|Day's range||0.3300 - 0.6200|
(Bloomberg) -- Federal Reserve Chairman Jerome Powell said the coronavirus “poses evolving risks” to U.S. economic growth and signaled the central bank is prepared to cut interest rates if necessary to support the country’s longest-ever expansion.The statement issued Friday by Powell before the financial markets closed for the U.S. weekend came as stocks posted their seventh-straight daily loss, a slump which earlier prompted a string of Wall Street banks to predict the Fed would soon start reducing rates. Yields on U.S. Treasury securities, one of the world’s safest assets, have fallen to record lows.“The fundamentals of the U.S. economy remain strong,” Powell said in a brief statement Friday. “However, the coronavirus poses evolving risks to economic activity. The Federal Reserve is closely monitoring developments and their implications for the economic outlook. We will use our tools and act as appropriate to support the economy.”The S&P 500 jumped after the statement was released and continued to pare earlier losses.‘Squarely on the Table’Michael Feroli, chief U.S. Economist at JPMorgan Chase & Co. in New York said Powell has put an interest-rate cut “squarely on the table” for when policy makers meet March 17-18 in Washington.“I think this is a step in the right direct to help calm some of the concerns,” he said. “This is important in that they’re saying they’re not going to be stubborn here.”Fed officials spent the week pushing back somewhat on the need for emergency rate cuts, saying there was too much uncertainty about the virus’s economic impact despite its spread from China.But stocks kept sliding and economists have been slicing their forecasts for U.S. growth this week. Some started to warn of the worst expansion globally since 2009 as the impact of the virus outbreak rippled from China to Europe and the Americas.Outlooks DowngradedGoldman Sachs Group Inc. economists said they now expect the coronavirus to inflict a “short-lived global contraction” on the world economy that forces the Fed to slash interest rates in the first half of this year. On Thursday, economists at Bank of America Corp. said they anticipate global growth will be the weakest this year since 2009.Bank of America forecast Friday a half-point cut at the Fed’s March meeting to “stem the panic in markets and support economic sentiment.”(Updates with market reaction and analyst reaction.)\--With assistance from Christopher Condon and Vince Golle.To contact the reporter on this story: Craig Torres in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Margaret Collins at email@example.com, Alister BullFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Fears about the coronavirus hammered credit markets across the globe this week and shut out almost all borrowers looking for fresh cash in the U.S. and Europe.There’s plenty of hope but few signs that next week will be any better.Wall Street debt bankers sat idle for a fifth straight day as corporate borrowers waited out the global market volatility. Bausch Health Cos. delayed an $8 billion debt refinancing, and other junk-rated companies in the U.S. and Europe pulled offerings that had been announced before the sell-off.With the World Health Organization raising the global risk of the coronavirus to “very high”, fear of global economic fallout sent risk premiums surging. For U.S. investment-grade bonds, yields relative to Treasuries jumped 17 basis points, putting them on pace for the biggest weekly increase since 2011. Euro high-grade spreads widened the most since March 2015, while Asian dollar bonds were on track for the worst week since 2014.Piling UpThe credit-market stall has left investor cash piling up and corporate borrowers ready to tap into yields that -- even after the selloff -- remain well below historical averages. The outlook has become so uncertain that a Bloomberg survey of Wall Street bond dealers suggested they expected either another week of zero issuance or a deluge of as much as $50 billion in sales.“At some point you have got to buy this,” said Andrew Feltus, a money manager at Amundi Pioneer Asset Management in Boston. “It is either the end of the world or everything has been put on sale pretty aggressively.”Many investors are bracing for rocky months ahead as they price in the potential for a significant blow to the global economy from a virus that continued to spread. It also comes at a time when companies, particularly in Europe, are usually readying for a March bond-sale deluge.New Deals?“Fear is spreading faster than the virus,” said Gordon Shannon, a London-based portfolio manager at TwentyFour Asset Management, which oversees 17.4 billion pounds ($22 billion). “Spread levels can go a lot wider.”European bankers are estimating just 10 billion euros ($11 billion) of new corporate and sovereign debt may come next week, according to a Bloomberg survey. That’s far cry from an average of 46 billion euros a week to start the year.The turmoil put an increasing number of planned junk-bond sales on ice. Fugro NV, a geological data provider pulled a planned 500 million euro bond sale Friday, citing market conditions. Minimax Viking and NorthRiver Midstream both yanked U.S. loan offerings earlier in the week.Bausch BailsBausch, the drugmaker once known as Valeant Pharmaceuticals, put the brakes on a $5.14 billion loan it had been marketing and a $3.25 billion bond offering that was originally expected to be announced this week, according to people familiar with the matter who asked not to be identified because they’re not authorized to speak publicly.“Primary will be quiet for a while -- I doubt issuers will come to the market until risk sentiment stabilizes,” said Tim Winstone, a portfolio manager at Janus Henderson Group Plc.The U.S. investment-grade company bond market faces its first week without a sale since July 2018, a rarity outside of summer lulls and holiday shutdowns. Europe has only seen two company deals this week totaling less than 1 billion euros. That compares with 20 billion euros of issuance from financial and non-financial companies in the equivalent week last year, according to data compiled by Bloomberg.Still, if issuers do bring forward deals, they may find willing buyers. This week’s limited number of syndicated bond sales in Europe all found reasonable demand. Global bond funds had a 60th week of net inflows, with investment-grade funds pulling in $11.8 billion, according to a Bank of America note, citing EPFR Global data.Investors in the U.S. felt more jittery. They pulled $283.5 million from the biggest leveraged loan exchange-traded fund, the most on record. Funds that buy up U.S. high-yield bonds saw their worst weekly outflow since 2018, according to data compiled by Refinitiv Lipper.