|Day's range||5.95 - 6.15|
(Bloomberg) -- U.S. consumer spending plunged in April by the most on record as widespread government lockdowns largely prevented Americans from spending federal stimulus payments in the month.Household outlays fell 13.6% from the prior month, the sharpest drop in more than six decades worth of data, a Commerce Department report showed Friday. The median estimate in a Bloomberg survey of economists called for a 12.8% decline.Incomes posted a record 10.5% increase, compared with estimates for a 5.9% decline, as federal stimulus payments were distributed under the CARES Act, the report said. It showed government social benefits rose by $3 trillion in April, up from a $70.2 billion gain the prior month. That helped drive the personal savings rate to a record 33% from 12.7%.But the rise in income temporarily masks the fact that people are in a fragile economic position, said Michelle Meyer, head of U.S. economics at Bank of America Corp.“Unemployment insurance only offsets less than half of the loss in compensation,” Meyer said. “The reason the numbers look so extreme this month was because of the one-time checks that were sent out -- which won’t be continuing.”A separate report Friday showed consumer sentiment stumbled in late May as pessimism built about the economic outlook. The University of Michigan’s final sentiment index fell to 72.3 from a preliminary reading of 73.7. The coronavirus pandemic halted purchases of all but the most essential goods and services amid the lockdowns, but gradual reopenings nationwide will boost spending in the coming months. Even though the temporary income replacement will help Americans to start spending again, economists expect it will take a year or more before spending recovers to pre-virus levels.U.S. stocks fell as investors weighed the decline in consumer spending and awaited President Donald Trump’s latest response in his escalating feud with China. The yield on 10-year Treasuries sank.The Federal Reserve’s preferred gauge of consumer prices rose 0.5% from a year earlier, the slowest pace since 1961 and far below the central bank’s 2% target. The core price index, which excludes more-volatile food and energy costs, advanced 1%, the least since 2011.Read more:Americans on Jobless Benefits Post First Drop of PandemicGreen Shoots Emerge in World Economy as Virus Lockdowns EaseSalaries Get Chopped for Many Americans Who Manage to Keep JobsFed’s Daly: U.S. Pandemic Shock Longer Than Initially ThoughtIn a contrast with the headline income number, wages and salaries fell 8% from the prior month amid widespread job losses, reductions in hours and pay cuts. The income category of personal current transfer receipts surged 89.6%.A separate report Friday showed U.S. merchandise trade in April slumped to the lowest level in a decade as the pandemic curtailed demand and disrupted supply lines.After adjusting for inflation, spending fell by 13.2% in April, also the most ever, supporting forecasts for gross domestic product to shrink by a record in the April-June period. The main drivers of the monthly decline were spending on food and beverages, restaurants, hotels and health care.(A previous version corrected the third paragraph to show benefit payments were an increase, not a level.)(Adds economist’s comment in fifth paragraph, Michigan sentiment in sixth.)For 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.
A U.S. judge on Thursday said institutional investors, including BlackRock Inc <BLK.N> and Allianz SE's <ALVG.DE> Pacific Investment Management Co, can pursue much of their lawsuit accusing 15 major banks of rigging prices in the $6.6 trillion-a-day foreign exchange market. U.S. District Judge Lorna Schofield in Manhattan said the nearly 1,300 plaintiffs, including many mutual funds and exchange-traded funds, plausibly alleged that the banks conspired to rig currency benchmarks from 2003 to 2013 and profit at their expense. "This is an injury of the type the antitrust laws were intended to prevent," Schofield wrote in a 40-page decision.
The iconic New York Stock Exchange floor is back open for business. Here is what New York Stock Exchange President Stacey Cunningham told Yahoo Finance.
According to Warren Buffett, diversification is only needed if you don't know what you're doing.
