Tuesday April 4 2017 Housing and Economic stories

TOP STORIES:            

Shock, Horror: ECB Not as “Independent” as it Claims – Report - (www.wolfstreet.com) The European Central Bank has found itself in the rare position of having to defend itself in the public arena following the release of a scathing report on its perceived lack of political independence. The report, published by anti-corruption watchdog Transparency International, argues that the institution has accrued new power and influence in the wake of the financial crisis but its code of conduct has not kept up with that newfound clout. It even suggests that the ECB should withdraw from the Eurozone’s Troika of creditors, precisely at a time that calls are rising for the creation of a European Monetary Fund. “The extraordinary measures taken by the ECB since 2008 have tested the ECB’s mandate (to ensure price stability) to breaking point,” Transparency International EU said. “The ECB’s accountability framework is not appropriate for the far-reaching political decisions taken by the Governing Council.”

CBO Warns Of Fiscal Catastrophe As A Result Of Exponential Debt Growth In The U.S. - (www.zerohedge.com) "The resulting losses for mutual funds, pension funds, insurance companies, banks, and other holders of government debt might be large enough to cause some financial institutions to fail, creating a fiscal crisis." In a just released report from the CBO looking at the long-term US budget outlook, the budget office forecasts that both government debt and deficits are expected to soar in the coming 30 years, with debt/GDP expected to hit 150% by 2047 if the current government spending picture remains unchanged. The CBO's revision from the last, 2016 projection, shows a marked deterioration in both total debt and budget deficits, with the former increasing by 5% to 146%, while the latter rising by almost 1% from 8.8% of GDP to 9.6% by 2017.

Market's vision of Brexit is too rosy - (www.reuters.com) Divorce can be messy even, when both sides start out wanting an amicable settlement. Brexit may well work the same way now that Prime Minister Theresa May has triggered the process for Britain to leave the European Union. For now, investors are more hopeful than they were six months ago that the UK can quit the bloc without ravaging its economy, a Breakingviews index based on asset prices shows. The Breakingviews index incorporates currency, bond, stock, and credit default swap prices. It falls when investors think a growth-damaging “hard Brexit” is more likely, and rises when they expect a more benign outcome. When the former occurs, sterling typically weakens and the domestically-focused FTSE 250 Index of mid-cap companies tends to underperform the FTSE 100 Index of blue-chips, which has a more international bias. Investors also tend to push up the cost of insuring against a British debt default relative to Germany, and compress the gap between two- and 10-year UK government bond yields.

The Dollar Bond Party Comes to Frontier Markets - (www.bloomberg.com) Talk about risk-on: the demand for higher-yielding securities is proving so strong that Papua New Guinea, one of Asia’s poorest nations, is contemplating a debut issue of dollar bonds. The southwest Pacific nation plans to raise $500 million in five-year bonds, central bank governor Loi Martin Bakani said Tuesday at the Credit Suisse Asian Investment Conference in Hong Kong. The country would join Mongolia among sub-investment grade issuers in 2017. Sales of high-yield bonds total almost $15 billion so far this year, according to data compiled by Bloomberg. It’s part of a broader trend of enduring strength in emerging markets that are weathering the U.S. Federal Reserve’s monetary tightening cycle with aplomb. Concerns about trade wars and the potential renewed decline of commodity prices have been set aside for now, with the long-awaited end of the global bond bull market seeming to be on hold.

Spooked by yield rise, ECB wary of changing message again - sources - (www.reuters.com) European Central Bank policymakers are wary of making any new change to their policy message in April after small tweaks this month upset investors and raised the specter of surging borrowing costs for the bloc's indebted periphery, six sources told Reuters. One of the officials, who are in or close to the Governing Council, even said the ECB had been overinterpreted by markets at its March 9 meeting. EXCLUSIVE: Greece and EU/IMF lenders agree on key labour reforms Taken aback when markets started to price in an interest rate hike early next year, policymakers are keen to reassure investors that their easy-money policy is far from ending, suggesting a reluctance to change message before June, the sources said. The euro, the bloc's government bond yields and banking stocks fell after the Reuters article was first published.

OTHER STORIES:

U.S. Stocks Fluctuate as Pound Slips on Brexit: Markets Wrap - (www.bloomberg.com)
Asia Stocks Outside Japan Rise, Oil Extends Gains: Markets Wrap - (www.bloomberg.com)
Brexit Begins as EU's Tusk Receives Divorce Papers from U.K. - (www.bloomberg.com)

Huishan Turmoil Highlights China's $8 Trillion Shadow Loan Risk - (www.bloomberg.com)
Brexit: What do businesses want from Article 50 talks? - (www.bbc.com)