“Certain issuers and tenors can still work in this type of market with a bit of new-issue premium,” said Tom Moulds, a senior portfolio manager at BlueBay Asset Management. “I think next week you will certainly see some issuers trying to come to the market.”Investors have been avoiding riskier debt. Funds that buy U.S. high-yield bonds saw their worst weekly outflow since 2018, according to data compiled by Refinitiv Lipper. And funds that buy leveraged loans had withdrawals of $952 million in the week ended Feb. 26.Week of TurmoilIn Asia, where companies have continued to issue debt, spreads on Asian dollar bonds widened 5 to 10 basis points Friday, according to traders, as a sell-off that started last week intensified. JPMorgan Private bank advised clients to take profit on borrowers with weaker structures and longer duration, according to Anne Zhang, the firm’s head of Asia fixed income.“The markets are in a state of panic,” said Ek Pon Tay, portfolio manager for emerging-market fixed income at BNP Paribas Asset Management.(Updates with pulled debt deal in third paragraph, dealer expectations in fifth.)\--With assistance from Finbarr Flynn, Brian Smith, Denise Wee, Jeannine Amodeo, Rebecca Choong Wilkins, Hannah Benjamin and Davide Scigliuzzo.To contact the reporters on this story: Claire Boston in New York at firstname.lastname@example.org;Tasos Vossos in London at email@example.com;Priscila Azevedo Rocha in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Vivianne Rodrigues at email@example.com, ;Shannon D. Harrington at firstname.lastname@example.org, Adam CataldoFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Treasuries rallied, driving two- and five-year yields to the lowest levels since 2016, as investors increasingly bet the Federal Reserve will cut interest rates to cope with the economic impact of the coronavirus outbreak.Rate futures now signal that the Fed will ease policy three times this year, with the first move coming as early as March, while benchmark U.S. yields stumbled to a new record low Friday amid a stock-market rout. In Europe, Germany’s bonds rallied, driving 10-year yields to the lowest since September while riskier Italian debt slid.Treasuries have led a global debt rally as investors sought haven assets with a worsening virus outbreak. The five-year yields declined as much as 12 basis points to 0.95%, while the two-year also fell below 1%.As benchmark Treasury yields smash through successive record lows, U.S. bond-market volatility is surging. The ICE BofA MOVE index, which tracks Treasury-market implied volatility, has jumped to the highest level since February 2016.Alongside the Fed, bets for easing have increased globally. Markets are now pricing in a more than 60% chance of a quarter point cut in the U.K. in March while prospects of rates being lowered in the euro zone are also growing.“Behind the drop in Treasury yields is investor expectations that the Fed will come to the rescue with a rate cut when in trouble,” Kenta Inoue, a senior market economist at Mitsubishi UFJ Morgan Stanley Securities in Tokyo, wrote in a client note. “We do expect the Fed to move, but there’s a risk that the Fed will wait to see economic data and be behind the curve.”The contagion, with its epicenter in China, is disrupting the global supply chain and savaging consumer demand in some of the world’s biggest economies. With the virus now spreading outside of China, fears of it denting a recovery in the global economy are intensifying.That’s pummeling riskier assets such as stocks and higher-yielding bonds such as those from Italy. The nation’s debt tumbled, with the rate on the 10-year security climbing as much as 16 basis points to 1.24%.“Given the global growth projections continue to slide and earnings growth is being slashed with no clear end in sight to the global spread, this correction in risk assets is certainly justified,” said Derek Halpenny, head of global market research at MUFG.To contact the reporters on this story: Anooja Debnath in London at email@example.com;Masaki Kondo in Tokyo at firstname.lastname@example.orgTo contact the editors responsible for this story: Dana El Baltaji at email@example.com, Anil VarmaFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- On Feb. 25 at 3 p.m. New York time, Federal Reserve Vice Chair Richard Clarida said it was “still too soon” to say whether the spreading coronavirus would result in a material change to the central bank’s economic outlook. For months, that has been the lofty bar for officials to shift from their current stance on monetary policy. At that moment, the S&P 500 Index was at 3,155, down about 7% from its record set the week before, and the benchmark 10-year Treasury yield was near a record low at 1.34%. Suffice it to say, the financial markets have only worsened since then. Stocks entered a correction at the fastest pace ever by falling more than 10% from their Feb. 19 peak, while 10-year yields dipped below 1.25% and two-year yields hurtled toward 1% in the steepest weekly decline since the financial crisis. Remember, the current fed funds rate is well above those, at 1.5% to 1.75%. Simply put, in a matter of just a few days, the bond market has priced in a tremendous amount of action from the Fed, in stark contrast to Clarida’s comments and those more recently from Chicago Fed President Charles Evans, who on Thursday called it “premature” to think about changing monetary policy.In one example spotted by Bloomberg News’s Edward Bolingbroke, some bond traders are placing huge bets that the fed funds rate will approach the zero lower bound in just the next few months. While short-term rates markets were already pricing in close to two quarter-point interest-rate cuts from the central bank by mid-year, this kind of wager, combined with growing calls for immediate central-bank support, puts into play the idea that the Fed will cut its lending benchmark by 50 basis points in one fell swoop.That’s a remarkable stance to take, given recent Fed commentary and the broad acknowledgment that a coronavirus outbreak simply can’t be cured by lower interest rates. Bond traders, effectively, are speculating that the Fed won’t replicate its “mid-cycle adjustment” strategy of a few consecutive quarter-point rate cuts given the recent market turmoil. Rather, it’s going to be an all-or-nothing event, starting with its March 18 decision.