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(Bloomberg) -- Two weeks after investors dumped everything they could to hoard U.S. dollars, some are now starting to sell.Intercontinental Exchange Inc.’s U.S. Dollar Index sank 4.4% this week, the biggest weekly drop since 1985. Traders point to a confluence of reasons, ranging from less stress in funding markets, the repatriation of funds as the quarter ends and the worsening coronavirus outbreak in the U.S.“The sell-off in the U.S. dollar is a reaction to the liquidity measures announced by the Federal Reserve and other central banks,” said Jane Foley, a currency strategist at Rabobank. “Fear may have subsided for now.”A separate gauge of the greenback, the Bloomberg Dollar Spot Index, fell 4.1% on the week, the largest weekly loss since its inception in 2005. It had surged 8.3% over the previous two weeks. The greenback slumped against most of 16 major peers this week, weakening more than 7% against the Norwegian krone and the British pound.The decline comes after the Federal Reserve expanded currency swap lines with central banks, ramped up cash offered to the repurchase-agreement markets and introduced a series of tools to unfreeze credit markets. Stress in cross-currency basis markets, a key funding channel, has eased.Funding Markets See Glimmer of Light With Dollar Stress EasingThe three-month dollar-yen basis is now back to levels seen in early March, while the euro equivalent has swung into positive territory. In foreign-exchange swap markets, the costs to borrow dollars is back to about 1.86% after it printed at more than 2.5% last week.“It’s 100% a dollar-funding story -- the mean reversion of the dollar liquidity crunch is prompting all other FX to rally against the dollar,” said Margaret Yang, a strategist at CMC Markets Singapore Pte.Asia GainsThe dollar weakened as much as 1.7% against the yen Friday amid broad greenback losses and in part by repatriation flows ahead of the nation’s fiscal year-end on March 31, according to Takuya Kanda, general manager at Gaitame.com Research Institute in Tokyo.Other currencies in Asia bounced off multi-year lows. The Australian dollar had dropped to the weakest since 2002 last week and has rebounded.Traders also pointed to the rising virus count in the U.S. and a jump in jobless claims to 3.28 million last week as sapping the greenback. Forecasters expect data next week to show the U.S. unemployment rate climbed.To be sure, the dollar weakness may be temporary.As the new quarter starts Wednesday, repatriation funds will slow and the haven bid from a worsening global pandemic may fuel a resurgence in demand.And while risk appetite returned to markets this week to spur a rebound in equities, Nomura’s Jordan Rochester says that sentiment may ebb next week and the dollar is likely to “regain some ground.”In equities, “it’s natural to see a rebound, but bear markets are marathons not sprints, so it’s not clear to us that the positive momentum can be sustained, especially with the potential for more lay-offs, credit downgrades and potential for defaults.”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) -- For 93 uncomfortable minutes, Bank of America Corp. rushed to escape infamy this week, before it was saved by the grace of James Corden, the affable talk show host known for crooning in cars with stars.The drama began when California Governor Gavin Newsom called out the bank for not offering 90-day grace periods to mortgage borrowers affected by the coronavirus, despite such pledges by rivals including JPMorgan Chase & Co. and Wells Fargo & Co. A journalist tweeted the lashing, and then Corden reposted it to his 10.7 million followers. The bank raced to correct what it called the governor’s mistake.Just over an hour later, the firm promised Corden it would defer payments on home loans for as long as the crisis requires. He relented, putting the internet’s fury to rest:Across the nation, bankers are on edge. Publicly, they’re emphasizing that unlike the last downturn in 2008 they aren’t the cause of this collapse and they intend to help America get through it. Privately, they worry they’re destined to get cast as villains.Once the government enacts its $2 trillion rescue package, banks are going to be the last resort for millions of consumers and businesses needing additional support to weather months of hardship. The nation’s eight banking titans have enough excess capital to ramp up lending by $1.6 trillion, but even that probably isn’t enough to meet everyone’s needs.That means bankers will often decide which borrowers get relief from existing loans or access to more credit -- make-or-break moments for people and businesses trying to avoid default and insolvency.One of the industry’s most senior leaders put it this way: The country’s banks are strong and ready to support the economy -- but they can’t afford to lend irresponsibly to clients who can’t repay. That limits the ability of banks to lend to others.