(Bloomberg) -- Bank of America Corp. was the first on Wall Street to issue a pandemic bond. It hopes to set a trend.The bank priced a $1 billion bond offering May 14 to fund projects addressing social issues related to Covid-19, the first sale from a U.S. financial institution that explicitly links all proceeds to tackling the virus. Response from investors has been enthusiastic, said Karen Fang, the bank’s global head of sustainable finance.“ESG is not just a bull market luxury,” Fang said in an interview, citing the bank’s own research. “ESG is a bear market necessity.”Corporations, governments, multilateral organizations and development banks have raised a record $108.4 billion of debt this year to alleviate the impacts of the deadly virus, according to data compiled by Bloomberg. Chinese companies have sold most of the so-called pandemic bonds, raising about $48.3 billion.Bank of America’s bond came about in March as the virus spread through the U.S. and much of the country began to shut down. Senior executives, including Vice Chairman Anne Finucane and Chief Operating Officer Tom Montag, were involved in internal discussions on the bond, which took weeks to construct.The pricing for the fixed-to-floating rate notes earmarked for lending to the health care industry was aggressive. The deal priced tighter than the lender’s regular benchmarks, Fang said, and the bonds will yield 1.30 percentage points above Treasuries.Strong PipelineBank of America has raised more than $8 billion through environmentally and socially themed bonds and has a “very strong” pipeline, Fang said. Other virus-related debt includes Pfizer Inc.’s $1.25 billion sustainability bond and USAA Capital Corp.’s $800 million offering to fund projects that may include Covid-19 relief.While the deal makes sense for a lender like Bank of America with a large presence in green and social bond markets, it might not open the floodgates for similar transactions, according to CreditSights analysts.“We’re a little doubtful we’re going to see an imminent increase in ESG-type offerings from the banks,” CreditSights’ chief of ESG and sustainability Josh Olazabal and the head of U.S. financials Jesse Rosenthal, wrote in an email. “It will really come down to the issuer’s internal goals around ESG products and investors.”Still, ESG-focused investors like Nuveen and Eaton Vance Management anticipate that more commercial banks will follow suit. Other lenders that have “the focus and expertise” to originate such loans will seek to replicate Bank of America’s deal, according to Vishal Khanduja, head of investment-grade portfolio management at Eaton Vance.“We expect other sponsors to continue to innovate the structure and provide investable impact opportunities at scale,” Khanduja said Tuesday in an interview.Nuveen, which oversees about $1 trillion in assets, has already had discussions with underwriters from two banks because there is interest in similar deals, according to Stephen Liberatore, head of the responsible fixed-income strategy team.“This was the leader,” Liberatore said of Bank of America’s bond. “Now that others are seeing what’s expected and how it can be done, there’s a template for other banks.”For 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) -- At first glance, the latest memo from JPMorgan Chase & Co. Chief Executive Officer Jamie Dimon reads like nothing short of a kumbaya moment from the billionaire who leads the biggest U.S. bank.Ahead of JPMorgan’s annual shareholder meeting, Dimon highlighted a $250 million global business and philanthropic commitment that will help “vulnerable and underrepresented communities”; a collaboration with Marriott International Inc. and others that will provide up to $10 million of hotel stays for health-care workers addressing Covid-19 in the U.S.; a lifeline to “hundreds of thousands of homeowners” to delay mortgage payments for three months; and almost $1 billion in new loans for small-business clients. The list goes on.The numbers that stuck out to me, however: JPMorgan has helped investment-grade companies raise $664 billion and an additional $104 billion in high yield so far this year. It’s not entirely clear what “helped” means, but the bank’s earnings presentation last month said it had “helped clients raise $380B+ through the investment-grade debt market in 1Q20,” implying that whatever the criteria, it has done an additional $284 billion of it in the second quarter with six weeks to go.April was a record month for the broad high-grade bond market, with some $300 billion of deals pricing, and May has shown little signs of slowing down with about $168 billion in the books. High-yield volume rebounded in April to $37.3 billion, the most in a month this year, and so far an additional $23.8 billion has priced in May. As Federal Reserve Chair Jerome Powell said in his “60 Minutes” interview about the central bank’s corporate credit facilities, “we haven't actually had to lend anyone any money because now the markets are working because the markets know that we’re there.”Functioning bond markets might be enough for Powell, but for Dimon and his counterparts like Bank of America Corp.’s Brian Moynihan, it’s still market share that matters. In