“If risk markets do not stabilize almost immediately, the Fed may attempt to ease market pressure by taking a softer stance in public statements on policy,” Ward McCarthy and Thomas Simons at Jefferies LLC wrote on Thursday. “If that does not work, it is likely that the Fed will act by cutting the fed funds rate by 50 bps.”Meanwhile, in a sign of how accustomed the financial markets have become to central banks coming to the rescue, “many folks are asking about inter-meeting cuts with the Fed,” said Russ Certo at Brean Capital LLC. It’s somewhat ridiculous to think that would actually happen, though perhaps it was more a question of whether that sort of action is unprecedented. It’s not.Rising above all the market carnage of the past week, the reality is the Fed’s March decision will be a close call. For one thing, officials have only one more week to convey their outlook to investors before their self-imposed “blackout” period begins. As it stands now, New York Fed President John Williams will have the last word on March 5. If central bankers were of the mind to cut interest rates next month — and certainly by any more than a quarter-point — expect more speakers to make last-minute appearances.Ordinarily, I’d take a firm stance that the bond market is expecting far too much from the Fed and that policy makers would be wise to hold interest rates steady. After all, it’s not as if borrowing costs are punishing U.S. companies, local governments or individuals. Quite the opposite. The yield on the Bloomberg Barclays U.S. Corporate Bond Index fell to a record low 2.45% this week, yields on top-rated 10-year municipal debt fell below 1% for the first time, and it’s probably just a matter of time before 30-year mortgage rates reach a new low. However, I also thought the Fed would remain on pause and let the U.S.-China trade war run its course last year. Instead, Chair Jerome Powell embarked on back-to-back-to-back interest-rate cuts. The difference between benchmark Treasury yields and the upper bound of the fed funds target range has reached extreme levels similar to the period from early June through mid-September of last year. That was precisely when the Fed gave in to traders’ demands for easier policy. Because of that precedent, I wouldn’t be surprised if the Fed reduced its short-term rate by 25 basis points next month. An even bigger cut seems unlikely, barring a complete collapse in the stock market. It’s reasonable to assume that the coronavirus outbreak and the various efforts to contain it will cause economic activity around the world to worsen in the coming months and potentially in the U.S. as well.My hunch is still that the Fed would prefer to hold steady in March and use the statement and Powell’s press conference to indicate that policy makers stand ready to act in April or June if the impact of the coronavirus shows up in economic data. For that reason, I’d expect coming speakers to mimic Clarida’s words, with Williams or another official swooping in at week’s end if it’s clear the bond market is priced for a cut and financial conditions don’t improve. It’s notable that on Thursday, European Central Bank President Christine Lagarde said the coronavirus outbreak was not yet at the stage where it would require a monetary policy response. While the ECB clearly has less room to maneuver than the Fed, its next decision is even sooner, on March 12, and the virus has caused pockets of havoc in the region, including Milan, Italy’s financial hub. If there’s a coordinated global monetary policy response in the offing, central bank leaders are doing a good job of hiding it.All told, I can’t help but be of the mind that the Fed should fight the impulse to cut interest rates after the stock market’s swoon. Tom Porcelli at RBC Capital Markets summed it up well:“Markets are calling for policy prescriptions that address demand shocks to solve what is a potential transitory supply shock, driven by pandemic fears. Even if it gets worse, unless you all of a sudden think we are looking at a 1918 Spanish Flu-like event, this too shall pass folks. And what do rate cuts at the front-end do exactly to shift the trajectory of the core short-term problems stemming from COVID-19? It boggles the mind.”However, traders place their bets based on expectations for what the Fed will do, not should do. And they’ve made up their minds that the central bank has no choice but to ease policy — definitely by its April meeting and quite possibly in March. Headlines like “Bank of America Says World Economy Weakest Since 2009” only add to their case.Will Fed officials stand up for themselves in the face of these massive trades and gloomy outlooks? History suggests not.To contact the author of this story: Brian Chappatta at firstname.lastname@example.orgTo contact the editor responsible for this story: Daniel Niemi at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Brian Chappatta is a Bloomberg Opinion columnist covering debt markets. He previously covered bonds for Bloomberg News. He is also a CFA charterholder.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The S&P is on pace for its worst weekly loss since the Financial Crisis as investors feared a jump in coronavirus infections in the U.S. could derail economic growth. The Dow Jones Industrial Average was down nearly 1,200 points, or 4.4% and Nasdaq Composite slumped 4.6%. In the U.S., California Gov. Gavin Newsom said the state is monitoring at least 8,400 people for Covid-19, with 28 people confirmed to have contracted the virus.
