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☆ Bank floats $10 bln Brazilian bond plan to halt Amazon deforestation
▼ + stars: | 2022-12-19 | by ( Marc Jones | ) www.reuters.com time to read: +3 min

LONDON, Dec 19 (Reuters) - Strategists at a UK bank have proposed the idea of a super-sized $10 billion Brazilian government bond that would be specifically designed to help halt the destruction of the Amazon rainforest. Stopping deforestation of the Amazon, which absorbs vast amounts of planet-warming greenhouse gas, is part of Brazilian President-elect Luiz Inacio Lula da Silva's sweeping plan to reclaim leadership on climate change measures. Money raised via sustainability-linked debt can be used for almost any purpose. "As a reference, a 2034 Brazilian bond is currently yielding around 6.35%, making the step up/down feature potentially financially material for Brazil," Vivanco's initial outline of the plan last week said. "If Lula goes around the world selling this bond, you would have to have a reason not to be part of it," Vivanco said.

[1/2] The European Central Bank (ECB) building is seen from a cafe amid Christmas decorations, before the monthly news conference following the ECB's monetary policy meeting in Frankfurt, Germany December 15, 2022. Formed in October, Meloni's government is also holding out on ratifying the euro zone's bailout fund. INFLATION TARGETECB policymakers from across the euro zone defended the bank's decision-making on Friday. Estonian governor Madis Mueller said rates would probably need to rise more than markets had expected so far, while Finnish central bank chief Olli Rehn said 50 bps hikes were likely at each of its next two meetings. Inflation in Germany, the euro zone’s biggest economy, is likely to be higher than earlier thought while economic growth will be weaker with a recession next year now certain, the Bundesbank said on Friday.

☆ Morning Bid: Hanging tough
▼ + stars: | 2022-12-16 | by ( ) www.reuters.com time to read: +4 min

As the world's major central banks turned the interest rate screw this week and insisted on more tightening ahead, their economies showed more signs of buckling under the pressure. And while markets lurched lower on the potentially toxic combination of a higher peak for interest rates into a looming recession, there are reasonable questions over whether the central banks will act as tough as they are talking. U.S. manufacturing declined 0.6% last month and reports from the New York and Philadelphia Federal Reserve's showed business conditions in their regions remaining depressed in December. Even though after Wall St stocks plunged 2-3% on Thursday, futures remained deep in the red ahead of Friday's open. Led by the jump in euro zone sovereign borrowing rates after the ECB rethink, bond yields were higher across the board.

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".

[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.

☆ Goldman Sachs warns traders of shrinking bonus pool as Wall Street hunkers down
▼ + stars: | 2022-12-02 | by ( Hugh Son | ) www.cnbc.com time to read: +3 min

Goldman began informing executives in its markets division this week to expect a smaller bonus pool for 2022, according to the people, who declined to be identified speaking about compensation matters. Wall Street is grappling with sharp declines in investment banking revenue after parts of the industry involved in taking companies public, raising funds and issuing stocks and bonds seized up this year. "This year, some of the good money traders made will have to go fund the other parts of the bonus pool." A Goldman spokeswoman declined to comment on the bank's compensation plans. The decrease in the bonus pool comes off a strong year for both trading and investment banking in 2021.

☆ Fed hikes and a stronger dollar are fueling risks of political instability in Africa
▼ + stars: | 2022-12-01 | by ( Elliot Smith | ) www.cnbc.com time to read: +3 min

ACCRA, GHANA - NOVEMBER 05: Ghanaians march during the 'Ku Me Preko' demonstration on November 5, 2022, in Accra, Ghana. "Exposure to international interest rate changes is exacerbated by the large proportion of African public debt that is held in dollars." watch now"High public debt levels and elevated borrowing costs will constrain public spending, which will likely result in a deteriorating ESG and political risk landscape across the continent," Hunter added. Spotlight on Ghana Hunter pointed to Ghana as among the most affected by this negative feedback loop between a deepening public debt burden, a constrained fiscal position and a deteriorating ESG and political landscape. ACCRA, GHANA - NOVEMBER 05: Ghanaians march during the 'Ku Me Preko' demonstration on November 5, 2022, in Accra, Ghana.

