Tuesday June 7 2016 Housing and Economic stories

TOP STORIES:

European Banks’ Trillion-Dollar Bad-Loan Burden Spurs Cash Calls - (www.bloomberg.com) Eight years after the financial crisis, a flurry of stock sales is reminding investors just how far some European banks still have to go to repair their balance sheets. Spain’s Banco Popular Espanol SA jolted markets last week with plans for a 2.5 billion-euro ($2.8 billion) rights issue a month after its chief executive officer said capital was adequate. In Italy, Banco Popolare SC and Veneto Banca SpA are tapping investors for 1 billion euros each after Banca Popolare di Vicenza SpA turned to a rescue fund for its cash call. All these consumer banks are raising money to cover a backlog of bad loans, a plight shared in varying degrees by many of their peers. "Banks have to adjust to new ECB requirements and that is what has driven some of these cash calls," said Stefano Girola, who helps manage about 40 billion euros at Syz Asset Management in Lugano, Switzerland. He said he wouldn’t be surprised if banks in Portugal and other lenders in Italy also sell new stock this year.

The Explosion in Quasi-Sovereign Bond Issuance Is Making Analysts Queasy - (www.bloomberg.com) Which fixed-income asset class is growing fast, outperforms similar debt issues, and rarely defaults? Emerging market 'quasi-sovereign' bonds, of course! At some $600 billion, debt sold by state-supported companies in emerging markets ranging from China to Oman has surpassed the amount of emerging market government debt outstanding, according to a new note from Bank of America Merrill Lynch. Such quasi-sovereign debt issuance has helped propel the stunning growth of the overall bond market, with EM issuance accounting for 47 percent of the growth in global debt between 2007-14, compared to 22 percent in the previous seven years, according to S&P Global Ratings.

Corporate Bonds to Join Draghi’s Asset Purchases on June 8 - (www.bloomberg.com) The European Central Bank, which is set to begin buying corporate bonds next week, said it won’t have to sell notes downgraded to junk as it fleshed out the latest expansion of a stimulus program. Securities can be retained even if their ratings fall below the criteria for purchase in the rebooted quantitative-easing plan, it said in a statement Thursday. Acquisitions will begin on June 8, marking the latest phase of policy makers’ efforts to boost growth and lending in the region. The decision to hold onto downgraded bonds may reflect the ECB’s desire to avoid creating price swings in the market. The announcement in March that it would start buying corporate debt helped drive borrowing costs toward record lows and spurred a flood of issuance.

Going Broke Slowly: A Guide to Sprint’s $33 Billion Debt Dilemma = (www.bloomberg.com) Sprint Corp.’s top executives are confidently promising a revival that will lead to the “greatest turnaround in history.” But their financing plans have some in the industry wondering whether the debt-ridden mobile-phone carrier is mortgaging its future to buy itself time with creditors. Sprint says the strategy will enable it to “break even” on a key measure of cash flow for the first time in five years and help repay debt. Yet to do that, the company had to slash network spending to the lowest since 2010 and is putting up phones, equipment and airwaves as collateral in a string of unconventional loan deals brokered by its parent, SoftBank Group Corp. What’s more, Sprint started measuring cash flow in a way that enabled it to post a much smaller deficit than traditional accounting would allow.

New car, new reality: Auto loan borrowing hits fresh highs - (www.cnbc.com) Americans are paying more every month for a new vehicle and making those payments for a longer time than ever. The latest data on auto loans by Experian shows Americans are taking out record-size loans, making larger monthly payments than ever before and extending their loans farther than ever. The numbers from millions of auto loans tracked in the first quarter of this year are striking. Average auto loan: $30,032 — the first time the amount borrowed to buy a new vehicle has topped $30,000. Average monthly payment: $503 — the first time the average auto payment has gone over the $500 mark. Average term for an auto loan: 68 months — this is the longest average term ever seen by Experian.

OTHER STORIES:

Japan Stocks Drop as Abe’s Lack of Stimulus Details Disappoints - (www.bloomberg.com)
Yen Set for Longest Gain in Month Amid Concern Over Brexit, Fed - (www.bloomberg.com)
Iran Resists Saudi Gesture for Unity as OPEC Fractures Reappear - (www.bloomberg.com)
Puerto Rico’s U.S. Rescue Won’t Come Soon Enough to Halt Default - (www.bloomberg.com)
‘Financial conditions’ indicator grips Fed watchers - (www.ft.com)

Corporate bonds join negative yield club - (www.ft.com)
Goldman Says Hedge Funds Wedded to Top Picks Like Never Before - (www.bloomberg.com)
Payday Loans’ Debt Spiral to Be Curtailed - (www.nytimes.com)
China tells U.S., don't let allies set South China Sea policy - (www.reuters.com)