(Bloomberg) -- Global stocks plunged to four-month lows, government debt yields sunk to unprecedented levels and crude oil extended declines as anxiety over the spread of the coronavirus deepened.The S&P 500 tumbled 4.4% to close at the lowest levels of the day. It whipsawed investors earlier, turning lower late after California’s governor said the state was monitoring 8,400 people for signs of the virus after they traveled to Asia. The decline of more than 10% since last Friday has the benchmark on pace for its worse week since the 2008 global financial crisis and helped push the index into what is known as a correction. The MSCI All-Country World Index fell to the lowest since October, while the Stoxx Europe 600 also entered a correction.“Stocks and bonds say we’re doomed,” said Chris Rupkey, chief financial economist for MUFG Union Bank. “Anyone who has a better idea for what lies ahead please let us know because right now the direction ahead for the economy is straight down.” The outbreak has the potential to become a pandemic and is at a decisive stage, the head of the World Health Organization said Thursday. The global economy is on course for its weakest year since the financial crisis as the virus damages demand in China and beyond, Bank of America predicted. Earlier, Goldman Sachs slashed its outlook for U.S. companies’ profit growth to zero. Germany is examining potential stimulus measures to stem the economic impact. Saudi Arabia halted religious visits that draw millions.Haven assets continued to be in demand, and the yen strengthened as yields on 10-year U.S. and Australian government bonds hit fresh record lows. Oil sank further. The pound reversed a gain after the U.K. told the European Union it could walk away from the negotiating table in June if progress isn’t being made toward a trade deal.Investors are pricing in a Federal Reserve easing in April followed by another rate cut in July, swaps data show, while bets for easing from Japan to Australia have also increased after the International Monetary Fund cut global growth forecasts.Losses continue to mount as investors weigh each gloomy headline on the virus. U.S. health authorities on Wednesday said they found the first case of the illness that does not have ties to a known outbreak. Microsoft Corp. joined an expanding list of companies warning over the impact of the virus on operations.“The way the market is going down, it’s happening pretty quickly, but it’s very difficult to say that it’s over,” said Sameer Samana, senior global market strategist for Wells Fargo Investment Institute. “Bottoming is a multistep process and you’re probably still in step one.”Here are some key events still to come this week:Earnings keep rolling in from companies including: Baidu Inc., Occidental Petroleum Corp. and Dell Technologies Inc. on Thursday after the close of U.S. trading, and London Stock Exchange Group Plc on Friday.Japan industrial production, jobs, and retail sales figures are due on Friday.These are the major moves in markets:\--With assistance from Luke Kawa and Claire Ballentine.To contact the reporters on this story: Vildana Hajric in New York at firstname.lastname@example.org;Katherine Greifeld in New York at email@example.comTo contact the editors responsible for this story: Jeremy Herron at firstname.lastname@example.org, Dave LiedtkaFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Everyone’s favorite haven currency is having a rough day.The dollar is down against most Group-of-10 and Asian peers, including the yuan in China, where the coronavirus originated. It’s being weighed down by rising speculation among investors that the U.S. will lower borrowing costs this year.Money markets are pricing in about 75 basis points of Federal Reserve cuts this year, up from 66 basis points Wednesday, including a quarter-point decline in interest rates by the end of April.Dollar investors’ nerves weren’t soothed by Donald Trump’s assurances that his administration is prepared to deal with a coronavirus outbreak. That’s adding to concern the U.S. may be headed for a contentious election, especially as Bernie Sanders establishes himself as a Democratic presidential front-runner.“Bearing in mind that the market is currently holding long dollar positions, speculation of lower Fed interest rates has the capacity to take some steam out of its current buoyant tone,” said Jane Foley, a senior foreign-currency strategist at Rabobank. “This may strengthen the safe haven status of the yen and the Swiss franc in the near term.”The U.S. Centers for Disease Control and Prevention reported a first case of an infected person with no known links to an existing virus outbreak.Reality CheckBut bearishness on the currency is being curbed by demand for U.S. Treasuries, even with yields at record lows. And, as ever, the dollar has an edge over its peers by being the world’s reserve currency of choice.Even with the decline on Thursday, a gauge of the the greenback has advanced about 1.4% in February, and is headed for its best month since July. Strategists at Bank of America have raised their forecasts for the greenback’s strength against the euro, pound and Australian dollar.The breather in the dollar’s rally was in contrast to gains in the battered Thai baht, the Philippine peso and the Chinese yuan, which rose at least 0.2%. The exception was the Indonesian rupiah, which tumbled to a two-month low as global funds continued to sell the nation’s bonds.