The gap in yields between two- and 10-year government bonds widened to the most in six weeks on speculation the European Central Bank won't raise interest rates, even with inflation above target.
Investors have bought shorter-dated notes, betting the crisis in credit markets and the euro's surge to a record against the dollar will make it difficult for ECB policy makers to raise rates this year. Swiss Reinsurance Co. said today it had made a 1.2 billion franc ($1.07 billion) loss related to the collapse of the U.S. subprime mortgage market.
``The ECB is set to remain on the sidelines in the next five to six months, and if anything there's a risk of a cut,'' said Nicholas Stamenkovic, a fixed-income strategist at RIA Capital Markets, in Edinburgh. Economic ``forward-looking indicators are clearly heading down.''
The yield on the two-year note fell 4 basis point to 3.76 percent by 10:35 a.m. in London. The price of the 4 percent note due September 2009 rose 0.07, or 70 euro cents per 1,000-euro ($1,463) face amount, to 100.40.
The difference in yield, or spread, between two- and 10-year bonds is at 32 basis points, the widest since Oct. 5.
U.S. Treasury Secretary Henry Paulson last week said the worst may still be to come in the subprime crisis, while Goldman Sachs Group Inc. estimated the slump in credit markets may reduce bank lending by $2 trillion.
book-in-finance.com
понедельник, 19 ноября 2007 г.
пятница, 16 ноября 2007 г.
Japanese Bonds Rise as BOJ Says Credit Turmoil May Hurt Growth
Japanese government bonds rose, pushing 10-year yields to the lowest in 21 months, as central bank Deputy Governor Toshiro Muto said global financial market turmoil may hurt the nation's economy.
Benchmark notes were poised for a third weekly gain as Muto, a likely candidate to replace Governor Toshihiko Fukui, said the U.S. housing market slump may make it ``difficult'' to decide when to raise Japanese interest rates. Markets are ``unstable,'' Bank of Japan policy makers said in minutes published today of the Oct. 10-11 meeting.
``People think JGBs are very, very safe'' compared with lower-rated securities like corporate bonds, said Xinyi Lu, chief strategist at the international treasury division at Mizuho Corporate Bank Ltd. in Tokyo. ``Financial institutions have to get a return on their money and need to buy JGBs.''
The yield on the benchmark 10-year note fell as much as 3.5 basis points to 1.46 percent, according to Japan Bond Trading Co., the nation's largest interdealer debt broker. The yield was 1.47 percent as of 3:55 p.m. in Tokyo. The price of the 1.7 percent bond due September 2017 rose 0.218 yen to 101.975 yen. A basis point is 0.01 percentage point.
Ten-year bond futures for December delivery gained 0.19 to 137.04 as of the afternoon close on the Tokyo Stock Exchange.
The central bank on Nov. 13 kept its target for the overnight call rate, the main rate at which banks lend to each other, at 0.5 percent, the lowest among major economies.
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Benchmark notes were poised for a third weekly gain as Muto, a likely candidate to replace Governor Toshihiko Fukui, said the U.S. housing market slump may make it ``difficult'' to decide when to raise Japanese interest rates. Markets are ``unstable,'' Bank of Japan policy makers said in minutes published today of the Oct. 10-11 meeting.
``People think JGBs are very, very safe'' compared with lower-rated securities like corporate bonds, said Xinyi Lu, chief strategist at the international treasury division at Mizuho Corporate Bank Ltd. in Tokyo. ``Financial institutions have to get a return on their money and need to buy JGBs.''
The yield on the benchmark 10-year note fell as much as 3.5 basis points to 1.46 percent, according to Japan Bond Trading Co., the nation's largest interdealer debt broker. The yield was 1.47 percent as of 3:55 p.m. in Tokyo. The price of the 1.7 percent bond due September 2017 rose 0.218 yen to 101.975 yen. A basis point is 0.01 percentage point.
Ten-year bond futures for December delivery gained 0.19 to 137.04 as of the afternoon close on the Tokyo Stock Exchange.