☆ BlackRock backs banks, cuts European, EM debt as part of "new playbook"
▼ + stars: | 2022-11-30 | by ( ) www.reuters.com time to read: 1 min

LONDON, Nov 30 (Reuters) - Asset manager BlackRock has said 2023 will require a new investment playbook, backing banks and energy sectors to do well while slapping 'underweights' on longer-term European government bonds and emerging market local currency debt. The BlackRock Investment Institute (BII) said in its 2023 global outlook that while the case for investment credit has brightened and short-term government debt yields looked attractive, the pressures of higher interest rates would weigh on longer-term sovereign bonds. "The macro damage we expect for next year is yet to be fully reflected in market pricing" said Wei Li, global chief investment strategist at the BII. Reporting by Marc Jones and Davide Barcuscia, editing by Karin StroheckerOur Standards: The Thomson Reuters Trust Principles.

But you have to go back centuries in some cases to get anything nearly as bad as 2022 for 'safer' sovereign bonds. "2023 will be the year of the bond," claimed Chris Iggo, chair of the AXA IM Investment Institute. "Road to recession - bullish bonds and quality credit," was how SocGen entitled their view. And while stock volatility makes forecasters nervy, there's a clear attraction for long-term funds in seeking both the fixed income as well as the lift to bond funds when sub-par price discounts disappear into maturity for most high-quality names. "Long high quality bonds in the U.S. and Europe seems like an obvious strategy for 2023," said hedge fund manager Stephen Jen at Eurizon SLJ Capital.

☆ El Salvador is moving toward raising $1 billion in bonds backed by bitcoin by broadening its bet on crypto
▼ + stars: | 2022-11-23 | by ( Carla Mozée | ) www.businessinsider.com time to read: +3 min

El Salvador is making moves that could lead the country to raise $1 billion in bitcoin-backed bonds. In September 2021, El Salvador became the first nation in the world to adopt bitcoin as a legal currency. Bukele in November 2021 said El Salvador had partnered with digital assets firm Blockstream to launch a so-called bitcoin bond dubbed Volcano Bonds. El Salvador made its last bitcoin purchase in July, according to a CoinTelegraph report. A bitcoin-backed bond cannot be issued before Congress passed the proposed legislation.

☆ Britain’s Big Swing Back to Austerity Isn’t Market-Friendly
▼ + stars: | 2022-11-17 | by ( Jon Sindreu | ) www.wsj.com time to read: 1 min

British Chancellor of the Exchequer Jeremy Hunt departs Downing Street with his Autumn Statement for parliament in London on Thursday. TOLGA AKMEN/EPA/SHUTTERSTOCKInvestors hated how former British Prime Minister Liz Truss rushed out a half-baked fiscal-stimulus plan in September, triggering a violent selloff in sovereign bonds. But belt tightening as the economy heads into a recession, based on the premise of dubious debt forecasts, isn’t quite what they ordered either. Financial markets were eagerly awaiting Thursday’s end-of-year update by the U.K.’s new Treasury chief, Jeremy Hunt . Much recent analysis of Britain’s economy has focused on a “black hole” in the government coffers, which Mr. Hunt gauged at around £55 billion ($66 billion).

"There's now a big push to get nature into sovereign debt markets," said Simon Zadek, executive director at NatureFinance, which advises governments on debt-for-nature swaps and other types of climate-focused finance. At that level, it would be the biggest debt-for-nature swap struck to date. The combined value of swap deals to date is $3.7 billion, according to the data. Securing the buy-in of development banks is usually key for the economics of a deal. The WWF has projects in Central and South America where they are monitoring deforestation by tracking jaguars, said Brenes, who has worked on debt-for-nature swaps for the last 25 years.

☆ Morning Bid: Bear Hunt
▼ + stars: | 2022-11-17 | by ( ) www.reuters.com time to read: +5 min

Long-term sovereign bond yields have been falling sharply all week in advance of finance minister Jeremy Hunt's new budget, dragged down largely by U.S. disinflation hopes. UK 10- and 30-year gilt yields outperformed, however, dropping to their lowest since early September before backing up slightly on Thursday. U.S. housing starts numbers out later will give another glimpse at the state of the ailing property sector. Reverberations continued around the world from this month's latest implosion in the crypto universe and the failure of the FTX exchange. Major crypto player Genesis Global Capital suspended customer redemptions in its lending business on Wednesday, citing the FTX collapse.

After a brief respite, China is again caught in investors' crosshairs. The economic data are coming in below expectations, hopes are fading that COVID-19 lockdown restrictions are about to be lifted and the exchange rate is back on the slide, along with sovereign bonds. The economy might warrant a cut to the one-year loan prime rate - currently 3.65% - but the exchange rate doesn't. The central bank said on Wednesday that China will continue to increase exchange rate flexibility while keeping the yuan stable at reasonable levels. Sounds a bit hopeful - increased flexibility makes new lows in the exchange rate more likely, requiring more dollar selling to minimize the volatility.