“The currencies which saw significant carnage earlier on are showing some signs of stabilization,” said Yanxi Tan, a strategist at Malayan Banking Bhd. “But for currencies such as the rupiah, which has escaped unscathed earlier, markets are fearful of a nasty surprise if sudden contagion is announced, and doubts are growing on this front.”The caveat is that the rebound in Asian currencies may simply be bargain-hunting after weeks of relentless selling, with some optimistically pointing to a slowdown in virus cases in China.G-10 PeersWhile the dollar wobbles, the euro is heading for its best week since October, rising more than 1%. Options traders are positioning for even more gains, betting that emerging-market carry trades will unwind further. They’re also optimistic about the chances of fiscal stimulus in the euro area after German Finance Minister Olaf Scholz said he’s considering easing a restriction on the country’s debt level.And the Swiss franc has maintained its haven status, rising almost 1% against the dollar in the past four days, on course for its best week since early December.In the long run, the dollar’s haven status is intact, “given its function as a transaction currency, liquidity and positive yield,” Foley said. “Consequently in our view, the dollar is unlikely to yield too much to the euro in the current environment.”(Disclaimer: Michael Bloomberg is seeking the Democratic presidential nomination. He is the founder and majority owner of Bloomberg LP, the parent company of Bloomberg News.)(Updates throughout.)\--With assistance from Neha D'silva.To contact the reporters on this story: Chester Yung in Singapore at email@example.com;Ruth Carson in Singapore at firstname.lastname@example.org;Vassilis Karamanis in Athens at email@example.comTo contact the editors responsible for this story: Tan Hwee Ann at firstname.lastname@example.org, Dana El Baltaji, Neil ChatterjeeFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Treasuries gained for a sixth day, leading a bond rally from Australia to Japan as investors increasingly bet on central banks easing to cope with the global impact of the coronavirus outbreak.Yields on 10-year Treasuries sank five basis points to a new record low of 1.282% on Thursday after the U.S. warned of the possibility that the virus is circulating in the nation, while infection counts mounted in Europe and Asia. Australia’s benchmark yield also fell to a record 0.84%.“Bond yields can fall to as low as they want until central banks ultimately meet the market’s demands -- and that is for more rate cuts, especially from the Fed,” said Chris Weston, head of research at Pepperstone Group in Melbourne, Australia. “Markets are really struggling to count the future economic damage from the virus and we’re seeing this huge re-allocation of capital to safety.”Investors are pricing in a Federal Reserve easing in April followed by another full rate cut in July, swaps data show, while bets for easing from Japan to Australia have also increased after the International Monetary Fund cut global growth forecasts.The drop in yields reflected an anxiety in markets as American health authorities said they’ve identified the first case of an infected person with no known links to an existing outbreak. Cases in South Korea skyrocketed past 1,000 this week, while countries from Italy to Spain have reported more patients.Japanese FearsJapanese funds are likely exacerbating the decline in yields during Asian trading hours as a rush to havens gathers pace, said Naoya Oshikubo, a senior economist at Sumitomo Mitsui Trust Asset Management.“Japanese funds including pension funds are likely buying U.S. Treasuries without currency hedges, pushing down yields during Asian hours,” he said. “The drop in U.S. yields comes amid speculation that the probability for the Fed to cut rates is high.”Yields fell as much as six basis points across the U.S. curve. Japan’s 10-year bond also declined 1.5 basis points to minus 0.11%, while in New Zealand, it fell 7 basis points.Bank of America Merrill Lynch said the 10-year Treasury yield could slip to 1.25%, while ING sees 1% as the outlook for economic growth grows grimmer by the day.Emergency PlanThe International Monetary Fund said last week that it was looking at “more dire scenarios” where the spread of the virus continues for longer than expected.The Australian government on Thursday activated an emergency plan to deal with the coronavirus outbreak, with the prime minister extending a travel ban on people coming from mainland China.Money markets are pricing in a 25 basis point interest-rate cut from the Reserve Bank of Australia in July, taking borrowing costs to a record low 0.50%. Yields on Australia’s three-year government debt declined 5 basis points to 0.56%.“The fall in the bond yields corresponds with the rise in the RBA rate cut expectations and weak risk sentiment of late,” said Fiona Lim, senior foreign-exchange strategist at Malayan Banking Bhd in Singapore. “Border restrictions do not help in the least and investors are probably bracing for ugly data out of China due as soon as this weekend.”