Posts Tagged debt
Chinese Express Wary Faith in Fannie, Freddie Debt
Posted by Oksana Grebenjuk in Trading Markets on Февраль 15th, 2011
China’s government, one of the biggest holders of debt from Fannie Mae and Freddie Mac, voiced confidence that Washington would continue to stand behind the obligations of the U.S. mortgage giants after the Obama administration outlined options for phasing them out.
The statement by the State Administration of Foreign Exchange, or SAFE, the arm of China’s central bank that manages foreign-exchange reserves, reflects Beijing’s continued concern about perceptions within China of the safety of its U.S. investments. Most of China’s $2.85 trillion in reserves is invested in dollar assets, and while China doesn’t disclose the size of its holdings of Fannie and Freddie securities, past records show it owning hundreds of billions of dollars of debt from them and other U.S. government-linked agencies.
Chinese officials have raised concerns about the possible impact of U.S. policy on the future value of China’s dollar holdings, saying loose monetary policy could hurt the value of U.S. assets. But the government has also rejected rumors that it has lost money on its existing holdings of Fannie and Freddie debt.
The Obama administration on Friday issued a white paper on plans to reduce U.S. government involvement in the mortgage market, including an eventual phaseout of Fannie and Freddie, which the government took over in 2008. But the White House’s report emphasized that it «will not waver from its commitment» to ensuring that the two «have sufficient capital to honor any guarantees issued now or in the future and meet any of their debt obligations.»
SAFE’s statement, posted on its website Saturday, said the White House plan «has aroused widespread public interest and concern that our foreign-exchange reserve investments could be damaged.» The statement said China has not had losses on its Fannie and Freddie holdings, and added that SAFE «took particular notice that the U.S. government’s commitment to support [Fannie and Freddie] hasn’t changed.» Read the rest of this entry »
Despite the party, global policymakers poles apart
Posted by Oksana Grebenjuk in Currency on Февраль 7th, 2011
Even after their annual Alpine get-together, global policymakers cannot agree which of the risks facing the world economy are most pressing let alone decide how to tackle them.
While there was broad agreement that the worst of the euro zone debt crisis has passed, countless panel discussions and bilateral meetings at the World Economic Forum in Davos did little to narrow differences of opinion over the threat of inflation to the global recovery and the imbalances associated with deficits and exchange rates.
The financial crisis forced policymakers to look into the abyss and work together to prevent the global economy going into meltdown. The recovery is seeing countries operating more independently.
«At the early stages of the financial crisis, at G20 level, there was a lot of talk of coordination … I think now everybody is going their own way,» Turkish Finance Minister Mehmet Simsek said during one of the Forum’s panel discussions.
«That’s an issue, that’s a problem,» he said. «Global imbalances are there, probably to grow.»
Turkey is one of a growing number of emerging market nations that have acted to stem «hot money» inflows destabilising their economies. Asian and Latin American nations have done the same, pointing the finger at the United States for flooding the world economy with newly-printed money. Read the rest of this entry »
German 2-Year Yield Rises to More Than 12-Month High on ECB Rate-Rise Bets
Posted by Oksana Grebenjuk in Fund Markets on Февраль 4th, 2011
German two-year government note yields jumped to the highest in more than a year this week on speculation the European Central Bank may act to stem inflation.
ECB President Jean-Claude Trichet said on Jan. 26 that policy makers will do “what is necessary” to keep inflation in check. German consumer-price growth accelerated to the highest level since October 2008. Irish bonds slid before a vote on the budget tomorrow. The debut auction of the European Financial Stability Facility drew bids for almost nine times the securities on offer.
The increase in the German note yield “was driven by fears of tighter monetary policy,” said Patrick Jacq, a senior fixed- income strategist at BNP Paribas SA in Paris. “This is clear when you look at the evolution of the curve. We have hawkish rhetoric coming in from the ECB so it makes sense to be short at the short end.”
The two-year note fell for a fourth straight week, pushing the yield eight basis points higher to 1.37 percent as of 5:27 p.m. in London. It earlier reached 1.43 percent, the highest since Jan. 4. The 10-year yield fell two basis points to end the week at 3.16 percent. Read the rest of this entry »
Don’t Bank on It
Posted by Oksana Grebenjuk in Banks on Январь 26th, 2011
Disappointing earnings, shrinking revenues and optimism that somehow the economy is improving despite an ongoing housing hangover — this is what America’s biggest banks offered as they released year-end financial results last week.
«Last year was a necessary repair and rebuilding year,» Bank of America CEO Brian Moynihan said Friday. Yes, we know. The shards of our broken economy remain scattered on the ground and we’re gluing them back together. What else could Mr. Moynihan say as he announced a 2010 loss of $2.2 billion?
«We enter 2011…against a backdrop of an improving economy,» he said. But then he qualified: «Full economic recovery depends on housing-market stability.»
And until we can return to housing-market stability, banks can borrow for next to nothing and lend at rates once charged only by Mafia loan sharks.
Banks enjoy guarantees not to fail unless the U.S. government goes down with them. They remain more or less free from regulations that might significantly curb their reckless risk-taking. And they continue to pay their executives better than rock stars or baseball players. Read the rest of this entry »
Euro crisis far from over
Posted by Oksana Grebenjuk in Currency, Favourites on Декабрь 21st, 2010
The euro crisis is far from over and the peripheral members of the euro zone should temporarily exit the currency bloc and get their financial houses in order, said a Pimco bond fund manager. Otherwise, current policies are ineffective in the absence of fiscal unity and will likely lead to a break-up of the euro.