“The best credits are made in the worst of times,” said Julie Solar, a senior analyst who tracks North American financial institutions at Fitch Ratings. As the virus’s toll on the economy worsens, lenders will eventually be forced to pick winners and losers, she said. “Those borrowers who are higher investment grade are going to fare better.”‘Fine Line’There are also ethical questions: Banks must walk a “fine line” to prevent desperate clients from overburdening themselves with debts they can’t repay, Citigroup Inc. Chief Executive Officer Michael Corbat told the Financial Times this week. That’s “the last thing that we all want to see.”Bank of America’s quick move to head off a Twitter backlash shows how worried banks are about keeping public criticism at bay. The lender followed up with a statement saying Newsom was mistaken and that it plans to defer payments on a monthly basis until the end of the crisis.Banks have many other lending decisions ahead. It’s not hard to imagine people and employers facing rejection will feel they could’ve made it through if their bankers just gave them a chance. Such accusations have deep roots in American history, notably the Great Depression.Desperation is rapidly mounting.Companies hit first by the sudden halt to global travel -- such as airlines, hotels, cruise-ship operators, casinos and oil producers -- have been drawing down billions of dollars from existing credit lines for weeks. Their pain soon spread to restaurants, retailers and legions of small businesses as a growing number mayors and governors told residents to stay home.On Thursday, the U.S. reported an unprecedented surge in the number of people seeking jobless benefits, with 3.28 million filing claims in just one week.Behind the scenes, senior bankers said they are rapidly reevaluating their loan portfolios to gauge how the virus and social distancing measures are likely to affect corporate customers, trying to figure out which are most or least resilient.Banks have been honoring credit lines they offered corporate clients in the halcyon years before the pandemic. One looming question is whether lenders might invoke the so-called MAC, or “materially adverse change” clauses, to stop drawdowns. One concern is that some businesses with little to no chance of making it through will siphon off billions in loans that could go toward supporting others.Citing those clauses risks sending shock waves across the industry, potentially prompting stronger companies to draw down their lines preemptively. Still, one high-level banker said he’s expecting to see a few denials this year.Banks are trying to maintain goodwill in Washington, working in close coordination with regulators on measures to shore up the financial system. Earlier this month, a delegation of CEOs from firms including Goldman Sachs Group Inc., Wells Fargo, Citigroup and Bank of America visited the White House to offer reassurances that they can weather the turmoil and help others.In the days since, national and regional lenders have rolled out a series of good deeds. They pledged more than $200 million to charities and relief efforts. Some offered branch workers extra pay. Several suspended long-planned layoffs to give workers certainty.While the stimulus bill passed by the Senate this week includes clauses offering some borrowers forbearance, consumer advocates have been urging banks to go further on their own.Lawmakers are ratcheting up pressure on lenders to help constituents in other ways. Last week, Senators Elizabeth Warren and Ed Markey pushed banks and credit unions in their home state of Massachusetts to suspend a variety of fees -- such as charges for late payments, overdrafts and using ATMS -- that generate billions of dollars in annual revenue nationally.To conserve funds for lending, the country’s largest banks vowed to stop buying back their own shares through at least the middle of the year. The move comes at a cost for investors, some of whom would have preferred firms snap up shares at depressed prices, blunting this year’s 40% plunge in the KBW Bank Index.“The biggest difference between now and 2008 is that the banks are a source of strength rather than the source of the problem,” said Tom Naratil, co-head of UBS Group AG’s wealth management unit. “This is the time for banks, obviously prudently, to make sure that we are extending credit to our clients.”(Updates with additional reference to bank’s response and extent of rout in bank stocks from second paragraph)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) -- Bank of America Corp. said it won’t cut any jobs this year as a result of the coronavirus, and is helping clients affected by the pandemic through increased commercial lending to companies and expanded forbearance for Main Street customers.The Charlotte, North Carolina-based lender has hired 2,000 people this month and is shifting more than 3,000 employees to new roles in its consumer and small business divisions to deal with the crisis, according to a company memo seen by Bloomberg. The moves include internal and external hires.