(Updates Treasury yield level in the second paragraph and Fed rate pricing in the fourth paragraph)\--With assistance from Chester Yung and James Hirai.To contact the reporters on this story: Ruth Carson in Singapore at email@example.com;Chikako Mogi in Tokyo at firstname.lastname@example.orgTo contact the editors responsible for this story: Tan Hwee Ann at email@example.com, Michael HunterFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- When in doubt, buy volatility.The old adage is holding strong, even as traders struggle to identify which currencies might offer the best shelter in times of upheaval. Bets that there will be price swings may look appealing, in particular as implied volatility in foreign-exchange hasn’t reacted with quite the same violence this week as similar measures for stock and bond markets.While Monday’s increase in option-implied currency volatility as measured by a JPMorgan Chase & Co. index was the third biggest of 2020, similar gauges of turbulence for U.S. shares and interest rates surged by the most in years. The Cboe Volatility Index, often labeled Wall Street’s fear gauge, posted its biggest jump since February 2018. And the ICE BofA MOVE Index of Treasury volatility climbed more than on any day since 2015.“The actual impact of the virus on macro economies is much harder to gauge right now than pricing the impacts on specific industries in equities, or pricing in the reactions of different central banks,” said Monex Europe FX analyst Simon Harvey. He sees volatility rising this year as the virus impact shakes out, but reckons daily shifts are likely to lag behind equities and rates.Correlation BreakdownInvestors have sought ways to factor in the coronavirus outbreak and growing risks of a technical recession in Italy and Japan. New doubts over traditional correlations between market havens and risk appetite have encouraged investors to take cover through options trades.These help even when assets known for their safety, such as the yen, defy their reputations by falling during wider moves away from risk. Similarly, the dollar has recently bucked established trends in its relationship with U.S. Treasuries at times, by rising when yields on the bonds fall.These unusual patterns may prove fleeting, but while they are occurring, traders are embracing the rising tide of higher volatility in the currency market.The cost of hedging the euro over a one-week period has reached its highest in four months, while buying volatility on the one-year tenor costs the most since early October. As questions swirl about what risk-off trading now actually looks like, volatility in dollar-yen is at multi-month highs across the curve.The uptick follows a period of historically low volatility across financial markets, with abundant policy support from global monetary authorities having helped to keep movements in check. That ended when the coronavirus roiled stocks, commodities and other assets, prompting speculation that central banks around the world might have to cut interest rates further to support the economy.Volatility Is Another Call Currency Traders May Have Got WrongAt the same time, currency volatility gauges are beginning to track their counterparts for interest rates in an about turn after decoupling for the better part of 2019. If that correlation holds, as long as efforts to price the next moves by the world’s major central banks remain a two-way trade, hedging moves in major currencies could become a costly exercise.“FX vol remains very low in comparison to other asset classes,” said Alan Ruskin, chief international strategist at Deutsche Bank AG. “But it’s getting a little dragged along for the ride.”(Updates prices throughout.)To contact the reporters on this story: Vassilis Karamanis in Athens at firstname.lastname@example.org;Jack Pitcher in New York at email@example.com;Susanne Barton in New York at firstname.lastname@example.orgTo contact the editors responsible for this story: Dana El Baltaji at email@example.com, Benjamin PurvisFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
U.S. Hispanic small business owners anticipate a decade of robust expansion and growth, expressing a brighter business outlook than their non-Hispanic peers in the year ahead, according to the fourth annual Bank of America Business Advantage 2020 Hispanic Business Owner Spotlight.
The S&P plunged for the second session in a row Tuesday as traders ditched stocks for safe havens, with global health authorities sounding the alarm on a "likely" coronavirus pandemic. The S&P 500 slumped 3.03% and the Nasdaq Composite fell 2.77%. Energy and financial stocks were among the worst hit as traders continued to reassess the impact of the virus on global growth, with new outbreaks in Asia, Europe and the Middle East stoking fears of a coming pandemic.
Bank of America's seasoned deal-maker Wadih Boueiz has resigned after a career spanning 21 years, a source with knowledge of the matter told Reuters. Boueiz, 43, was in charge of the bank's global sovereign wealth funds and public pensions division. Boueiz, known as Woody, started his career at Bank of America in New York in 1999 and then moved to London in 2007.
Bank of America's seasoned deal-maker Wadih Boueiz has resigned after a career spanning 21 years, a source with knowledge of the matter told Reuters. Boueiz, 43, was in charge of the bank's global sovereign wealth funds and public pensions division. Boueiz, known as Woody, started his career at Bank of America in New York in 1999 and then moved to London in 2007.