a subtle way, Dimon might have been letting his competitive side show by lauding the bank’s underwriting figures so far in 2020.According to Bloomberg’s league tables, JPMorgan finished No. 1 in both investment-grade and high-yield underwriting in 2019. As it stands now, JPMorgan is on track to reclaim its titles in 2020. A back-to-back finish atop the rankings hasn’t happened for the bank since 2013, which capped off a four-year string of first-place finishes after the last recession.The league tables, which use a stricter criteria on which deals qualify for a given bank, show just how slim the margins can be at the top. For instance, Bank of America snatched first place in investment-grade underwriting in 2018, the only time in the past decade that JPMorgan didn’t hold the top spot. The two banks underwrote $141 billion and $139.9 billion, respectively. That same year, JPMorgan edged out Credit Suisse in high yield, $17 billion to $16.1 billion. So far in 2020, JPMorgan has increased its investment-grade market share year-over-year by 3.28 percentage points, more than any other bank. Its closest competitor, Bank of America, has increased its share by 2.21 percentage points. In high yield, Bank of America has picked up the most market share and has done the most deals, though it still trails JPMorgan in overall volume, according to the Bloomberg league tables.All this is to say, fees from debt underwriting will play an important role in the second-quarter earnings results of the biggest U.S. banks. With Treasury yields near record lows, net interest income will inevitably come under pressure. Market volatility is nowhere near the levels seen in March, as measured by the VIX Index, which means trading revenue won’t be the lifesaver it was in the previous quarter. And provisions for credit losses will still eat into profitability. One of the few constants so far in the second quarter has been the flood of new bond deals hitting the market.JPMorgan and other big banks are clearly trying to tone down their competitive side during this pandemic to avoid appearing greedy during a time of fear. As I’ve said before, bankers are positioning themselves to be the good guys in this crisis, given that they’re well capitalized and have the capacity to be there for clients, unlike in 2008.Dimon’s memo, in that sense, effectively summarizes the mood. “Let’s leverage this moment to think creatively about how we can mobilize to address so many issues that inhibit the creation of an inclusive economy and fray our social fabric,” he wrote. “By doing the right thing during times of crisis, we can emerge stronger and more cohesive in its wake.” At the same time, he has an obligation to have JPMorgan emerge stronger from this economic downturn as well. Part of that is keeping a tight grip on its debt-underwriting throne.This column does not necessarily reflect the opinion of the editorial board or 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.
(Bloomberg) -- Bank of America Corp. Chief Executive Officer Brian Moynihan said consumer spending is picking up in some areas of the U.S. as government relief programs cushion the credit impact of the coronavirus pandemic.“These measures taken by Congress, by the administration and by the Fed have worked to offset the unfortunate aspects of very high unemployment -- and so far, you’re not seeing delinquencies and things rise,” Moynihan said in a Bloomberg Television interview Tuesday. “We expect to see charge-offs coming later on, as this thing goes on, but the reality is right now you’re not seeing the type of credit damage that you’d expect to see with this amount of downdraft in activity.” Consumer spending is down 2% to 4% this month from a year earlier, and is picking up faster in areas of the country that are reopening, he said. In China, it surged when stay-at-home orders were lifted, but then declined.“That’s what we have to watch in the United States -- there’ll be a burst of activity in some of these places” as people emerge from their homes, but the question is whether they’ll sustain spending on larger purchases such as cars or homes, Moynihan said. While the economy won’t recover to its pre-pandemic size until the end of next year, there are likely to be incremental gains until then, he said.Here are other takeaways from the interview:The lender has granted about 1.5 million payment deferrals. About 35% to 40% of people who asked to delay their credit-card bills ended up paying them anyway, he said.Bank of America has processed 320,000 small-business relief loans with an average balance of $80,000. Of those, 98% are for companies with fewer than 100 employees.High-grade debt issuance will probably have another record month in May after Fed programs stabilized the market, he said. High-yield debt will have a strong month, while convertible bond and equity deals are starting to be done. “The stabilization and the fact those facilities aren’t all used, it’s actually a good thing because that means the market’s doing what they’re doing and providing capital,” Moynihan said.In terms of returning employees to bank offices, “we’ll go back slowly,” he said.For 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.