The central bank on Nov. 13 kept its target for the overnight call rate, the main rate at which banks lend to each other, at 0.5 percent, the lowest among major economies.
training-in-stocktraiding.com
Eurodollar Futures Prices Signal Persistent Credit Concerns
Futures traders are betting the rate banks charge each other for dollar loans in London will rise on concern that subprime mortgage losses and constriction of credit markets will increase.
The price of Eurodollar futures contracts expiring next month on the three-month London interbank offered rate, or Libor, fell yesterday. The difference, or spread, between it and the March 2008 contract was the widest since Sept. 17, the day before the Federal Reserve cut its benchmark lending rate for the first time in four years.
``The Libor issue is heating up again,'' said Michael Marzano, Chicago-based interest-rate futures trader at Prudential Securities Inc. ``The fear is about short-term borrowing through year-end and if there will be more credit issues'' such as ``the recent mortgage-related writedowns.''
The spread between the price of the December 2007 Eurodollar futures contract and the March 2008 contract reached minus 0.64 percentage point yesterday. The difference between the near contract and the so-called first deferred contract peaked this year at 0.8375 percentage point on Sept. 10, the widest since at least February 1998, as far back as Bloomberg compiles data.
The contracts, trading on the Chicago Mercantile Exchange, are quoted in price terms and based on predictions for the three-month dollar Libor rates. A declining price corresponds to a rise in implied yield.
training-in-stocktraiding.com
The price of Eurodollar futures contracts expiring next month on the three-month London interbank offered rate, or Libor, fell yesterday. The difference, or spread, between it and the March 2008 contract was the widest since Sept. 17, the day before the Federal Reserve cut its benchmark lending rate for the first time in four years.
``The Libor issue is heating up again,'' said Michael Marzano, Chicago-based interest-rate futures trader at Prudential Securities Inc. ``The fear is about short-term borrowing through year-end and if there will be more credit issues'' such as ``the recent mortgage-related writedowns.''
The spread between the price of the December 2007 Eurodollar futures contract and the March 2008 contract reached minus 0.64 percentage point yesterday. The difference between the near contract and the so-called first deferred contract peaked this year at 0.8375 percentage point on Sept. 10, the widest since at least February 1998, as far back as Bloomberg compiles data.
The contracts, trading on the Chicago Mercantile Exchange, are quoted in price terms and based on predictions for the three-month dollar Libor rates. A declining price corresponds to a rise in implied yield.
training-in-stocktraiding.com
четверг, 15 ноября 2007 г.
Japan's 10-Year Bonds Gain on Signs Subprime Losses Spreading
Japan's bonds rose on signs losses stemming from U.S. subprime mortgage securities are spreading.
Ten-year yields approached their lowest in 21 months after Mizuho Financial Group Inc. cut its full-year profit forecast because of losses related to investments in U.S. home loans to riskier borrowers. Treasuries gained yesterday as concern about weak investor demand for debt used to fund company buyouts overshadowed a stronger-than-forecast retail sales report.
``The generally bond-positive environment is still intact and all the credit-crunch stories are still there, which is why 10-year yields have declined through 1.5 percent,'' said Naruki Nakamura, who helps manage the equivalent of $3.2 billion of bonds in Tokyo at Fischer Francis Trees & Watts.
The yield on the 1.7 percent bond due September 2017 fell 1.5 basis points to 1.5 percent as of 3:15 p.m. in Tokyo, according to Japan Bond Trading Co., the nation's largest interdealer debt broker. The price rose 0.130 yen to 101.713 yen. A basis point is 0.01 percentage point.
Ten-year bond futures for December delivery gained 0.34 to 136.85 as of the afternoon close on the Tokyo Stock Exchange.
Aozora Bank Ltd., the Japanese lender bought and restored to health by U.S. buyout firm Cerberus Partners LP, said yesterday it expects a 23 percent decline in full-year profit after writing down the value of investments related to U.S. home loans. Shinsei Bank Ltd. said Nov. 13 first-half earnings plunged 40 percent as it added to provisions linked to U.S. home loans.
a-training-in-finance.com
Ten-year yields approached their lowest in 21 months after Mizuho Financial Group Inc. cut its full-year profit forecast because of losses related to investments in U.S. home loans to riskier borrowers. Treasuries gained yesterday as concern about weak investor demand for debt used to fund company buyouts overshadowed a stronger-than-forecast retail sales report.