“We don’t want our teammates to worry about their jobs during a time like this,” Chief Executive Officer Brian Moynihan said in a CNBC interview Friday. “And we’ll continue to pay everybody, even those who can’t work from home.”Bank of America joins U.S. lenders Citigroup Inc., Wells Fargo & Co. and Morgan Stanley, along with European counterparts including HSBC Holdings Plc, in pledging to preserve jobs amid the widespread impact of the coronavirus. The banks are seeking to reassure their employees as the pandemic roils markets and raises the prospect of deep losses industrywide.Bank of America has extended more than $50 billion in loans to commercial clients this month so they can build up cash and pay employees, according to Moynihan.“We’ve put our capital to work to increase the new lines of credit, the draws in lines of credit, the access to markets,” he said.Other takeaways from the interview:“We’re going to make sure we maintain strong capital ratios and strong liquidity right through this crisis,” Moynihan said.The nation’s top 40 banks are all waiting for the implementation of government assistance programs.Bank of America has “a limited number of cases” of the virus among staff members.About 150,000 of the company’s 208,000 employees are working from home, and it boosted the number of staffers who have computer monitors at home to 50,000 from 10,000 in five weeks.(Updates with commercial lending from first paragraph.)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.
"What's different this time is clearly our capital liquidity," Moynihan said in a CNBC interview. "Everything that changed has led the banking industry be in a great condition to service clients continuously for the last few weeks as this thing has hit." The bank has also been hiring and reallocating employees to the consumer bank to help manage a surge in requests related to the pandemic, according to a memo seen by Reuters.
(Bloomberg) -- The Bank of England said the economic fallout from the coronavirus pandemic risks becoming entrenched, with some companies already describing the current shock as being worse than the 2008 financial crisis.“There is a risk of longer-term damage to the economy, especially if there are business failures on a large scale or significant increases in unemployment,” BOE officials said, according to the minutes of their latest policy meeting published Thursday. “The economic consequences of these developments are becoming more apparent and a very sharp reduction in activity is likely.”The warning suggests that a recovery would swiftly follow a recession in the first half of the year -- the base scenario of many economists -- may not be a forgone conclusion. The outbreak has already shuttered large parts of the economy, with the government heavily restricting non-essential movement for the next three weeks in an attempt to check the spread of the virus.BOE officials said that while the measures they have taken so far helped stabilize markets and improve liquidity, they stand ready to provide further stimulus if needed. They voted unanimously to keep interest rates and their bond-buying program unchanged, after loosening policy considerably in coordinated action with the Treasury.The benchmark interest rate was left at a record-low 0.1%, after policy makers cut it from 0.75% at two emergency meetings this month. At the second meeting, on March 19, officials also said they will buy 200 billion pounds ($239 billion) of bonds. There wasn’t a strong case for further changes in policy at this week’s meeting, the BOE said.The BOE took swift action in response to the crisis in coordination with the Treasury, which has unveiled a massive fiscal stimulus in an attempt to prevent the recession from causing mass unemployment.What Bloomberg Economists Say...“The Bank of England kept its powder dry at today’s meeting after unleashing a huge amount of emergency stimulus this month. The decision and narrative running though the minutes are consistent with the view that the shock from the pandemic will be large, but temporary.”\-- Dan Hanson, senior U.K. economist. Read full REACT.“Very early reports from several companies suggested that the scheme would save jobs that might otherwise have been lost,” the BOE said.Still, nearly 500,000 Britons have applied for state support payments in the last nine days. If all of those claimants are jobless, the unemployment rate could already have risen to 5.3% from the current level of about 4%, according to Bank of America Merrill Lynch research.That would already be around half the unemployment increase during the global financial crisis, BofA economists wrote.(Updates with universal credit data in final paragraph)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.