(Bloomberg Opinion) -- The most obvious symptom of coronavirus’ spread in the energy sector is the slumping oil price. The less obvious, but equally serious, signs can be found in the financing market for oil and gas producers.Exxon Mobil Corp., that haven of havens in oil, just saw its dividend yield spike above 6% for the first time since the merger that formed the modern company more than 20 years ago. If you want true stability among Big Oil in stormy seas these days, you have to go to Saudi Arabian Oil Co., or Saudi Aramco, which yields a mere 4.2% (prospectively). Then again, the remarkably subdued price moves and turnover in Aramco’s stock amid the turmoil rather underscores how its IPO was quarantined already from the wider world long before that behavior caught on elsewhere. Exxon’s fall from grace is roughly inversely correlated with its counter-cyclical investment binge; the sort of thing that worked better with investors when they (a) trusted oil majors to spend money wisely and (b) trusted oil demand to never stop going up. It will be interesting to see if the messaging on strategy has shifted at all when Exxon faces analysts in 10 days’ time.The really vulnerable crowd, however, is those oil and gas producers who had compromised their immunity with excessive leverage, exposure to natural gas or both. As I wrote here in November, E&P stocks with higher debt have performed notably worse than less encumbered peers since last spring. Coronavirus’ impact on commodity prices and sentiment in general has exacerbated that. Since the start of the year, low leverage stocks in my sample are down about 16%; not great, but better than the very-high leverage index, which has fallen more than 40%.The really eye-catching action is in the bond market. The rush to safety in Treasuries has widened an already gaping risk premium on high-yield bonds for energy issuers. The option-adjusted spread for the ICE BofA U.S. High Yield Energy Index ended Friday at 772 basis points. That’s up from 650 points at the start of 2020. But another way to look at it is that the gap between the energy index’s spread and the spread for the broader CCC-rated bond index — the junkiest end — has narrowed sharply. Indeed, this spread-of-the-spreads is now narrower than at any time since early 2016, the very depths of the oil crash:Besides the echoes of that earlier panic in today’s market, the structure of the sector plays a part. In terms of face value, almost a fifth of the energy high-yield index — which is the biggest sector of the overall index — is rated triple-C or less. That segment of the market is highly concentrated in relatively few issuers, with the top five accounting for roughly half the market value, according to CreditSights. That, er, upper echelon is dominated by the truly suffering oilfield services sector, with issuers such as Transocean Inc. and struggling gas-weighted producer Chesapeake Energy Corp., whose stock hasn’t traded above a buck since early November.Meanwhile, single-B issues account for roughly another 40% of the index. While this segment is less concentrated, the biggest issuers consist of oilfield services again, gas-heavy producers and midstream names such as Genesis Energy LP, which, as an aside, slashed its dividend in late 2017 to save cash but now sports a higher yield than before that (see this for some history).This is a target-rich environment for a curve ball like coronavirus. While oil dominates, keep an eye on natural gas, which had been hit hard by the mild winter already. Benchmark prices are below $2 in the late February, and they are only that high because of the escape valve of liquefied exports. Now coronavirus is leading some buyers to refuse cargoes. If that spreads, then the effect will move quickly back up the chain to crash prices further in a U.S. market where the flaming flares of west Texas illuminate the glut in depressingly literal terms.There was some relief in energy circles last week, and not just because virus-related fears had subsided. Several Permian-focused E&P companies, such as Diamondback Energy Inc. and Pioneer Natural Resources Corp. reiterated plans for bigger payouts, signaling they were sticking with newfound strategies of drilling less and rewarding shareholders with more cash. Monday serves as a reminder that the hole, dug over the course of years, is deep. A broad shift in the sector’s mindset, while welcome, has come late and under duress. And the duress is intensifying. To contact the author of this story: Liam Denning at firstname.lastname@example.orgTo contact the editor responsible for this story: Mark Gongloff at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Bank of America has appointed Jérôme Morisseau as its head of investment banking for France as it seeks to bolster its Paris franchise and win more business from large French clients, a memo seen by Reuters said. The U.S. bank has also named veteran French banker Stéphane Courbon as chairman of corporate and investment banking for France. The appointments are part of a top level management reshuffle in Paris and follow the recent departures of senior deal-makers Bernard Mourad and Luigi Rizzo who used to head investment banking in France and EMEA, respectively.
Bank of America has appointed Jérôme Morisseau as its head of investment banking for France as it seeks to build out its French franchise and win more business from large French clients, a memo seen by Reuters said. The Wall Street bank has also named veteran French banker Stéphane Courbon as chairman of corporate and investment banking for France. Courbon will work closely with Bank of America's vice chairman of investment banking for France, Laurent Vieillevigne, the memo said.
Brian Moynihan has been the CEO of Bank of America Corporation (NYSE:BAC) since 2010. First, this article will compare...
Commodities-related revenue at the world's 12 biggest investment banks gained 11% last year compared to 2018 due to buoyant oil and metals trading, consultancy Coalition said on Friday. Commodities revenue at the 12 banks extended its rebound from 2018, when revenue jumped 45% from its lowest in more than a decade in 2017. During 2019, revenue from commodity trading, selling derivatives to investors and other activities in the sector was $4 billion, the financial industry analytics firm said.
Analysts say the Morgan Stanley and E-Trade tie-up is a matter of survival in a brokerage industry crushed by technology-driven trends in retail investing.
