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☆ Central banks hike rates again, but a pause is coming
▼ + stars: | 2023-02-02 | by ( ) www.reuters.com time to read: +5 min

REUTERS/Joshua RobertsLONDON, Feb 2 (Reuters) - Major central banks are steadily moving closer to a pause in their aggressive interest rate hiking campaigns. The European Central Bank and the Bank of England raised rates on Thursday, but markets suspect a peak is nearing. Overall, 10 big developed economies have raised rates by a combined 2,965 basis points in this cycle to date, with Japan the holdout dove. Canada's central bank has raised its policy rate at a record pace of 425 basis points in 10 months. The central bank raised its forecast for its peak interest rate to 5.5%, up from a previous forecast of 4.1%.

☆ ECB lays out balance sheet run-off, will further favour green firms
▼ + stars: | 2023-02-02 | by ( Yoruk Bahceli | ) www.reuters.com time to read: +3 min

The ECB is laying out details after it announced in December it would run bonds off its balance sheet at an average pace of 15 billion euros per month from March through June. The ECB will allocate proceeds remaining after the rundown proportionally to upcoming maturities across its public sector, corporate, covered bond and asset-backed security portfolios, it said in a statement. For its public sector holdings, it will reinvest in proportion to upcoming redemptions by each country and across governments versus supranational debt, the bank said. The ECB said it will also would skew remaining corporate debt reinvestments "more strongly" towards companies with a better climate performance, enhancing a process it first started in October. By raising longer-term borrowing costs, the winding-down of its bond portfolio should tighten financial conditions, making it more expensive for firms and governments to borrow.

☆ End of easy-cash era is going to hurt
▼ + stars: | 2023-02-01 | by ( ) www.reuters.com time to read: +5 min

LONDON, Feb 1 (Reuters) - The end of the easy-cash era is over and its impact yet to be felt on world markets, hopeful that the pain of aggressive rate hikes and high inflation has passed. Reuters Graphics3/ GOING PRIVATEPrivate debt markets have ballooned since the financial crisis to $1.4 trillion from $250 billion in 2010. Reuters Graphics Reuters Graphics4/CRYPTO WINTERRising borrowing costs roiled crypto markets in 2022. Reuters Graphics5/FOR SALEReal estate markets, first responders to rate hikes, started cracking last year and 2023 will be tough with U.S. house prices expected to drop 12%. How the sector services its debt is in focus and officials warn European banks risk significant profit hits from sliding house prices.

[1/2] Men walk past an electric board displaying Nikkei and other countries' indexes outside a brokerage in Tokyo, Japan January 16, 2023. After $14 trillion was wiped off world shares in 2022, $4 trillion has been added back this month. "Markets are in this Goldilocks-scenario of OK growth, slowing inflation and softer monetary policy," said Richard Dias, founder of London-based investment consultancy Acorn Macro. Major central banks have added almost 3,000 basis points to global borrowing costs in this tightening cycle to date. "We've had a monumental rally in government bonds based on expectations we've reached the peak in interest rates," he said.

☆ Debt ceiling 'game of chicken' will terrify markets -Bain Capital's Lavine
▼ + stars: | 2023-01-24 | by ( Nell Mackenzie | ) www.reuters.com time to read: +2 min

LONDON, Jan 24 (Reuters) - If the U.S. Congress becomes mired in an argument on whether to raise the debt ceiling, this will hurt the U.S. economy and rattle financial markets, a top executive at private equity firm Bain Capital said on Tuesday. "The debt ceiling is a real risk that will come to a point where it will terrify markets, because it is a wild game of chicken," Jonathan Lavine, co-managing partner at Bain Capital, which manages $160 billion in assets globally, told an event. House Republicans want to use that critical deadline to force spending cuts, while the White House has said there should be no negotiations over lifting the debt limit. Expectation of a recession has made markets more sensitive to unanticipated risks, Lavine told attendees at a London School of Economics (LSE) conference. Reporting by Nell Mackenzie; additional reporting Jason Lange; editing by Yoruk Bahceli and Susan FentonOur Standards: The Thomson Reuters Trust Principles.

Jan 19 (Reuters) - Zambia needs "desperate debt relief" and agreements under a Group of 20 restructuring vehicle are proving difficult, the World Bank's managing director of operations said on Thursday. "In the last two years, we have seen the limitations of the common framework," Axel van Trotsenburg told a panel at the World Economic Forum's annual meeting in Davos, moderated by Reuters Editor-in-Chief Alessandra Galloni. Zambia has become a test case for the G20-led "Common Framework" restructuring vehicle launched during COVID-19 to streamline debt restructuring efforts as poorer countries buckle under the fallout from the pandemic hit. "Right now we have negotiations where there is not an established debt sustainability framework. What you see in the discussions is that different creditors are challenging all the underlying assumptions," van Trotsenburg added, without specifying which creditors he was referring to.