☆ Fed terminal rate to reach just under 5%, said bond strategists
▼ + stars: | 2022-11-09 | by ( ) www.reuters.com time to read: +2 min

With scant evidence of sustained cooling in inflation, global central banks are unlikely to deviate yet from their current tightening paths. If any, the bias was for them to take interest rates higher or keep them at elevated levels for longer. He also said the "ultimate level" of the central bank's benchmark policy rate was likely to be higher than previously estimated. The median forecast from over 30 bond strategists who answered an additional question in the Nov. 4-9 poll put the terminal fed funds rate at 4.75%-5.00%, with one forecast as high as 5.50%-5.75%. A strong 74% majority, 23 of 31, expected the terminal rate to be reached by end-Q1 2023.

☆ Here's how to invest to take advantage of the best outlook for long-term investors since 2010, according to JPMorgan Asset Management
▼ + stars: | 2022-11-09 | by ( James Faris | ) www.businessinsider.com time to read: +7 min

The forward outlook for investors is the best since 2010, according to JPMorgan Asset Management. This year is on pace to be the worst for stocks since 2008, but the long-term investing outlook is as promising as it's been since 2010, according to JPMorgan Asset Management (JPMAM). Both developments give long-term investors an attractive entry point. That's far lower than the 2.9% growth that the world saw from 2010 to 2020, according to JPMAM's 2021 report. How to invest for the long termInvestors should build long-term portfolios around three asset classes, according to JPMAM: stocks, bonds, and alternative assets.

☆ Natural disaster-hit countries get automatic debt freeze option
▼ + stars: | 2022-11-09 | by ( Marc Jones | ) www.reuters.com time to read: +2 min

LONDON, Nov 9 (Reuters) - Countries hit by climate change-driven disasters such as flooding and hurricanes will automatically be able to freeze debt payments under new plans laid out by the bond market rule setting International Capital Market Association (ICMA). ICMA's move on Wednesday introduced new "climate resilient debt clauses" (CDRCs) that countries can now plug into the government bonds they sell to raise money on the international capital markets. Any country that uses them will be able to defer their debt payments for a maximum of 2 years, with the aim of giving them enough financial breathing space to provide aid and support to affected populations. "As well as supporting disaster resilience by freeing up cash flow, CRDCs could help avoid the liquidity challenges faced by low-income countries in such circumstances becoming costly payment defaults," ICMA said. ICMA said while technically no country is excluded from using CRDCs, they were likely to be most suitable for low-income countries, Small Island Developing States, or other developing countries particularly vulnerable to climate change.

☆ The dollar's blistering rally is almost over as support from US economic outperformance is fading, Societe Generale says
▼ + stars: | 2022-11-03 | by ( Carla Mozée | ) www.businessinsider.com time to read: +4 min

The rally in the US dollar this year is likely to be closer to an end and headed toward "trendless trading," Societe Generale said Thursday. The "drivers of economic outperformance are fading" for the greenback, which has risen to a 20-year high against key rivals. "So far, US rates have risen further and faster than elsewhere, on the back of economic out-performance," Kit Juckes, macro strategist at Societe Generale, said in a note. That means we are close to the end of the dollar's long rally and moving to a phase of trendless trading." As the Fed has tightened, climbing US Treasury yields relative to other sovereign bond yields has bolstered dollar demand among holders of other currencies.

☆ The US spent half a trillion dollars last year alone financing its mountain of debt
▼ + stars: | 2022-11-01 | by ( Matt Egan | ) edition.cnn.com time to read: +6 min

By 2025 or 2026, the United States may hit a bleak milestone: Federal interest payments could exceed the country’s entire defense budget, according to Moody’s Analytics. The Fed kept interest rates very low to stimulate growth (and encourage inflation) and investors around the world clamored to buy US debt. But White of Moody’s notes that gross interest payments include interest the government pays to itself and said net interest is the more relevant category to watch here. In a best-case scenario, the United States grows its way out of the debt mess, with the economy expanding more rapidly than interest payments. With interest rates going up, the sovereign bond bubble is unwinding,” Boockvar said.

