economics

January 16, 2010

news Jan 13th 2010

Filed under: Uncategorized — ktetaichinh @ 6:22 am
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Banks Dive Into Corporate Debt- Investor Demand Meets Cheap Financing; Overseas Interest

Financial firms, particularly foreign banks, are dominating sales of new highly rated corporate bonds as they tap investor demand and attractive financing costs, often to refinance government-guaranteed debt, said several market observers.

So far this year, which is off to a record start, financial firms have sold 70% of U.S.-marketed investment-grade bonds, data provider Dealogic said. They accounted for only 45% over the same period last year.

The reason for the rush is clear: About $260 billion of government-supported debt from banks in Europe, Asia, and Australia will mature in 2010, estimated Guy LeBas, chief fixed-income strategist at Janney Montgomery

Bank of England officials’ comments boost British pound

LONDON (MarketWatch) — The British pound gained ground on Wednesday after a Bank of England official indicated it was time to consider putting monetary-stimulus measures on hold.

Japanese bank lending declines

January 12 2010 08:01 | Last updated: January 12 2010 17:10

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// ]]>Loans by Japanese banks fell for the first time in four years in December, reflecting the reopening of bond and money markets for large companies, which can use such funds to repay their banks.

China raises bank reserve requirements

Reserve requirements were raised by 0.5 percentage points, while rates on one-year paper increased by 0.08 per cent and on three-month paper by 0.04 per cent.

Stock markets and commodities fell in Asia on Wednesday after the surprise decision, sparking concerns that the move could slow China’s purchases of natural resources and other imported goods from around the region.

Forex Traders Closely Watch U.K. Election

For some economists, the likely impact of the election campaign on the pound is clear cut; if the Conservative Party holds on to its lead in the opinion polls and forms the next government, the pound should hold firm. That is because the Conservatives have said they will cut the deficit more quickly and by more than Labour, and have pledged an emergency budget within 50 days of gaining power.

Douglas McWilliams, chief executive at the Centre for Economics and Business Research, a consultancy, predicts a “probable sterling crisis” if the current Conservative lead in the opinion polls shrinks. If that happens, investors should brace for the pound to slump by about 10%, hitting parity against the euro.

However, many economists don’t see the link between sterling and the opinion polls as so straightforward. The Labour government has argued that cutting spending or raising taxes too aggressively this year would derail the recovery, and economic growth is essential if the deficit is to be cut.

“It’s not clear which outcome would be better or worse for sterling,” said Jonathan Loynes, U.K. economist at the consulting group Capital Economics. “The Conservatives may come to power with plans for rapid fiscal tightening, but the markets may see that as a risk that the U.K. could fall back into recession.”

And while bond markets may react favorably to tough cutbacks, equities could fall, leaving the impact on the pound uncertain.

That level of uncertainty is enough in itself to produce some sterling weakness.

Michael Sneyd, a currencies economist at Barclays Wealth, the U.K.’s largest wealth manager, said he expects the pound to rebound once the election is out of the way and the new government has clarified its plans. In the meantime, though, he is advising his clients with heavy sterling exposure to diversify into stronger currencies, like the U.S. dollar, and into currencies that offer higher returns, like those from emerging markets and commodity-exporting major economies

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