Japan's 10-year bond yield, trading at 0.4%, fell on Wednesday but is not far off its highest levels since 2015. Total holdings of foreign bonds by Japanese institutional investors, excluding Japan's $1 trillion reserve portfolio, reached $3 trillion at their peak. GOING HOMEThe implications of higher inflation and a possible end to ultra-low rates are not lost on Japanese investors. Still, anticipating a shift, Japanese investors sold a net 2.1 trillion yen ($15.94 billion) of foreign bonds in December, marking a fourth straight month of selling. According to Nomura, Japanese investors have been far more active buyers of global and overseas equities than domestic stocks in the last decade.

☆ Crypto hedge funds ended 2022 down almost 50% - BarclayHedge data
▼ + stars: | 2023-01-17 | by ( Nell Mackenzie | ) www.reuters.com time to read: +1 min

LONDON, Jan 17 (Reuters) - Hedge funds trading crypto currencies tracked by index provider BarclayHedge ended 2022 down almost 50%, the research firm said on Tuesday, a sign that the collapse of the cryptocurrency exchange FTX continues to ripple through the industry. "The more skeptical voices have turned to openly wondering if the 'Crypto Winter' isn’t a season at all, but a state more akin to a nuclear winter," said Crawford. An index of 47 hedge funds, the names of which BarclayHedge keeps anonymous, posted a loss of over 47% for the year, the data said. But the 2022 result was not the worst performance the index has seen in the last five years. The Cryptocurrency Traders Index ended 2018 down over 60%, said BarclayHedge, which is part of the company Backstop Solutions.

☆ Cargo ship from Ukraine grounded in Bosphorus strait, traffic halted
▼ + stars: | 2023-01-16 | by ( ) www.reuters.com time to read: +1 min

[1/3] Turkish Navy's rescue ship TCG Isin sails in the Bosphorus as the Palau-flagged bulk carrier MKK1, carrying grain under UN’s Black Sea grain initiative, is seen drifted aground in Istanbul, Turkey January 16, 2023. REUTERS/Yoruk IsikISTANBUL, Jan 16 (Reuters) - The cargo ship MKK 1, travelling from Ukraine to Turkey, was grounded in Istanbul's Bosphorus Strait on Monday and traffic in the strait was suspended but no damage was reported, shipping agents Tribeca said. Several tugs were among vessels sent to provide assistance to the ship, the coastguard authority said. Television footage showed the bow of the ship, carrying 13,000 tonnes of peas, grounded close to the coastline on the Asian side of the Bosphorus. Tribeca said the Palau-flagged general cargo ship was grounded at Acarburnu at the northern end of the strait early on Monday as it headed southbound.

☆ Russia’s war in Ukraine sparked a historic food crisis. It’s not over
▼ + stars: | 2023-01-15 | by ( Julia Horowitz | ) edition.cnn.com time to read: +7 min

“All the major causes of the food crisis are still with us — conflict, Covid, climate change, high fuel prices,” Cary Fowler, the US special envoy for global food security, told CNN. But high food prices mean that funding can’t go as far, and Russia’s war continues to generate volatility. “The Ukraine crisis has had this ongoing negative impact on world food prices and [added] even more volatility,” said Abby Maxman, CEO of Oxfam America. Russia “is not assisting in alleviating the food crisis in slowing down the grain inspections,” Fowler said. Oxfam’s Maxman, who traveled there in September, said disruptions to food supplies were obvious in markets.

☆ Analysis: China's rapid reopening brings joy and woe for world markets
▼ + stars: | 2023-01-13 | by ( Yoruk Bahceli | ) www.reuters.com time to read: +6 min

The impact of the reopening of the world's second largest economy on financial markets, hit by double-digit losses last year as inflation and interest rates jumped, is critical. Being touted among the top buying bets on recovery hopes are emerging markets, commodity currencies, oil, travel and European luxury companies. The boost to world growth from China's reopening was expected to hurt the safe-haven dollar but benefit the euro. INFLATION CAUTIONBut a boost from China's reopening raises some concerns about inflation. China is the world's leading importer of oil and many other commodities -- oil prices have risen 10% since mid-December to almost $84 .

☆ Analysis: Move over TINA, it's time for TARA
▼ + stars: | 2023-01-11 | by ( Naomi Rovnick | ) www.reuters.com time to read: +5 min

Reuters GraphicsIdanna Appio, a portfolio manager at First Eagle Investments, said that TINA was good for passive investors as it meant that equity prices went up because bond yields went down. "The risk free rate," he added, referring to core government bond yields, "actually gives you something." Bond funds recorded net inflows for six straight weeks until early January, BofA said, based on its analysis of EPFR data. "The end of TINA is very important," said Francesco Sandrini, head of multi-asset strategies at Amundi, Europe's largest fund manager. "You don’t need a bond bull market, you now have income," said Jeffrey Sherman, deputy chief investment officer at U.S. money manager DoubleLine.

