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WASHINGTON, April 10 (Reuters) - The U.S. banking system remains strong and resilient, but American officials will continue working with foreign counterparts to bolster financial resilience after recent bank failures, U.S. Treasury Undersecretary Jay Shambaugh said on Monday. Shambaugh said recent bank failures and developments were very different from those of the 2008 global financial crisis, which centered on credit risk, but regulators were working hard to shore up confidence in liquidity both at home and abroad. "Recent events have in some sense highlighted some of the downside risks that exist, but they haven't really fundamentally altered the overall picture of our baseline," he said. Work will continue with international partners to increase financial resilience, he said, adding that recent events were a reminder to complete any unfinished regulatory business and "repair and fix any cracks in the regulatory perimeter." Reporting by Andrea Shalal; Editing by Chris Reese and Jonathan OatisOur Standards: The Thomson Reuters Trust Principles.
WASHINGTON, April 10 (Reuters) - The U.S. government will seek to rally allies this week to ratchet up economic pressure on Russia over its invasion of Ukraine, and shore up support for Kyiv, a top U.S. Treasury official is slated to say on Monday. "The United States is redoubling our efforts to rally our global coalition of allies at the Spring Meetings on Treasury’s two lines of effort as part of the United States’ unwavering commitment to Ukraine," he said in the prepared remarks. That means "shoring up economic support for Ukraine’s government and people, and ... continuing to deny (Russian President Vladimir) Putin the revenue and military equipment he needs to further his illegal war." Shambaugh highlighted the four-year $15.6 billion IMF program approved for Ukraine on March 31 as another key form of support, and a way to underpin Ukraine’s efforts to strengthen good governance. "Looking ahead, Ukraine will need support from a broad set of donors as its recovers and rebuilds.
“I’m more concerned than I’ve been in a long time,” said Matt Anderson, managing director at Trepp, which provides data on commercial real estate. About $270 billion in commercial real estate loans held by banks will come due in 2023, according to Trepp. Questions about the health of banks with sizable exposures to commercial real estate loans cause customers to pull deposits. That forces lenders to demand repayment — exacerbating the sector’s downturn and further damaging the banks’ financial position. The likeliest outcome is thought to be an uptick in defaults and reduced access to funding for the commercial real estate industry.
The monetary policy committee (MPC) retained the key lending rate or the repo rate (INREPO=ECI) at 6.50% in a unanimous decision. With the likely softening of CPI to the low- to mid-5% levels in the coming month, the current repo rate of 6.5% implies that India’s real policy rate will hover around 1% during 2023-24, while maintaining a policy rate differential of about 1.5% with the US. Room for additional rate hikes has been retained with MPC’s policy stance continuing to remain unchanged at ‘withdrawal of accommodation’. We believe the bar for future rate hikes has increased, especially since near-term prints of CPI will be sub 6%. Scope for further hikes is limited given our growth-inflation outlook and impact of the past rate hikes on the same.
How the Bank Mess Can Hit Home Buyers
  + stars: | 2023-03-29 | by ( Telis Demos | ) www.wsj.com   time to read: 1 min
Mortgage bonds are a big driver of the unrealized losses on bond portfolios that banks are struggling with. As investors scan for potential spillovers from the present banking crisis, one place to look is in mortgage rates. There are several inputs into the rates that are offered to home buyers. If mortgage bonds are in demand, that can lead investors to buy more mortgages at lower interest rates. But if mortgage bonds aren’t much in demand, that puts upward pressure on mortgage rates.
A capital increase was among proposals the World Bank made in January. It would not be possible without the support of the United States, the World Bank's dominant shareholder. "We are not requesting a capital increase," Yellen said during a budget hearing of the U.S. House of Representatives Appropriations Subcommittee on State, Foreign Operations, and Related Programs. "We do want to see better mobilization of private resources alongside World Bank investments as well, but we're not requesting a capital increase at this time." Yellen has previously called for the World Bank to take "bolder and more imaginative" steps to unlock more lending for climate change.
LONDON, March 29 (Reuters) - The Bank of England on Wednesday told regulators to move fast to toughen rules for funds used by Britain's pension industry which nearly collapsed last year after former Prime Minister Liz's Truss's "mini-budget." But the BoE's Financial Policy Committee called on pension regulators to act "as soon as possible" to mitigate the risks posed by liability-driven investment (LDI) funds. The FPC also said there is a need to toughen resilience of money market funds, used by companies for day-to-day financing, and UK regulators will publish a consultation paper on MMF regulation later this year. The FPC stressed that "all UK banks" have been assessed on their resilience to moves in interest rate rises, including the impact on their holdings of net open bond positions. (Reporting by Huw Jones and William Schomberg)((uk.economics@reuters.com; +44 20 7542 5109))Keywords: BRITAIN BOE/Our Standards: The Thomson Reuters Trust Principles.