☆ Breakingviews: Bank of Japan fiddles while bond market burns
▼ + stars: | 2022-10-31 | by ( Pete Sweeney | Thomson Reuters | Asia Economics Editor Pete Sweeney Joined Reuters Breakingviews In Hong Kong In September Previously He Served As Reuters' Chief Correspondent For China Economy | ) www.reuters.com time to read: +4 min

HONG KONG, Oct 31 (Reuters Breakingviews) - Bank of Japan (8301.T) Governor Haruhiko Kuroda is playing with forex fire. With consumer costs spiking in Western economies, the Federal Reserve has been hiking borrowing rates, but in Japan inflation remains relatively tepid and growth anemic. Annual consumer inflation, at 3%, is subdued by global standards, but it is not the kind of demand- and wage-driven price rises the Bank of Japan has been trying to deliver. The central bank already owns roughly half of the total sovereign market; its holdings of long-term government bonds have risen to 560 trillion yen ($3.8 trillion) in 2022 from 40 trillion yen in 2008. Japan’s annual consumer inflation rate was 3% in September.

☆ Bank of Japan fiddles while bond market burns
▼ + stars: | 2022-10-31 | by ( Pete Sweeney | Thomson Reuters | Asia Economics Editor Pete Sweeney Joined Reuters Breakingviews In Hong Kong In September Previously He Served As Reuters' Chief Correspondent For China Economy | ) www.reuters.com time to read: +4 min

"Brazil is ready to retake its leadership in the fight against the climate crisis," Lula told a crowd of supporters in Sao Paulo. Silva said that Brazil would demand rich countries provide financing to poor countries to respond to climate change and give compensation for permanent "loss and damage" from climate change. Under Lula, Brazil will also discuss expanding its national targets for cutting climate-related emissions, said Silva, his former environment minister from 2003 to 2008. The firm, with roughly 237 billion euros ($234 billion) in assets under management, only owned about 100 million euros in Brazilian sovereign bonds when the prohibition took effect. Environmental advocates also cheered Lula's proposals for the Amazon, but cautioned that his agenda would face enormous political resistance.

☆ ECB stops financing undue bank profits
▼ + stars: | 2022-10-27 | by ( ) www.reuters.com time to read: +2 min

LONDON, Oct 27 (Reuters Breakingviews) - The European Central Bank managed on Thursday to appear dovish, despite increasing its key interest rate by another notch and announcing its first attempt to shrink its balance sheet. The central bank bumped its key rate from 0.75% to 1.5%, as expected, but suggested further increases may not come as fast as feared, triggering a 1% slide in the euro and lifting bank stocks. With TLTRO loans available at preferential interest rates, lenders could take advantage of an arbitrage opportunity to book a risk-free profit by parking the funds with the central bank. The hope is that the new conditions will prompt lenders to repay the loans early, allowing the ECB to start cutting the size of its 8.8 trillion euro balance sheet, a form of tightening. Changing the TLTRO contractual terms carries however some legal risks, as ECB boss Christine Lagarde acknowledged.

☆ Rishi Sunak set to become UK PM after meeting King Charles
▼ + stars: | 2022-10-25 | by ( Jenni Reid | ) www.cnbc.com time to read: +5 min

Rishi Sunak has been named as the U.K.'s new prime minister and the country's first leader of color. Jeff J Mitchell | Getty Images News | Getty ImagesLONDON — Rishi Sunak will become the U.K.'s third prime minister of the year Tuesday following a meeting with King Charles III. Sunak was elected party leader by fellow Conservative lawmakers on Monday following the resignation of Liz Truss on Thursday. watch nowThe 42-year-old will be the youngest U.K. prime minister since 1812, and the first person of color to lead the country, which U.S. President Joe Biden said Monday was "a groundbreaking milestone." Sunak's parents are of Indian descent and in the 1960s moved from East Africa to the U.K. Sunak also has the greatest personal wealth of any of his predecessors.

☆ Sovereign bond market turmoil to spill well into next year: Reuters poll
▼ + stars: | 2022-10-24 | by ( Hari Kishan | ) www.reuters.com time to read: +4 min

BENGALURU (Reuters) - Turmoil in global sovereign bond markets is set to persist for another six months to a year as central banks carry on raising interest rates to bring down inflation, according to a Reuters poll of market strategists. Since the Fed first moved, bond markets have been subjected to high levels of volatility and deep sell-offs, jolting many bond investors out of their complacency. Bond Market Option Volatility Estimate Index, which began rising late last year, hit its highest level since March 2020 last week. But those median forecasts were higher than in September’s poll, suggesting yields are still facing upside risks. The poll expected bund yields to drop slightly from their current levels to 2.10% by end-2022 and then rise slightly to stay around 2.20% in the following six months.

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