The amount of new public-sector debt investors will have to absorb in 2023 will be twice as much as the previous record a decade ago, BofA notes. As early as November, the ECB's bond market contact group cited the high amount of debt private investors would have to buy as the most frequently mentioned concern. JPMorgan, the leader for euro government debt sales, expects a fall. The biggest challenge for governments will be timing, Dutch debt office head Saskia van Dun told Reuters last week. They will also have to be careful when picking maturities to issue and compensate investors enough to buy the debt, investors said.

While the error margins are unlikely to distort euro inflation in the long-term, economists say they could warp inflation expectations if not addressed, at a time when the European Central Bank is raising rates aggressively to tame double-digit inflation. As falling energy prices will take time to be reflected in household contracts, the current methodology will underestimate inflation when energy prices fall, CBS said. More volatility could follow when Germany introduces a cap on energy prices in March, that will also cut costs for January and February retroactively, he said. Eurostat has said that only measures that have a direct impact on energy prices, known to consumers before they purchase the energy, should reflect in inflation calculations. FEEDTHROUGH RISKSWith inflation at 10%, the calculation issues are unlikely to significantly impact the aggregate euro zone inflation print.

After being wrong-footed by sudden price rises, the ECB has been raising rates at an unprecedented pace. Inflation has soared since economies reopened after the COVID-19 pandemic, driven by supply bottlenecks and then surging energy costs following Russia's invasion of Ukraine. Justifying Lagarde's pledge for more hikes, the ECB's new projections on Thursday showed inflation above the ECB's 2% target through 2025. [1/2] Signage is seen outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. The ECB also said it currently expected any recession to be "relatively short-lived and shallow" and Lagarde noted that euro unemployment levels were at "rock-bottom".

☆ Central banks ramp up rates again but the pace slows
▼ + stars: | 2022-12-15 | by ( ) www.reuters.com time to read: +5 min

LONDON, Dec 15 (Reuters) - Central banks in Britain, Norway, Switzerland, the euro zone and the United States have all raised interest rates this week. The central bank raised its forecast for its peak interest rate to 5.5%, up from a previous forecast of 4.1%. Money markets moved after the statement to forecast UK interest rates will top out at around 4.5% in August. Markets anticipate an 80% chance of a 50 bps hike when the Riksbank meets next in February. But market players do not expect any significant change from the world's lone major central bank dove.

[1/2] Signage is seen outside the European Central Bank (ECB) building, in Frankfurt, Germany, July 21, 2022. After being wrong-footed by sudden price rises, the ECB has been raising rates at an unprecedented pace. Inflation has soared since economies reopened after the COVID-19 pandemic, driven by supply bottlenecks and then surging energy costs following Russia's invasion of Ukraine. "We judge that interest rates will still have to rise significantly and at a steady pace," Lagarde told a news conference following its rate announcement. Money markets immediately moved to price in a peak deposit rate of just over 3% by July, compared to 2.75% before the meeting.

☆ ECB to start offloading bond holdings in March
▼ + stars: | 2022-12-15 | by ( ) www.reuters.com time to read: +3 min

It will do so by not reinvesting part of its maturing bond holdings. More detailed parameters for the reduction will be provided at its February meeting, the ECB said. "The asset purchase programme (APP) portfolio will decline at a measured and predictable pace," the ECB said in a statement. The 3.3 trillion euros of purchases made under the APP account for the bulk of the ECB's debt holdings. Investors will now watch for further details expected at ECB President Christine Lagarde's press conference at 1345 GMT news conference.

☆ Analysis: Investors on alert for policy error after cheering slower rate hikes
▼ + stars: | 2022-12-12 | by ( Yoruk Bahceli | ) www.reuters.com time to read: +6 min

With inflation potentially peaking and recession looming, the risk of overtightening accelerating a downturn is on investors' watchlists for next year. "We're past the point of the big (Fed) policy mistake, we think they kind of made it," Robert Waldner, head of macro research at $1.3 trillion asset manager Invesco, said. Recent Fed research suggests the bank has exceeded the level called for by commonly followed policy rules and should target 3.52%, versus the 3.75%-4% it currently targets. Fed research, taking into account the premium on mortgages and corporate borrowing costs, has found financial conditions in September already reflected the equivalent of a 5.25% policy rate. I am worried the Fed may not be taking into account the lags in their monetary policy," Costerg said.