``The generally bond-positive environment is still intact and all the credit-crunch stories are still there, which is why 10-year yields have declined through 1.5 percent,'' said Naruki Nakamura, who helps manage the equivalent of $3.2 billion of bonds in Tokyo at Fischer Francis Trees & Watts.
The yield on the 1.7 percent bond due September 2017 fell 1.5 basis points to 1.5 percent as of 3:15 p.m. in Tokyo, according to Japan Bond Trading Co., the nation's largest interdealer debt broker. The price rose 0.130 yen to 101.713 yen. A basis point is 0.01 percentage point.
Ten-year bond futures for December delivery gained 0.34 to 136.85 as of the afternoon close on the Tokyo Stock Exchange.
Aozora Bank Ltd., the Japanese lender bought and restored to health by U.S. buyout firm Cerberus Partners LP, said yesterday it expects a 23 percent decline in full-year profit after writing down the value of investments related to U.S. home loans. Shinsei Bank Ltd. said Nov. 13 first-half earnings plunged 40 percent as it added to provisions linked to U.S. home loans.
a-training-in-finance.com
SIV Asset Values Drop to 69.7 Percent of Capital, Fitch Says
The net asset value of structured investment vehicles, companies that borrow short term to buy higher yielding securities, has fallen to 69.7 percent as the credit slump erodes their holdings, Fitch Ratings reported.
The amount that would be left after selling SIV assets and repaying debt dropped from 71 percent on Oct. 19 and above 100 percent in July, data compiled by Fitch show.
SIVs have been forced to sell about $75 billion of investments since July after record U.S. home foreclosures caused investors to shun asset-backed debt. Citigroup Inc., the largest manager of SIVs, is working with the U.S. Treasury, Bank of America Corp. and JPMorgan Chase & Co. to create an $80 billion fund to help SIVs avoid dumping their holdings and further roiling credit markets.
Fitch's report is based on the SIVs it rates, including three run by New York-based Citigroup.
The data doesn't include Rhinebridge Plc, the SIV set up by Dusseldorf, Germany-based IKB Deutsche Industriebank AG that was forced to sell assets to repay debt. Fitch, based in New York, said it hasn't received information on Rhinebridge since the SIV was forced to appoint Deloitte & Touche LLP as a receiver on Oct. 23 to protect investors. The SIV had a zero net asset value last month, Fitch said.
a-training-in-finance.com
The amount that would be left after selling SIV assets and repaying debt dropped from 71 percent on Oct. 19 and above 100 percent in July, data compiled by Fitch show.
SIVs have been forced to sell about $75 billion of investments since July after record U.S. home foreclosures caused investors to shun asset-backed debt. Citigroup Inc., the largest manager of SIVs, is working with the U.S. Treasury, Bank of America Corp. and JPMorgan Chase & Co. to create an $80 billion fund to help SIVs avoid dumping their holdings and further roiling credit markets.
Fitch's report is based on the SIVs it rates, including three run by New York-based Citigroup.
The data doesn't include Rhinebridge Plc, the SIV set up by Dusseldorf, Germany-based IKB Deutsche Industriebank AG that was forced to sell assets to repay debt. Fitch, based in New York, said it hasn't received information on Rhinebridge since the SIV was forced to appoint Deloitte & Touche LLP as a receiver on Oct. 23 to protect investors. The SIV had a zero net asset value last month, Fitch said.
a-training-in-finance.com
вторник, 13 ноября 2007 г.
BlackRock's Fink Says Subprime Credit Losses to Rise
Laurence Fink, who helped create the market for mortgage-backed securities, said the credit losses that have already cost banks and securities firms $45 billion are about to get worse.
Fink, chief executive officer of New York-based fund manager BlackRock Inc., said today at an investor conference that ``many institutions don't understand what the credit crunch is going to do to earnings and their balance sheet.'' At the same conference, Goldman Sachs Group Inc., CEO Lloyd Blankfein said his firm is continuing to bet that mortgage-backed securities and collateralized debt obligations will fall.
