jan. 21 amid a cash shortage and escalating management dispute that threaten more defaults. The company is due to repay almost 1.9 billion yuan ($290 million) of bond principal and interest, according to a statement Thursday. The announcement comes days after its parent, China Shanshui, filed legal actions against Shandong Shanshui’s former directors. They have also filed suit this month, alleging that China Shanshui released "false and illegal statements." "The root reason for Shandong Shanshui debt issues is the unresolved fight for control for the company, the company’s financing has consequently been limited," the operating unit said in the statement. 

OTHER STORIES:

Global Junk-Rated Company Defaults Doubled in 2015, Moody's Says - (www.bloomberg.com)
China Bear Market Looms as PBOC Fails to Stop Flight to Safety - (www.bloomberg.com)

U.S. Stocks Tumble as Selloff Resumes, Led by Consumer Shares - (www.bloomberg.com)
The Peer-to-Peer Loan Industry Has Been Getting Slammed - (www.bloomberg.com)

U.S. Steps Up Scrutiny of Cash Real Estate Deals in N.Y., Miami - (www.bloomberg.com)
The Quiet Side of China’s Market Intervention - (online.wsj.com)
Merkel Fires Back at Opponents of Her Open-Door Refugee Policy - (www.bloomberg.com)