[1/2] Oil product tanker Lila Fujairah sails in the Bosphorus, on its way to the Mediterranean Sea, in Istanbul, Turkey December 6, 2022. REUTERS/Yoruk IsikCompanies Ingosstrakh SPAO FollowLONDON, Dec 7 (Reuters) - Western officials are in talks with Turkish counterparts to resolve oil tanker queues off Turkey, a British Treasury official said, after the G7 and European Union rolled out new restrictions on Dec. 5 aimed at Russian oil exports. "The UK, U.S. and EU are working closely with the Turkish government and the shipping and insurance industries to clarify the implementation of the Oil Price Cap and reach a resolution," the official told Reuters. At least 20 oil tankers continue to face delays to cross from Russia's Black Sea ports to the Mediterranean as operators race to adhere to the Turkish rules. "The (insurers) have agreed that they cannot and should not issue such a letter," UK P&I said in a statement on its website.

☆ Russia is concerned over oil tankers build-up in Bosphorus - RIA
▼ + stars: | 2022-12-07 | by ( ) www.reuters.com time to read: +2 min

[1/2] The Maltese-flagged crude oil tanker Minerva Baltica sails in the Bosphorus, on its way to the Black Sea, in Istanbul, Turkey December 5, 2022. REUTERS/Yoruk Isik/File PhotoMOSCOW, Dec 7 (Reuters) - Russia is concerned about a build-up of oil tankers in the Bosphorus Strait and is discussing the issue with insurance and transport companies, RIA cited Russian deputy foreign minister Alexander Grushko as saying on Wednesday. After all, insurance companies insure, not the state," Grushko is quoted as saying. The European Union banned all seaborne Russian crude imports from Dec. 5, with a fuel import ban to follow in February. Kazakhstan, a large oil exporter, said on Wednesday that the build-up of the oil tankers at the Bosphorus is normal during the winter season.

☆ Euro, European shares fall after U.S. jobs datra
▼ + stars: | 2022-12-02 | by ( ) www.reuters.com time to read: +1 min

LONDON, Dec 2 (Reuters) - European shares, the euro and government bond prices fell after U.S. jobs data came in above expectations, challenging hopes that the U.S. Federal Reserve may start slowing the pace of its interest rate hikes. Euro zone government bond yields, which move inversely with prices, reversed earlier falls. Germany's 10-year yield rose as much as 3 basis points on the day to 1.855%, having been down around 5 bps prior to the release. Germany's 2-year yield, more sensitive to changes in interest rate expectations, was last unchanged at 2.04%, having fallen 8 bps before the data. Reporting by London markets team, editing by Yoruk BahceliOur Standards: The Thomson Reuters Trust Principles.

Blackstone (BX.N) limited withdrawals from its $69 billion unlisted REIT on Thursday after redemption requests hit pre-set limits amid investor concerns it was slow to adjust valuations as interest rate surged, a source close to the fund said. The development is yet another reminder of the risks facing not just sectors that are sensitive to higher interest rates but also broader financial markets, which have rallied sharply on hopes that interest rate hikes will slow. "REITS had a fantastic performance for a couple of months but when you have that outperformance, investors don't react to traditional fundamental signals such as rising rates," she said. But in recent weeks expectations have risen that the Fed will "pivot" from aggressive tightening, prompting investors to price in lower peak interest rates. Blackstone has reported a 9.3% year-to-date net return for the REIT, while the publicly traded Dow Jones U.S.

☆ Deutsche Bank sees U.S. leveraged loan defaults near record highs in 2024
▼ + stars: | 2022-11-21 | by ( Chiara Elisei | ) www.reuters.com time to read: +2 min

Nov 21 (Reuters) - Default rates on U.S. leveraged loans will hit a near-record high of 11.3% in 2024, while defaults on euro leveraged loans will hit 7.1%, as the global economic outlook deteriorates, Deutsche Bank said on Monday. For 2023, however, Deutsche Bank expects default rates to be kept in check given the lack of near-term maturities. The bank said in a research note it expects a 5.6% default rate in the United States and 3.7% rate in the euro market respectively in 2023. But it expects default rates to rise from then onwards. This will lead to more distressed exchanges and missed interest payments, triggering an increase in default rates in 2024.

☆ Analysis: Investors face expensive quest for year-end cash and safe assets
▼ + stars: | 2022-11-14 | by ( Yoruk Bahceli | ) www.reuters.com time to read: +6 min

Money markets too suggest securing cash and quality assets investors need to make a smooth transition into 2023 will be expensive. But analysts noted year-end is still 1-1/2 months away and the spread tends to widen in late November as demand for cash rises. The risk is any unexpected news emerging as liquidity thins further in December, requiring investors to reconsider positioning. BofA said it now sees year-end German repo 6 percentage points below the overnight rate, which it said would still make it the most expensive on record for investors borrowing bonds then. "It's still early days, but (last year's repo pricing) would probably be the best case already in terms of year-end pricing," Commerzbank's Leister said.

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