American Express CEO Stephen Squeri lays out his vision for how employees will return to work after COVID-19 quarantines lift.
(Bloomberg Opinion) -- Goodbye, high-yield savings accounts. We hardly knew you.For years, the oxymoronic products were a resounding success for both consumers and financial institutions alike. After getting almost zero interest from big U.S. banks, individuals who parked their excess cash with the likes of Ally Financial Inc., Barclays Plc, Goldman Sachs Group Inc.’s consumer bank, Marcus, or HSBC Holdings Plc’s HSBC Direct were suddenly bringing in a comparatively bountiful 2% or more around this time last year. At that point, the Federal Reserve had raised its short-term interest rate for what would be the final time this cycle in December 2018. The rest is history. First, the Fed felt compelled to lower interest rates three times from July through October to offset the economic impacts from the Trump administration’s trade wars. That, as I noted in an October column, brought prevailing high-yield savings rates dangerously close to the fed funds rate. And yet, in early 2020, Marcus users could still lock in that 2% magic number by opting for a no-penalty certificate of deposit.Then the coronavirus happened. This chart says it all: As it’s plain to see, there’s now a chasm between the fed funds rate and the going rates on some top high-yield savings accounts. The banks have so far moved lower gradually, likely to avoid sticker shock that would cause their customers to take their deposits elsewhere. But even with online banking’s cost-saving advantages over more typical brick-and-mortar institutions, they can’t defy gravity forever. Eventually, rates will have to head closer to the zero lower bound. These savings accounts will still hang around but will hardly seem to fit the moniker of “high yield.”Marcus announced the cut to its savings rate on May 8 with this message:“Effective today, the rate on our Marcus high-yield Online Savings Account has been adjusted down to 1.30% from 1.55% APY. We understand that this isn’t welcome news. During this unprecedented time, please know that the rate on our Marcus Online Savings Account remains highly competitive with an APY that’s still 4X the national average. You can rest assured that we continue our commitment to providing value and helping your money grow.”“For a guaranteed return, consider adding a fixed-rate No-Penalty CD. You’ll earn a high-yield rate with the flexibility to withdraw you balance beginning 7 days after funding. Our 7-month No-Penalty CD currently earns 1.55%.”The marketing is top-notch. First, it’s transparent about being bad news, but then quickly pivots to play up that Marcus still provides comparatively more interest than accounts at Bank of America Corp., Citigroup Inc. and JPMorgan Chase & Co. The announcement also wastes no time suggesting a no-penalty CD to make up for the lost interest (and, in a benefit to Goldman, create a “stickier” deposit). Marcus is a relatively new venture for Goldman, and it seems reasonable to assume the investment bank will operate it with Chief Executive Officer David Solomon’s “evolutionary path” in mind. Goldman is looking to diversify away from historically volatile trading revenue, much like its Wall Street rival Morgan Stanley. If it means running Marcus with tight margins to keep customers in the fold, so be it.A bank like Ally, on the other hand, may have less flexibility. Heading into this year, it was fresh off of an upgrade by S&P Global Ratings to BBB-, one step above junk. That upswing didn’t last long; it was one of 13 banks that S&P put on negative outlook earlier this month. Analysts said it “could be more sensitive to the economic fallout from the Covid-19 pandemic than the average U.S. bank. We attribute this sensitivity to Ally's sizable concentration in auto lending that may face heightened risk of financial distress in the current economic environment.” Also a risk: “Ultra-low interest rates will weigh on net interest income,” which accounts for more than 70% of Ally’s net revenue.Ally, for its part, also knows how to sell itself. “People don’t want to hear messages that are depressing and that add to their anxiety,” Andrea Brimmer, chief marketing officer at Ally, told the Financial Brand in an article published last week. “They want to hear optimism and they want to hear about purposeful ideas that make them feel like the world is going to kind of get back to normal.” The theme of a campaign promoting its savings options: “Is your money not sure what to do with itself?”Whether Ally, Barclays, Marcus or HSBC are the answer to that is an open question. As it stands, these interest rates barely cover the market-implied inflation rate over the next 10 years. That’s