The outlook is another indication that the contagion from losses on mortgages to people with poor credit is continuing to spread. Bank of America Corp. Chief Financial Officer Joe Price said the second-largest U.S. bank may write down $3 billion of subprime-related debt in the fourth quarter.
At the investor conference in New York, sponsored by Merrill Lynch & Co., Blankfein said Goldman, the world's most profitable investment bank, doesn't plan to take any significant writedowns on mortgage-related assets. Goldman shares rose 8.5 percent to $233.04 at 4 p.m. in New York Stock Exchange composite trading, and other financial stocks also climbed.
``We continue to be net short in these markets,'' Blankfein, 53, said in response to a question about the New York-based firm's position.
Financial Shares Rally
Banks and brokerages in the Standard & Poor's 500 Index have rallied 7.6 percent since reaching a two-year low on Nov. 7. Bank of America, based in Charlotte, North Carolina, climbed 5.2 percent today to $46.27. Lehman Brothers Holdings Inc. jumped 9.2 percent to $63.49 after UBS AG analyst Glenn Schorr said the New York-based securities firm's potential CDO losses are ``negligible.''
``I don't know when it's over, but it's not over yet,'' Fink, 55, said. ``The bottom has not been achieved yet.''
The selloff of financial stocks had gained steam after Merrill Lynch announced a record $8.4 billion credit writedown on Oct. 24, which led to the ouster of CEO Stan O'Neal. Deutsche Bank AG yesterday said credit losses may reach $400 billion, while Lehman last week predicted losses would reach $250 billion over the next five years.
At the same time, money managers including Bank of America and Baltimore-based Legg Mason Inc. have collectively set aside almost $500 million to prop up money-market funds that invested in debt issued by structured investment vehicles, known as SIVs.
tradingonlineschool.com
Fink, chief executive officer of New York-based fund manager BlackRock Inc., said today at an investor conference that ``many institutions don't understand what the credit crunch is going to do to earnings and their balance sheet.'' At the same conference, Goldman Sachs Group Inc., CEO Lloyd Blankfein said his firm is continuing to bet that mortgage-backed securities and collateralized debt obligations will fall.
The outlook is another indication that the contagion from losses on mortgages to people with poor credit is continuing to spread. Bank of America Corp. Chief Financial Officer Joe Price said the second-largest U.S. bank may write down $3 billion of subprime-related debt in the fourth quarter.
At the investor conference in New York, sponsored by Merrill Lynch & Co., Blankfein said Goldman, the world's most profitable investment bank, doesn't plan to take any significant writedowns on mortgage-related assets. Goldman shares rose 8.5 percent to $233.04 at 4 p.m. in New York Stock Exchange composite trading, and other financial stocks also climbed.
``We continue to be net short in these markets,'' Blankfein, 53, said in response to a question about the New York-based firm's position.
Financial Shares Rally
Banks and brokerages in the Standard & Poor's 500 Index have rallied 7.6 percent since reaching a two-year low on Nov. 7. Bank of America, based in Charlotte, North Carolina, climbed 5.2 percent today to $46.27. Lehman Brothers Holdings Inc. jumped 9.2 percent to $63.49 after UBS AG analyst Glenn Schorr said the New York-based securities firm's potential CDO losses are ``negligible.''
``I don't know when it's over, but it's not over yet,'' Fink, 55, said. ``The bottom has not been achieved yet.''
The selloff of financial stocks had gained steam after Merrill Lynch announced a record $8.4 billion credit writedown on Oct. 24, which led to the ouster of CEO Stan O'Neal. Deutsche Bank AG yesterday said credit losses may reach $400 billion, while Lehman last week predicted losses would reach $250 billion over the next five years.
At the same time, money managers including Bank of America and Baltimore-based Legg Mason Inc. have collectively set aside almost $500 million to prop up money-market funds that invested in debt issued by structured investment vehicles, known as SIVs.
tradingonlineschool.com
Florida Holds $2.2 Billion of Debt Cut to Junk
The Florida agency that manages about $50 billion of short-term investments for the state, school districts and local governments holds $2.2 billion of debt cut to junk status.
