Friday November 18 20916 Housing and Economic stories

TOP STORIES:

Era of Low Interest Rates Hammers Millions of Pensions Around World - (www.wsj.com) Central bankers lowered interest rates to near zero or below to try to revive their gasping economies. In the process, though, they have put in jeopardy the pensions of more than 100 million government workers and retirees around the globe. In Costa Mesa, Calif., Mayor Stephen Mensinger is worried retirement payments will soon eat up all the city’s cash. In Amsterdam, language teacher Frans van Leeuwen is angry his pension now will be less than what his father received, despite 30 years of contributions. In Tokyo, ex-government worker Tadakazu Kobayashi no longer has enough income from pension checks to buy new clothes. Managers handling trillions of dollars in government-run pension funds never expected rates to stay this low for so long. 

The Mortgage Market Is Changing Fast - (www.wsj.com) The remaking of U.S. politics also is likely to upend the nation’s mortgage market. There are two reasons why: interest rates and regulation. Changes in these areas could affect the course of the housing recovery, the availability of credit to borrowers and the extent to which lenders are willing to take on new risk. It may also affect the current structure of the mortgage market, in which banks mostly have focused on plain-vanilla and jumbo loans while nonbank lenders have targeted riskier borrowers, sometimes with more exotic mortgage products. Interest rates are the most immediate concern. Donald Trump’s victory has led to a surge in bond yields and, in turn, mortgage rates. In the two days following the election, the average rate on 30-year fixed-rate conforming mortgages spiked a quarter of a percentage point to 3.87%, according to MortgageNewsDaily.com.

Chinese Bonds Headed for Longest Run of Losses in Three Years - (www.bloomberg.com) Chinese sovereign bonds headed for the longest losing streak in three years, driving the yield curve to the widest in two months, as accelerating inflation and signs of an improving economy damped demand for the safety of government debt. The difference between the yields on one- and 10-year government notes, a measure known as the yield curve, rose to 67 basis points on Monday. The gap has been forced apart by a surge in the longer-term yield, with a central bank effort to reduce leverage in the financial market and a global selloff adding to the pressure. China’s economy held ground last month following new measures to cool property markets in almost two dozen big cities, with industrial production matching September’s pace of 6.1 percent.

Bond Vigilantes to Trump: Be Careful, It Could Get Painful - (www.bloomberg.com) When it comes to Donald Trump’s plan to “Make America Great Again,” the bond market is sending the president-elect a simple and unambiguous warning: be careful, or it’s going to cost you. In the days after the billionaire scored a stunning victory with a mix of populist rhetoric and promises to cut taxes, rein in immigration and spend big on infrastructure, America’s financing costs have unexpectedly soared. Yields on Treasuries jumped, contributing to the biggest surge since the “taper tantrum.” Part of it, of course, has to do with expectations Trump’s fiscally expansive, pro-growth agenda will spur faster inflation. But crucially, it serves as a not-so-subtle reminder that America’s creditors can still wield considerable power to constrain public spending, and force the incoming administration into making some hard choices about the proposals it can and cannot afford. 

Moody's turns gloomy on sovereign credit  - (www.investing.com) The outlook for global sovereign ratings is negative possibly until 2018 amid expectations for low economic growth and high public-sector debt, according to Moody's Investors Service. Around 26%, or 35 out of 134 sovereigns, currently have a negative outlook, marking the largest proportion since late 2012 during the European debt crisis. Meanwhile, a two-day thumping has wiped out more than $1T across global bond markets worldwide, on bets that a Trump administration would boost spending and fire up inflation.

OTHER STORIES:

China fires its first warning shot, warning iPhone sales will suffer if Trump starts a trade war - (www.cnbc.com)
China Home Sales Value Rose 38% in October From Year Earlier - (www.bloomberg.com)
China Housing Sales Rise 42.6% in Jan-Oct - (www.nasdaq.com)

China’s Economy Holds Ground as Housing Curbs Start to Bite - (www.bloomberg.com)
As BOJ wanes, Japan sees fiscal stimulus as likely next step - (www.reuters.com)
China Pumps the Brakes on U.S. Dealmaking After Trump Win - (www.bloomberg.com)