What the banking crisis means for mortgage rates
  + stars: | 2023-03-24 | by ( Anna Bahney | ) edition.cnn.com   time to read: +6 min
Generally, home buyers can anticipate mortgage rates to move down through the rest of this year as the banking crisis drags on, which could cool down inflation. Neither the actions of the Federal Reserve nor the bank failures directly impact mortgage rates. When Treasury yields go up, so do mortgage rates; when they go down, mortgage rates tend to follow. Following the Fed’s announcement on Wednesday, bond yields — and the mortgage rates that usually follow them — fell. “Homebuyers in 2023 have shown themselves to be quite sensitive to any changes in mortgage rates,” Fratantoni said.
It's something that the Treasury and regulators did in the depths of the 2008 global financial crisis, but regulatory reforms in 2010 required a streamlined approval from Congress. Meanwhile, hardline Republicans oppose any increase in the current $250,000 Federal Deposit Insurance Corp insurance limit. Yellen explained to the U.S. Senate on March 16 that there would be no guarantee for deposits in banks not deemed a systemic threat, spooking community banks. A temporary systemwide deposit guarantee is needed to stop the bleeding," Ackman said on Twitter after Yellen's testimony to a Senate committee on Wednesday. Yellen is due to testify later on Thursday before the U.S. House of Representatives Appropriations Subcommittee on Financial Services and General Government.
Responding to SVB’s failure, the central bank promised to make available additional liquidity to banks and other deposit-taking institutions. By reassuring depositors, the central bank aims to prevent runs on other institutions and contagion through the financial system. And by promising to buy high-quality assets at face value, the central bank is trying to forestall a fire sale that could depress valuations and become self-reinforcing. POLICY AND SUPERVISIONThe central bank’s intervention has highlighted the complex interaction between monetary policy and bank supervision. But given the spillovers between monetary policy and supervision, the offer of additional liquidity is probably not enough to insulate monetary policy from financial stability considerations.
Regulators said that depositors at Silicon Valley Bank will have access to all of their money on Monday. U.S. regulators took control of a second bank Sunday and raced to roll out emergency measures to stem potential spillovers from Friday’s swift collapse of Silicon Valley Bank, backstopping both firms’ uninsured depositors and making more funding available to the banking system. Regulators announced Signature Bank, one of the main banks for cryptocurrency companies, was closed Sunday. The New York bank’s depositors will be made whole, officials said.
For more on that, I recommended reading my colleague Dan DeFrancesco's excellent 10 Things on Wall Street newsletter. And for today, let's see why the Fed's own economists are warning of a nearly 20% housing correction. They argued US home prices would have to tumble nearly 20% to bring the housing market back to fundamentals — and additional Fed rate hikes could lead to an even worse housing correction. Have you entered or exited the housing market in the last year? These four charts explain the troubling state of the housing market right now.
The outsized role played by the United States in capital markets, trade and debt reinforces the status quo. Unless the global economy undergoes a complete overhaul, the dollar will remain on top. America may have never “run on Dunkin’”, as the donut-maker’s slogan claimed, but the global economy runs on the dollar. The United States has spurred the search for alternatives by wielding its currency as a weapon against its adversaries. The greenback’s function as the lubricant of global economic activity has another important effect: a stronger dollar curbs global trade.
Dallas Fed economists warned of a 19.5% housing market correction in a Tuesday research report. "[I]f the observed price-to-rent ratio grows at an explosive rate relative to its fundamental-based ratio estimated with long-term interest rate and rent growth data, the bubble hypothesis merits attention," they said. For the US housing market to return to its fundamentals, they estimated that a 19.5% correction would be necessary. There were signs that the US price-to-rent ratio began to fall in third quarter as prices cooled faster than rents, they added. For now, a modest housing correction remains the baseline scenario, but the authors warned that more hawkish monetary policy could trigger a steeper correction.
Participants at the meeting, however, are likely to focus on the war in Ukraine. The G20 bloc includes the wealthy G7 democracies, as well as Russia, China, India, Brazil and Saudi Arabia. French Finance Minister Bruno Le Maire told Reuters that G20 financial leaders must condemn Russia's aggression against Ukraine and that Europe was working on new sanctions against Moscow. G7 chair Japan's finance minister, Sunichi Suzuki, told reporters that the group would closely monitor the effectiveness of sanctions and "take further actions as needed". German Finance Minister Christian Lindner said the pressure on Russia must be kept high to "completely isolate" Russia's economy.
BENGALURU, Feb 24 (Reuters) - Global finance leaders will tally the economic damage from Russia's war in Ukraine on Friday as they meet on the conflict's first anniversary with some voicing concerns that more sanctions on Moscow would disrupt a modest improvement in growth. U.S. Treasury Secretary Janet Yellen on Thursday highlighted the improvement, saying the global economy "is in a better place today than many predicted just a few months ago". Yellen and fellow G7 ministers on Thursday called for more financial support for Ukraine and vowed to maintain tough sanctions on Russia. German Finance Minister Christian Lindner said the pressure on Russia must be kept high to "completely isolate" Russia's economy. Yellen said the communique was still under discussion and she hoped to see a strong condemnation of Russia's invasion and the damage it has caused Ukraine and the global economy.