(Bloomberg) -- Bank of America Corp.’s lawyers came through big for their client last year when they whittled down a U.S. case over precious metals spoofing.Justice Department prosecutors wanted to bring criminal charges, but bank lawyers asked for none and prevailed. Prosecutors named Bank of America throughout the draft settlement document but not in the final version.Details of wrangling between bank lawyers and the Justice Department are usually tightly guarded. The previously untold story of the talks are on point now that another big global bank, JPMorgan Chase & Co., is poised to conduct its own negotiations with the Justice Department over alleged manipulation of precious metals futures. For JPMorgan, the Bank of America deal sets a low baseline for penalties in the relatively new area of enforcing market-manipulation cases.Over several months of haggling last spring, lawyers for Charlotte, North Carolina-based Bank of America argued that senior officials hadn’t been involved in any manipulation and the bank’s overall compliance culture was strong, according to several people who requested anonymity to describe the talks. The lawyers also pointed out that the handful of previous spoofing investigations of banks had resulted in civil rather than criminal settlements.Bank representatives ultimately persuaded the U.S. to back off from a resolution that would have required its Merrill Lynch subsidiary to show up in court and admit to criminal conduct. The bank’s lawyers also prevailed on Justice Department prosecutors to excise multiple appearances of the Bank of America’s name from a draft of the settlement, according to two of the people.Spokesmen for the Justice Department and Bank of America declined to comment.JPMorgan arguably faces deeper peril. U.S. authorities have alleged that traders there engaged in an eight-year conspiracy through 2016, spanning desks in New York, London and Singapore, to move gold and silver futures prices to their advantage by placing orders they didn’t intend to execute. Six current and former employees have been charged, including the bank’s global head of base and precious metals trading. Prosecutors are looking to build a criminal case against the bank itself, Bloomberg has reported. JPMorgan declined to comment.JPMorgan’s Role in Metals Spoofing Is Under U.S. Criminal ProbeThough each spoofing case is unique, the Justice Department has identified these inquiries as important to ensure the integrity of financial markets. Several traders have pleaded guilty to spoofing in recent years, and regulators have reached civil settlements with four banks.Bank of America was the first to face potential criminal charges. The case began in 2018 when prosecutors in Chicago charged two former Merrill Lynch commodities traders with spoofing over several years when Merrill was owned by Bank of America.Two-Tier PlanBy early last year, U.S. prosecutors had internally arrived at a two-tiered resolution, according to the people familiar with the matter. The plan was to charge the Merrill Lynch unit but agree not to prosecute, provided the unit adhere to an improved compliance program -- a so-called deferred prosecution agreement. The parent company would enter into a non-prosecution agreement. The action would be accompanied by a fine of $15 million to $30 million.Like most companies dealing with Justice Department investigations, the bank turned to a Washington lawyer with industry expertise and government connections. Reginald Brown heads the banking practice at one of the bank’s outside law firms, WilmerHale. A veteran of the George W. Bush White House, Brown has cultivated ties to officials in Democratic and Republican administrations.Brown and his legal team met with Robert Zink, head of the Justice Department’s fraud section, and one of his deputies to discuss the government’s proposed resolution. Brown argued that Bank of America’s relatively clean history with the Justice Department, combined with evidence that the spoofing misconduct was confined to a few traders long gone, merited a favorable outcome.He and his legal team also considered the prospect of a deferred prosecution, with its criminal charge hanging over the bank, to be an unwarranted punishment for Merrill.Zink listened but didn’t make any deal. Brown then sought a meeting with one of Zink’s superiors, and ended up getting an audience with John Cronan, principal deputy assistant attorney general to Brian Benczkowski, the chief of the Justice Department’s criminal division. Such requests are often part of the back-and-forth between the government and corporate defense attorneys.After the Cronan meeting, the bank’s lawyers asked for and received an audience with Benczkowski. Like Brown, Benczkowski served in the Bush administration, as an official in the Justice Department.Before Brown met with Benczkowski, fraud section prosecutors softened their position, according to one of the people, telling their chief that they would be willing to accept a deferred prosecution with Merrill Lynch only, and not involve the parent company.Settlement MatrixFor the Benczkowski meeting in mid-May, Brown brought along David Leitch, Bank of America’s general counsel, a veteran of both Bush administrations.The legal team showed officials a matrix of U.S. bank prosecutions and settlements over a decade. The spoofing conduct at Merrill, they argued, was limited to a few traders and the potential damages were small -- in contrast with what they said was far more pervasive misconduct at other banks accused of manipulating interest and currency rates.The legal team also pointed out that Bank of America, unlike competitors including JPMorgan, had not been forced to take any guilty pleas in the aftermath of the financial crisis during the Obama administration. A criminal charge, even one that would likely get withdrawn as part of a deferred prosecution agreement, would impact the bank and create a reputational issue, they said.The argument ultimately prevailed. Leadership in the criminal division downshifted to a non-prosecution agreement with Merrill.In June, Merrill Lynch signed the non-prosecution pact and agreed to pay a $25 million fine to the Justice Department. Merrill admitted that the conduct was unlawful and amounted to commodities fraud but no charges were brought against it.Although the deal required Bank of America to continue to cooperate with prosecutors in any cases against individuals, the bank’s name was scrubbed from the settlement that had been drawn up. It appeared a couple times in the attachments accompanying the agreement. The final settlement refers to two entities, Merrill Lynch Commodities Inc. (“MLCI”) and its parent, “MLCI Parent.”Bank of America didn’t keep its name out of the proceedings altogether, however. The Justice Department press release announcing the deal identified the bank by name as Merrill’s parent.The department credited the bank for its cooperation in the matter and for its internal compliance program. At the time of the agreement, the bank cited its cooperation and added that it was “disappointed by the conduct of the former Merrill Lynch Commodities employees.”To contact the reporters on this story: Greg Farrell in New York at firstname.lastname@example.org;Tom Schoenberg in Washington at email@example.comTo contact the editors responsible for this story: Jeffrey D Grocott at firstname.lastname@example.org, ;Winnie O'Kelley at email@example.com, Steve DicksonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.