somewhat by design, of course — the Fed cuts rates in part to encourage borrowing and purchases of riskier assets, both of which boost the economy more than parking cash in a high-yield savings account. Stocks, however, seem increasingly detached from the current economic reality. In that sense, Ally’s focus on being unsure might resonate with individual investors.Future interest rates on high-yield savings accounts are on equally shaky ground. While there’s not much in the way of precedent, it’s safe to say they’ll continue to offer more than the rock-bottom rates on money-market funds. Banks will probably do whatever they can to delay going below 1%, a round number that could be the last straw for some individuals. Other than those parameters, though, anything is possible; such is life at the zero lower bound.This column does not necessarily reflect the opinion of the editorial board or 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.
All you have to do is check out the stocks owned by Berkshire Hathaway (NYSE: BRK.A) (NYSE: BRK.B). Warren Buffett either personally picked or approved the purchases of every stock included in Berkshire's portfolio. Here are the five best Warren Buffett stocks that you can buy right now, ranked by market cap in descending order.
(Bloomberg Opinion) -- Just as some U.S. states begin to reopen and try to mend the virus-stricken economy, Warren Buffett delivered a harsh reminder that things may be anything but normal for a long time.The crisis has spooked America’s forever optimist so much so that he’s fled the airline industry entirely, and now even certain automobile and banking stocks, according to a regulatory filing Friday detailing Berkshire Hathaway Inc.’s investing moves for the first quarter. This included dumping 84% of Berkshire’s stake in Goldman Sachs Group Inc. and reducing its JPMorgan Chase & Co. position by 3%. Buffett, 89, said proudly just two weeks ago that he thinks “nothing can stop America,” but it’s getting harder to believe him. While Buffett made his about-face on airlines known during Berkshire’s atypically morose shareholder meeting two weekends ago, the near-exit of Goldman was the latest shocker. Shares of the investment bank dipped 2% in late trading and are down more than 25% for the year. Occasionally, some big Berkshire investment decisions have been made by Buffett’s deputies, Todd Combs and Ted Weschler; however, Buffett said exiting airlines was his call, and it’s fair to assume that selling all that Goldman stock wouldn’t happen without his blessing. Of course, we don’t know exactly when in the first quarter those sales were made, but they raise a red flag nonetheless.When it comes to banks, Berkshire itself is looking more and more like one as it sits on an ever-rising pile of cash. Its war chest stood at $137 billion as of March, and for what seems to be the first time ever, Buffett isn’t looking to spend it. “The cash position isn’t that huge when I look at the worst-case possibilities,” the billionaire told his virtual listeners on May 2 during the meeting, which was filmed from an empty Omaha auditorium that would normally be lined with some 40,000 of his devoted followers. Indeed, for one of the world’s most famous investors, he isn’t doing much investing lately. Still, Buffett did explain that the U.S. Federal Reserve’s extraordinary actions to help buoy financial markets are partly why he hasn’t been able to strike his usual sweetheart deals — like the Goldman stake he acquired during the 2008 financial crisis. Investors also may not have seen the worst of things yet; Buffett’s actions clearly suggest that he sees the possibility for further pain. If he saw buying opportunities, he’d be buying. The Fed even warned Friday in its financial-stability report that asset prices are “vulnerable to significant declines” if this public-health crisis worsens.Even if Buffett’s outlook for the coming months is quite bleak, there are some long-term holdings he seems comfortable holding onto: Berkshire’s sizable stakes in Apple Inc., American Express Co., Bank of America Corp., Coca-Cola Co. and Wells Fargo & Co. were all unchanged. That said, much has happened in the six weeks since the last quarter ended, so who knows.Buffett may always be America’s biggest cheerleader, but he’s an investor first and this is what that looks like. He’s also only an investor, as even he’ll admit, and only health officials can really say where we go from here. This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Tara Lachapelle is a Bloomberg Opinion columnist covering the business of entertainment and telecommunications, as well as broader deals. She previously wrote an M&A column for Bloomberg News.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.