[1/4] A Singapore dollar note is seen in this illustration photo May 31, 2017. However, recent comments from the Fed about hiking rates for longer dampened sentiment. They turned bearish on the Thai baht , Asia's best-performing currency this year, the Singapore dollar and the Malaysian ringgit for the first time in three months. The poll uses estimates of net long or short positions on a scale of minus 3 to plus 3. The survey findings are provided below (positions in U.S. dollar versus each currency):Reporting by Tejaswi Marthi in BengaluruOur Standards: The Thomson Reuters Trust Principles.
"Continued, robust support for Ukraine will be a major topic of discussion during my time here in India." Yellen said that previous U.S. military, economic and humanitarian aid totalling $46 billion has allowed Ukraine to preserve economic and financial stability under "extraordinary circumstances." In the coming months, we expect to provide around $10 billion in additional economic support for Ukraine." Yellen said that G20 countries, especially China, need to work to ease the debt overhang that is putting more than half of low-income countries in debt distress. The United States intends to put forward a candidate for the World Bank presidency "very quickly", she added.
LONDON, Feb 16 (Reuters) - The potential economic effects of the earthquake in Turkey could result in a loss of up to 1% of the country's gross domestic product this year, the European Bank for Reconstruction and Development (EBRD) said in a report published on Thursday. "The earthquake affected to a large extent agricultural areas and areas where there is light manufacturing, so spillovers to other sectors are limited," EBRD chief economist Beata Javorcik told Reuters. Growth for Turkey, the single biggest recipient of EBRD funds, has been revised down to 3% from 3.5% in 2023, without considering the impact of the earthquake in the estimates. The bank added that growing external financing requirements and political uncertainty associated with elections in 2023 create significant economic vulnerabilities. Reporting by Jorgelina do Rosario in London Editing by Karin Strohecker and Matthew LewisOur Standards: The Thomson Reuters Trust Principles.
OPEC had kept its 2023 demand growth forecast steady for the past two months after a series of downgrades. "Concern hovers around the depth and pace of the country's economic recovery and the consequent impact on oil demand." OPEC expects Chinese demand to grow by 590,000 bpd in 2023, up from last month's forecast at 510,000 bpd. On the flipside, it noted a number of factors that could curb economic growth and oil demand. OPEC said its crude oil output in January fell by 49,000 bpd to 28.88 million bpd.
The IMF said in a report on China's economy that the country's property crisis remains "unresolved." But China's hit back at that, saying its property market "has been operating smoothly in general, and is not in a 'crisis' situation." China's real estate market has been mired in debt woes for the past few years. The IMF says China's property crisis "intensified" in 2022The IMF said in its Friday report China's property crisis "intensified" in 2022. The debt crisis also had a deep social impact.
Millions of Americans retired early during the first years of the pandemic. A new study found early retirement can lead to "faster cognitive decline." The researchers found that early retirement can lead to "faster cognitive decline among the elderly." Social engagement and connectedness may simply be the single most powerful factors for cognitive performance in old age." Even if the report's findings are true, this doesn't mean early retirement has to be associated with faster cognitive decline.
She said she believed Chinese officials understood the imperative to reduce the debts of some of these countries, but declined to forecast what China would ultimately do, and when. Yellen, long critical of the pace of China's efforts on debt treatments for Zambia and other countries, on Friday called again for China and other countries to provide "timely," "comprehensive" and "meaningful debt relief to help countries regain their footing." Yellen said U.S. officials expressed specific concern about Zambia, whose debt restructuring effort under the Group of 20 Common Framework has taken much longer to resolve than expected. Failure to act would result in negative spillovers, including conflict, fragility, war, terrorism and migration, she said, sucking up resources that would hamper a country's ability to grow and move forward, Yellen said. Partial debt reductions would allow a country to invest and grow and pay back some of the reduced debt, she said.
Asian shares cautious, BOJ faces crunch policy decision
  + stars: | 2023-01-16 | by ( Wayne Cole | ) www.reuters.com   time to read: +5 min
Earnings season gathers steam this week with Goldman Sachs, Morgan Stanley and the first big tech name, Netflix, among those reporting. However, it did try to get ahead of speculative sellers by announcing it would do another emergency round today, suggesting it was determined to defend its yield policy at least for now. THE YEN UN-ANCHOREDThe BOJ's uber-easy policy has acted as a sort of anchor for yields globally, while dragging down on the yen. Were it to abandon the policy, it would put upward pressure on yields across developed markets and likely see the yen surge. "A soft-landing also reduces the tail risk of much higher U.S. rates, and this reduced risk premia helps global risk appetite."
A crashed stablecoin could pose a threat to the wider financial system, a Cornell professor warned. The companies that issue stablecoins would have to redeem their government bond holdings if the digital tokens fail, Eswar Prasad said Thursday. "A large volume of redemptions, even in a fairly liquid market, can create turmoil in the underlying securities market," Prasad said. The turmoil hasn't yet spilt over into traditional financial markets, but financial watchdogs are worried that stablecoin issuers' government bond holdings pose that risk, according to Prasad. "The fact that we haven't had spillovers from this part of the financial ecosystem into traditional financial markets or into the real economy certainly seems to be suggestive of the fact that there is a firewall," he added.
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