Decent loan demand along with improved digital offerings is expected to aid Bank of America's (BAC) profitability amid the current economic slowdown.
Four of the nation's five largest banks have agreed to postpone foreclosures and offer forbearance on mortgage payments for three months for homeowners impacted by COVID-19, California Governor Gavin Newsom said on Wednesday. Bank of America spokeswoman Jessica Oppenheim said the governor was mistaken, however. U.S. bank regulators have directed financial institutions to exercise forbearance and work with their customers who may face hardship, but there are no consistent guidelines on what such forbearance should entail.
Dividends are one of the best benefits to being a shareholder, but finding a great dividend stock is no easy task. Does Bank of America (BAC) have what it takes? Let's find out.
(Bloomberg Opinion) -- A little more than a decade ago, the U.S. was in the midst of wrenching a financial crisis. Many things contributed to the debacle. Government officials took charge, using whatever tools they had at hand, and managed to wrestle the worst of the 2008-09 financial crisis into submission, a saga I described in my book “Bailout Nation.”The prescription was a mix of monetary and fiscal responses, though monetary stimulus did most of the heavy lifting. The worst economic effects eventually subsided and the economy more or less recovered. But the remedies brought with them a heavy dose of unintended consequences: The reliance on monetary policy disproportionately benefited those with capital, leading to big gains in equities and a recovery in residential real estate. Other effects included greater wealth inequality, not to mention the rise of new conspiracy theorists and political opportunists. Around the globe, there was a surge in populism, anti-globalizaton and a disdain for science and expertise.Today, we have a new crisis, one with roots in the last rescue plan. In fashioning our response to the 2020 Covid-19 pandemic, we should be careful to avoid the mistakes made in haste then. Consider three broad categories of the last crisis’ errors: 1) inadequate fiscal stimulus; 2) lack of support for the social safety net; and 3) overly generous bailouts terms for banks and other companies. All were unpardonable, but for now let's focus on the third error.We eventually learned just how much the banks and brokers had leveraged themselves and how little capital they had. Managers across the board had failed to consider the possibility that the good times would end one day. New post-crisis rules were put into place, ensuring banks took less speculative risk and had greater capital reserves. Most of the government bailout money was repaid, though it was not a rewarding investment. And then there were those unintended consequences.Today, the banks are in better shape, but wide swaths of the rest the economy are in deep trouble: Social-distancing rules mean entire industries have ground to a standstill. No one is buying new houses, building cars or shopping for durable goods. Retail, travel, restaurants, entertainment, tourism are all confronting a business collapse unlike anything experienced since at least World War II.That’s the bad news. The worse news is that most of these companies have lots of debt, disappearing revenues and no rainy-day funds. They are all starting to come to Uncle Sam looking for a bailout. Just to cite one example, the White House is considering a $50 billion bailout for the airlines, an industry that clearly failed to plan for hard times.When considering rescuing these companies, we have a variety of past bailouts to select as a template. The bailouts of Citigroup, Wells Fargo, Bank of America were at one end of the spectrum, while the rescue plans for automakers General Motors and Chrysler are at the other end. The American International Group bailout was a more complex, while mortgage giants Fannie Mae and Freddie Mac, which were creatures of government anyway, were essentially nationalized.Of all the bailout plans of that vintage, the one that made the most sense was the GM rescue. Rather than allow GM to collapse -- which surely would have had disastrous consequences -- the government instead helped manage a so-called prepackaged bankruptcy.This turned out to be smart. There was little in the way of panic. There were no mass job losses. The plan adhered to the basic rules of capitalism: when your company is insolvent, it either reorganizes its debts or liquidates. Shareholders were wiped out, bond holders got a haircut, some management was fired and the company was reduced to a sustainable size. GM eventually recovered and went public. The government recouped some of the money it injected into the company when it sold the stake it had taken to facilitate the program.