The downgrades affect more than 4 percent of what the Florida State Board of Administration has purchased for the funds, according to a report by the agency's director, Coleman Stipanovich, that will be delivered at a Cabinet meeting of Republican Governor Charlie Crist today. Some $3.6 billion, or 7.3 percent, of the securities may be downgraded by credit- rating companies, according to the document, provided to Bloomberg by the state board.
Florida rules require the state's short-term investments to only be top-rated, liquid securities, so taxpayer funds aren't placed at risk. The data from Florida shows how far the effects of the bursting of the housing bubble are being felt as complex investment vehicles once marketed as high-yielding safe havens are now backed by collateral shunned by investors.
``Investment of public money needs to be carefully conducted and thoroughly researched,'' said Harvey Pitt, former chairman of the U.S. Securities and Exchange Commission. ``This is not the place for seat-of-the-pants judgments. It requires a lot more than jumping on the latest investment du jour to improve your results.''
Florida isn't the only government whose short-term investments have been affected by rising mortgage defaults in the U.S. and investors' diminished appetite for the securities tied to them.
King County Woes
Last month, Fitch Ratings said Washington state's King County, which includes the city of Seattle, may have its rating lowered on $1.5 billion of bonds because of its investments in debt being roiled by rising defaults on U.S. home mortgages.
Florida's state funds were affected by bad investments in asset-backed commercial paper, short-term debt sold by financial institutions that is secured by collateral such as mortgage securities and credit-card receivables. As the value of that collateral dropped, investors were unwilling to reinvest their money when the short-term debt matured, creating a liquidity crisis for the financial institutions.
Florida's short-term holdings include $400 million of Axon Financial Funding LLC debt, which was cut to junk status by Standard & Poor's on Nov 9. The others rated below investment grade are $850 million of KKR Atlantic Funding Trust, which was cut to default by Fitch last month; $577 million of KKR Pacific Funding Trust debt, cut by Fitch to default last month; and $319 million of debt issued by Ottimo Funding Ltd., cut to default by S&P on Nov. 9.
tradingonlineschool.com
The downgrades affect more than 4 percent of what the Florida State Board of Administration has purchased for the funds, according to a report by the agency's director, Coleman Stipanovich, that will be delivered at a Cabinet meeting of Republican Governor Charlie Crist today. Some $3.6 billion, or 7.3 percent, of the securities may be downgraded by credit- rating companies, according to the document, provided to Bloomberg by the state board.
Florida rules require the state's short-term investments to only be top-rated, liquid securities, so taxpayer funds aren't placed at risk. The data from Florida shows how far the effects of the bursting of the housing bubble are being felt as complex investment vehicles once marketed as high-yielding safe havens are now backed by collateral shunned by investors.
``Investment of public money needs to be carefully conducted and thoroughly researched,'' said Harvey Pitt, former chairman of the U.S. Securities and Exchange Commission. ``This is not the place for seat-of-the-pants judgments. It requires a lot more than jumping on the latest investment du jour to improve your results.''
Florida isn't the only government whose short-term investments have been affected by rising mortgage defaults in the U.S. and investors' diminished appetite for the securities tied to them.
King County Woes
Last month, Fitch Ratings said Washington state's King County, which includes the city of Seattle, may have its rating lowered on $1.5 billion of bonds because of its investments in debt being roiled by rising defaults on U.S. home mortgages.
Florida's state funds were affected by bad investments in asset-backed commercial paper, short-term debt sold by financial institutions that is secured by collateral such as mortgage securities and credit-card receivables. As the value of that collateral dropped, investors were unwilling to reinvest their money when the short-term debt matured, creating a liquidity crisis for the financial institutions.
Florida's short-term holdings include $400 million of Axon Financial Funding LLC debt, which was cut to junk status by Standard & Poor's on Nov 9. The others rated below investment grade are $850 million of KKR Atlantic Funding Trust, which was cut to default by Fitch last month; $577 million of KKR Pacific Funding Trust debt, cut by Fitch to default last month; and $319 million of debt issued by Ottimo Funding Ltd., cut to default by S&P on Nov. 9.
tradingonlineschool.com
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