In an interview with the German newspaper Die Welt, Munich-based Andrew Bosomworth warned that “market tensions” will persist into the new year and that the new “permanent bailout- mechanism” proposed by euro zone finance ministers has arrived too late since it will not become applied until 2013.
He cites that the European Union should have sought a more urgent solution to the problems of debt-stricken euro members.
«Greece, Ireland and Portugal cannot get back on their feet without either their own currency or large transfer payments,» he said. He suggested that these countries could begin fixing their financial and debt problems by re-adopting their original currencies, thereby enabling them to sell their exports cheaper to other countries.
Bosomworth also complains that by forcing weaker euro zone members to adopt harsh austerity programs defeats the purpose since they make it difficult for these nations to grow their economies and stabilize their debt. Read the rest of this entry »
The Only Kind Of Credit Card Debt That You Should Ever Have
Posted by Oksana Grebenjuk in Banks on Декабрь 16th, 2010
I know that we all are all taught that credit card debt is a bad thing. I typically agree with this as all debt is bad debt. There is however a certain form of credit card debt that is essential for certain individuals to have. This debt is vital to the success of their future financial buying power. What is this form of debt?
The answer is secured credit card debt.
Secured credit card debt is appropriate for individuals looking to rebuild their credit. You might need to rebuild your credit for any of the following reasons:
too many financial obligations
job loss
foreclosure
repossession
bankruptcy
neglect
Secured credit cards are the best tool for rebuilding your credit. In order to qualify for a secured card, you have to make a deposit into a bank account with the card company. Your account is backed up by the deposits in the bank account. Your credit limit is equal to the deposit amount. Read the rest of this entry »
The European Situation And The Financial Markets
Posted by Oksana Grebenjuk in Currency, Favourites on Декабрь 1st, 2010
Are the financial markets the WikiLeaks of economics? Politicians and economists and business people ignore what financial markets are saying at their peril.
The financial markets have not responded well to the «rescue» package for Ireland put together by the European Union. The news out of London: «The euro continued to slide Tuesday, falling to a 10-week low under $1.30 as Italian, Spanish, Portuguese and Irish bond-yield spreads all continued to widen relative to Germany.»
«The euro had started the European day with a rally, helped by regular month-end flows in its favor. However, things turned sour again as it became apparent that the risks of contagion remained as strong as ever and that Italy is now being affected by the lack of investor confidence in the euro zone.
Like the debtor countries on the periphery, Italy watched the yield on its bonds rise relative to those of Germany as investors demanded greater returns for holding Italian debt.»
The Financial Times writes: «it is still hard to see how Ireland can repay all the debt it has now taken on. So it is unsurprising that the market sensed a fatal combination: governments lacked the means either to nix moral hazard or end the crisis by writing an enormous check.» Read the rest of this entry »
Ireland Will Need Bailout — Portugal Next
Posted by Oksana Grebenjuk in Favourites, Trading Markets on Ноябрь 16th, 2010
From Morgan Stanley on the Irish debt crisis:
Financial markets in the periphery (bonds, CDS and in some cases banks) have become rather volatile in recent days. This escalation follows several weeks of spread widening in the three smaller peripheral markets (notably Ireland and, to a lesser degree, Portugal and Greece). While each country has its own interesting idiosyncratic story, the danger of contagion has clearly increased. In this note, we discuss political deliberations on tapping the European Financial Stability Fund (EFSF).
We outline how the process would work if it were to be activated and highlight the likely market reaction that could be expected on the announcement, based on what was observed in Greece. On balance, we believe that the sharp rise in market tensions over the last few weeks has increased the chances of the EFSF being tapped.
This is in particular true for Ireland, in our view, where it seems increasingly difficult for the government to effectively backstop the problems in the banking system. We would stress, however, that no country will apply to the EFSF lightly or ‘just’ to reduce debt-servicing costs: tapping the EFSF is a monumental decision that will shape economic, fiscal and financial policies in that country for many years to come. It is a step that a government would only take in case of no other viable alternative, in our view. Read the rest of this entry »
3 Companies That May Not Exist By The 2012 Elections
Posted by Oksana Grebenjuk in Business, Favourites on Ноябрь 12th, 2010
We have just gotten through the 2010 election season. Now everyone is turning their attention to 2012. On that note, let’s take a look at a few companies that I believe will not be alive during the next economic cycle. These companies are struggling to stay alive and their stock prices reflect their dire circumstances.
Rite Aid Inc. (RAD)
First up is a once prominent national chain that is now struggling to remain relevant. No, it’s not Blockbuster. It’s Rite Aid! The company has been under intense pressure since its failed merger with Albertson’s. Rite Aid is crumbling under its massive debt burden and declining sales. Same stores sales are down nearly 2% and have declined for 17 straight months. While CVS Caremark Corp. (CVS) and Walgreens (WAG) are raking in profits, Rite Aid is drowning in red ink.
First Mariner Bancorp (FMAR)
Next up is a local banking institution in my home state of Maryland. This stock has been in a freefall for two years. The bank has been doing a better job recently of raising revenue but the company still has not returned to profitability. The company has been under the intense scrutiny of bank regulators for the last year. Shares have recently dropped below $1 and the stock is facing delisting. With so many banks failing each week, it’s hard to see how the bank will remain afloat over the next year. Read the rest of this entry »
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