(Bloomberg Opinion) -- Almost a month after its plunge into minus-land, oil is on a tear. Or not. It depends which oil price you’re watching. The front-month Nymex oil future — for June, currently — has surged by more than 50% so far this month and now trades close to $30 a barrel. Peer further out, though, and the landscape looks a lot flatter.The rally in the June contract (along with swaps for the balance of the year) owes much to relativism: Once you’ve seen negative prices, how much worse can it get? But it also reflects real signs of recovery in oil demand as Covid-19 lockdowns begin to ease and cuts to supply accelerate.As you might expect, exploration and production stocks have hitched a ride. The frackers haven’t matched the best-performing sector in the S&P 1500 Supercomposite over the past month: Home Furnishing Retail (which, let’s face it, makes a ton of sense). But they are in the top five. That's where those long-dated oil prices become relevant.Some E&P companies, such as Permian player Diamondback Energy Inc., have talked of pumping again once oil gets back above $30 a barrel. We’re nearly there already. Yet the lack of enthusiasm in the far end of the futures curve reads like a big Stop sign.Futures prices aren’t forecasts of where oil will trade; they’re just how producers (and some users) of oil hedge their price exposure while speculators bet on where it’s going. And while optimism on recovery has taken hold in near-dated oil — which is where speculative money has tended to congregate — there are plenty of reasons for caution further out. These range from the dreaded “second wave” of Covid-19 to more mundane considerations. Two of the latter concern the glut of oil inventory that is still growing and the less-tangible glut of spare capacity that is also growing as companies and countries curb oil output.Consider the latest International Energy Agency forecasts, released earlier this week. These added to the market’s optimism as the IEA revised its forecast for the drop in oil demand this year from an unprecedented 9.3 million barrels a day to a still-unprecedented 8.6 million. Even so, the IEA’s numbers imply almost 1.7 billion excess barrels having flowed into storage by the end of June, of which just over 1 billion will flow back out by year-end. To give a sense of what the remaining 630 million barrels sloshing around means, it would be enough to replace OPEC-member Nigeria’s output for an entire year.And bear in mind two things about that forecast: First, it assumes demand strengthens consistently through the rest of 2020. Second, it relies on supply continuing to drop year-over-year into the fourth quarter.In other words, a lot has to go right in a year where, thus far, a lot has gone wrong. And that’s just to limit the glut of inventory.This is what those subdued futures beyond 2020 are telling us. Even if a second wave of Covid-19 is avoided, the lingering economic damage and build-up in oil inventory will still signal fewer, rather than more, new barrels are required. The curve itself enforces this. Most frackers rely on hedging to finance their drilling programs, but it’s hard to ramp up when you can only lock in prices that start with a three.As it is, the scars of April’s plunge may limit the speculative flows that take the other side of hedging trades, making them costlier (see this). Moreover, for the glut of inventories to drain, the curve must flip from sloping upward — today’s “contango,” to use the industry term — to sloping downward. “Backwardation,” whereby future prices slope down from today’s, makes it uneconomic to store barrels, and that’s when tanks drain.So if, as the IEA expects, the glut is due to begin shrinking this summer, then near-term futures must rally further relative to long-dated oil. In the past five years, that has only tended to happen when near-dated oil has been priced around $55-60 a barrel, according to a report from BofA Securities published Friday. Before you start dreaming of oil doubling by July, think about the wider environment and those flat 2021 prices. As BofA’s analysts write, it’s more likely that any flip to backwardation this year will happen at a lower level.That still implies oil getting into the $40s soon. But for frackers, it also implies resisting that siren song, weak as it sounds compared to pre-Covid times. Don’t forget this all coincided with a breakdown of cooperation between Saudi Arabia and Russia. While they are cutting now to prop up prices, they aren’t likely to tolerate the sight of U.S. producers getting back to work (they tried that already in recent years). While they await recovery in demand, their spare capacity should suppress long-dated futures, thereby allowing the inventory glut to start draining at a level where many frackers can’t justifiably hedge. Getting back to work in the Permian would kill the rally supposedly encouraging that. The message from the curve to America’s oil producers is this: Enjoy the rally, but retrenchment and restructuring remain unavoidable.This column does not necessarily reflect the opinion of the editorial board or 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.
