Daily Digest

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Daily Digest 3/4 - Cash Stimulus Distorts Markets, Negative Yields Buy Security

Wednesday, March 4, 2015, 12:11 PM

Economy

China’s Debt Binge Spawns Asset-Backed Bond Boom: Credit Markets

Having banned asset-backed bonds in 2009 after they’d helped spark the global financial crisis, authorities in the world’s second-largest economy started allowing sales in 2012. Issuance has climbed since then to 282.3 billion yuan ($45 billion) last year, almost 15 times the offerings in 2013, according to data compiled by Bloomberg.

Japan Monetary Base Surges 36.7% In February

The monetary base in Japan spiked 36.7 percent on year in February, the Bank of Japan said on Tuesday, coming in at 275.261 trillion yen.
That follows the 37.4 percent annual surge in January.

Draghi's Rescue Plan Has Created a $103 Billion Problem

There's a corner of the pension world that needs to brace itself for Mario Draghi.
His European Central Bank's 1.1 trillion euro ($1.2 trillion) bond-buying plan might have already blown a 92 billion-euro hole in defined-benefit pension plans by depressing bond yields, Standard & Poor's said Feb. 26. And if the actual start of QE pushes yields further, for longer, companies may have to take drastic measures to make ends meet, and could face a hit to their credit ratings.

Schlumberger Debt Signals Free Cash as Stimulus Distorts Markets

The European Central Bank’s plan to pump 1.1 trillion-euro ($1.2 trillion) into the region’s economy through large-scale bond purchases is driving borrowing costs to record lows. Some companies are going a step further and selling the debt with rates below zero directly to investors, according to David Hiscock at industry group the International Capital Market Association.

Negative Yields Buy Security

Bond prices are so high that yields on $3.75 trillion of the developed world's $24 trillion plus monetary liquidity have currently turned negative. This "inversion" has spread to a dozen countries, where government bond investors pay for the privilege of eventually getting their money back from those nations' treasury debts, and long-term bonds issued.

Russian Wealth Fund Falls Most Since 2010 as Deficit Widens

The holdings shrank $8 billion to $77.1 billion, the lowest since December 2012, as the Finance Ministry used its maximum yearly allowance of 500 billion rubles ($8 billion) for budget financing, according to a Tuesday statement by the ministry in Moscow.


Australia's net foreign debt approaches $1 trillion, trade figures show

The latest official trade figures show Australia's net foreign debt has hit a new record and is approaching $1 trillion.

Bond Funds Brace for Outflows With Push Into Corporate-Debt ETFs

Yellen said inflation and wage growth remain too low even as the job market improves, and she signaled that a change in the Fed's guidance on interest rates won't lock it into a timetable for tightening.

In Negative-Yield World, Actavis Shows Little Goes Long Way

The European Central Bank’s unprecedented plan to buy bonds is leaving investors little choice other than to purchase additional company securities, which look preferable to the more than $2.15 trillion of the world’s sovereign debt that has negative yields.

Ukraine Debt Ratio Breaches Eurobond Terms With Russia

Ukraine National Bank said Monday the country’s sovereign and sub-sovereign debt reached 71.5% of gross domestic product at the end of 2014, effectively breaking the terms of a $3 billion eurobond it sold to Moscow in December.

Opinion: Slowing U.S. economy is inconvenient truth

Instead of growing 3% or better in the fourth quarter, the actual number hit the tape at 2.6% — and was subsequently revised downward to only 2.2%. Right away, the new year wound up with one strike against it, since the jumping off point for this year’s first quarter is now far below expectations.

Austria sells bonds at negative yield

Austria Tuesday joined a handful of European countries that have sold five-year government bonds at a negative yield at an auction, reflecting low and falling borrowing costs across the euro area ahead of the start of the European Central Bank’s blockbuster sovereign bond-buying program.

Denmark intervenes in currency market in big way

Denmark's central bank bought a record amount of foreign currency last month in a bid to protect the krone's peg to the euro, underscoring the fallout from the European Central Bank's efforts to boost economic growth.


Only mass default will end the world's addiction to debt

According to recent analysis by McKinsey Global Institute, global debt has increased to the tune of $57 trillion, or 17pc, since 2007, with little sign of a slowdown in sight.

Spiraling pension costs may send Hollywood over financial cliff, experts warn

Hollywood's unfunded pension liability is $492 million as of Oct. 1, 2014, Lalla said. Each of the city's three pension funds — for police, fire and general employees — are funded at less than 57 percent.

Massachusetts public college retirees drive up six-figure pensions

The number of retirees paid at least $100,000 by the Massachusetts State Employees’ Retirement System has skyrocketed by nearly 77 percent since 2011 as more college staffers 
retired, the review found.

Greece taps public sector cash to help cover March needs - sources

Greece is tapping into the cash reserves of pension funds and public sector entities through repo transactions as it scrambles to cover its funding needs this month, debt officials told Reuters on Tuesday.

Argentina says creditors filed $7-8 billion more claims in debt battle

Argentina's economy minister said on Tuesday "me-too" investors who want compensation for debt owed since the country's 2002 default have lodged claims for between $7 billion and $8 billion in the hope of gaining from its legal battle with other holdouts.

N.J. municipalities group warns Christie's pension changes could trigger 'mass exodus' of workers

The commission stressed that with $83 billion in unfunded pension liabilities, $53 billion in unfunded health care liabilities and soaring annual pension payments, New Jersey can little afford to drag its feet on making these changes.
"The need for urgency in adopting a solution cannot be overstressed. The already narrow window for a reasonable solution is closing fast," they wrote.

McCain, Reed Want $577B Plus War Funding

Senate Armed Services Committee leaders are urging congressional budget writers to clear the Pentagon to spend $577 billion next year, $54 billion above existing spending caps.

Gold & Silver

Click to read the PM Daily Market Commentary: 3/2/15

Provided daily by the Peak Prosperity Gold & Silver Group

Article suggestions for the Daily Digest can be sent to [email protected]. All suggestions are filtered by the Daily Digest team and preference is given to those that are in alignment with the message of the Crash Course and the "3 Es."

3 Comments

saxplayer00o1's picture
saxplayer00o1
Status: Diamond Member (Offline)
Joined: Jul 30 2009
Posts: 4148
Draghi’s Inflation Gap Dashboard Points to Stimulus Extending

Headlines:

  1. China’s Money Rate Drops as PBOC Targets Lower Borrowing Costs
  2. Draghi’s Inflation Gap Dashboard Points to Stimulus Extending
  3. Poland's Central Bank Slashes Rates to Combat Deflation Risk
  4. Canadian consumer debt, including mortgages hits $1.53 trillion: Equifax
  5. Pennsylvania Governor Calls for $3 Billion Bond for Pensions
  6. Ukraine's economy teeters towards collapse
  7. ECB Buying Turns Yields Negative on $24 Billion of Covered Bonds

"The finances of the nation's third-biggest city are sagging under an unfunded pension liability Moody's has pegged at $32 billion and that is equal to eight times the city's operating revenue. The city has a $300 million structural deficit in its $3.53 billion operating budget and is required by an Illinois law to boost the 2016 contribution to its police and fire pension funds by $550 million."

robie robinson's picture
robie robinson
Status: Diamond Member (Offline)
Joined: Aug 25 2009
Posts: 1182
pinecarr's picture
pinecarr
Status: Diamond Member (Offline)
Joined: Apr 13 2008
Posts: 2244
Thanks Robie!

Interesting article.

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