Investors piled on more cash, loaded $15.8 billion(12.95 billion pounds) in bonds and dumped equities this week, BofA said on Friday, amid worries about a second wave of coronavirus infections and a longer strain to the global economy from lockdowns. Data for the week to Wednesday showed investors added $35.6 billion to money market funds, taking the year-to-date count to a whopping $1.2 trillion. Equity funds, meanwhile, saw outflows of $6.2 billion, dragged down by "chunky" outflows from emerging markets, BofA's number crunching showed.
(Bloomberg) -- Bank of America Corp. priced a $1 billion bond issue to fund Covid-19 relief efforts. It’s the first sale from a U.S. financial institution that explicitly links all proceeds to tackling the virus, Bloomberg data show.The Charlotte, North Carolina-based lender sold fixed-to-floating rate notes to fund investments addressing social issues related to the pandemic, according to a person with knowledge of the matter. The bonds will yield 1.30 percentage points above Treasuries, said the person, who asked not to be identified as the details are private. Bank of America is sole manager of the bond sale.Borrowers globally have raised a record $102.6 billion of debt this year to combat the impact of the coronavirus. Chinese companies have issued the most so-called pandemic bonds, according to data compiled by Bloomberg. Paraguay and South Korea’s Kookmin Bank last month sold debt in U.S. dollars for Covid relief.U.S. corporations are catching up. Pharmaceutical giant Pfizer Inc. issued a $1.25 billion sustainability bond to fund social and environmental impact endeavors, some of which may address the Covid-19 pandemic. Meanwhile, USAA Capital Corp. sold an $800 million sustainability bond to fund projects, which may include Covid-19 relief.Social and sustainability bond issuance is expected to nearly double this year to a new record as issuers take advantage of receptive capital markets to respond to the crisis, according to HSBC. Supply jumped 69% in the first quarter compared to the same period last year, according to HSBC, boosted by sales from the African Development Bank and International Finance Corporation.Schroders expects banks to become more active issuers of social bonds given capital relief they are getting from regulators in Europe, as well as incentives to lend to small and medium-sized companies.For 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.
Bank stocks haven't been doing too well since the pandemic started and interest rates have been cut down, but that doesn't make them bad investments. Bank of America (NYSE: BAC) is down after disappointing Wall Street with its first-quarter earnings report on April 15. Over time, Bank of America has grown its business and delivered value for investors.
Although Berkshire Hathaway (NYSE: BRK.A)(NYSE: BRK.B) CEO Warren Buffett's annual performance has been a bit hit and miss as of late, it's undeniable that his buy-and-hold investment strategy has worked wonders over the long term. According to Buffett's 2019 annual shareholder letter, the broad-based S&P 500 has returned a hearty 19,784% between 1964 and 2019, inclusive of dividends. Currently, Buffett and his team own 48 securities, factoring in the Berkshire Hathaway annual meeting admission that all four major airlines were sold in their entirety.
There is great comfort to be found in regular, reliable dividend payouts, especially in times of economic uncertainty. But finding shares that can pay them isn8230;
(Bloomberg) -- Uber Technologies Inc. brought a $900 million bond sale, just a day after a report said it has made an offer to acquire food delivery company Grubhub Inc.That’s up from a planned $750 million, which may be used for acquisitions among other general corporate purposes, according to a statement Wednesday. The five-year notes, which can’t be bought back for two years, will yield 7.5%, according to people with knowledge of the matter, who asked not to be named discussing a private transaction.Read more: Uber Fueling Up With Liquidity for Grubhub M&A: Credit ReactA deal with Grubhub would combine two of the largest food-delivery apps in the U.S. as the coronavirus drives a surge in demand, Bloomberg reported Tuesday. While neither company confirmed, they both acknowledged they’re always looking for opportunities to provide value to their businesses.Uber said last week that it will close its food delivery service, Uber Eats, in markets where it isn’t popular. In the first quarter, bookings from ride-hailing customers declined for the first time ever due to travel shutdowns, but Uber said that part of its business is now beginning to recover.S&P Global Ratings grades Uber’s new unsecured notes as CCC+, or seven levels below investment grade. Moody’s Investors Service rates them B3, one step higher than S&P.Morgan Stanley, Bank of America Corp., Citigroup Inc., Goldman Sachs Group Inc., Barclays Plc and HSBC Holdings Plc are managing the bond sale, according to the people.(Updates with size in first paragraph, yield in second)For 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) -- Renege on a deal with the Agnellis and you can expect to pay for it.Scion John Elkann has refused to renegotiate the Italian family’s $9 billion sale of its reinsurance business after the buyer, French mutual Covea, sought to revise the terms. A deal at a lower price could have made sense for both sides. The mystery is why Elkann saw more advantage in playing hardball, with the risk of the deal failing. Covea walked away on Tuesday.If Covea had been smarter, it wouldn’t have agreed to pay so much for PartnerRe in the first place. The transaction was done in early March when it was clear that the coronavirus was taking hold outside Asia. But Covea wasn’t trying to wriggle off the hook entirely. It has a strategic goal to diversify away from its home market. Buying PartnerRe for less would achieve that.Chiseling a bit off the price might still have left this a fair deal. Analysts at Bank of America Corp. value PartnerRe at $7.2 billion. They reckon the initial sale price was a little shy of what could have been justified, but if you factor in a correction in reinsurance stocks during the Covid-19 crisis then a 20% haircut is warranted.Now consider the strategic value to the Agnellis of having a big pot of cash to deploy in a world where asset values have fallen almost everywhere. On that basis, even a less than fair price might have been worth taking.So why not budge? One possible answer lies in the regulatory risks surrounding the deal. The chances of approval were harder to predict here than would usually be the case. The transaction would have taken Covea into new territory. Insurance industry supervisors would have been mindful of it stretching the purchaser’s management. It’s one thing for PartnerRe’s owners to accept a reduced price, quite another if the lower proceeds aren’t certain to land anyway.Another reason for standing firm lies in the reputational risks of budging. Blinking in M&A carries long-term costs by undermining your credibility the next time you want to do some dealmaking. John Malone, the U.S. cable billionaire, let the sale of his Swiss business collapse last year rather than bow to pressure to cut the price. Perhaps it’s no coincidence that his next big transaction — last week’s combination of his U.K. assets with those of Spain’s Telefonica SA — was struck on favorable terms to his vehicle, Liberty Global Plc.All the same, it’s still a puzzle that Elkann didn’t try harder to save this. The last explanation must be the possibility of financial redress. That wouldn’t come from the reported break fee — at about 2% of the deal, it’s puny. Juicy compensation would require litigation.Exor NV, the Agnellis’ investment vehicle, doesn’t say in its statement whether it will sue. While neither side would relish a court battle, Elkann might calculate that Covea would want legal action even less than the Italian side. A settlement would therefore make sense. The talks may not be over yet.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Chris Hughes is a Bloomberg Opinion columnist covering deals. He previously worked for Reuters Breakingviews, as well as the Financial Times and the Independent newspaper.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.