(1)The airlines were not as reckless as the banks, but they certainly were irresponsible with their capital. As Bloomberg News reported Monday, U.S. airlines spent 96% of their free cash flow, or about $12.5 billion, on buybacks. These companies should have planned better and acted more responsibly; instead, they thought the best use of their cash was to reduce their share count and boost their stock prices.If ever there was a case of moral hazard, this is it: Profitable companies that failed to save money for a downturn now want help from the government. If they get a bailout today, what's to stop them from being even more reckless in the future, knowing the feds will ride to their rescue?If we're going to bail out the airlines, that $50 billion should be in the form of a loan secured by the companies' physical assets. Then that $12.5 billion of stock they bought back during the past decade gets sold to the government at a 30% discount to the repurchase price or to the current share price, whichever is lower. The industry will kick and scream, but if they can get better terms from what the private-equity funds might offer instead, they should take them.This is but one troubled sector. Will hotel chains be next? Automakers? Restaurants? The entire economy is suffering from cash-flow problems. How can we bailout one sector but ignore most of the others? And that’s before we discuss small businesses, hourly workers and people in the gig economy.The least we can do is avoid many of the same errors we made the last time.(1) Many observers prefer the fire sales of Washington Mutual and Bear Stearns to cash-rich buyers.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Barry Ritholtz is a Bloomberg Opinion columnist. He is chairman and chief investment officer of Ritholtz Wealth Management, and was previously chief market strategist at Maxim Group. He is the author of “Bailout Nation.”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) -- Federal Reserve Bank of St. Louis President James Bullard predicted the U.S. unemployment rate may hit 30% in the second quarter because of shutdowns to combat the coronavirus, with an unprecedented 50% drop in gross domestic product.Bullard called for a powerful fiscal response to replace the $2.5 trillion in lost income that quarter to ensure a strong eventual U.S. recovery, adding the Fed would be poised to do more to ensure markets function during a period of high volatility.“Everything is on the table” for the Fed as far as additional lending programs, Bullard said in a telephone interview Sunday from St. Louis. “There is more that we can do if necessary” with existing emergency authority. “There is probably much more in the months ahead depending on where Congress wants to go.”Massive AidBullard’s grave assessment of the world’s largest economy underscores the critical need for Congress and the White House to quickly find agreement on a massive aid program. The Fed last week restarted financial crisis-era programs to help the commercial paper and money markets, after cutting interest rates to near zero and pledging to boost its holdings of Treasuries by at least $500 billion and of mortgage securities by at least $200 billion.Read more: Fed Going All In to Save Economy. Here’s What Could Come Next“This is a planned, organized partial shutdown of the U.S. economy in the second quarter,” Bullard said. “The overall goal is to keep everyone, households and businesses, whole” with government support. “It is a huge shock and we are trying to cope with it and keep it under control.”The U.S. central bank bought $272 billion of government debt last week, of the more than $500 billion authorized, which Bullard emphasized should not be seen as a limit.More if Needed“This is unlimited and we can go much higher if necessary,” he said. “We are trying to provide as much support as we can to that market.”Commercial paper funding should provide support for corporations trying to roll over short term debt, Bullard said, and the Fed could look at buying other corporate debt.Read more: Fed Already About Halfway Through Bond-Buying Announced Sunday“We could certainly look at that,” he said. “We are already supporting very short term funding markets.”Bullard said Fed purchases of municipal debt are permitted for short term debt, and “that is probably the place we would want to concentrate on here” if the Fed were to go ahead with direct buying. At the same time, he said the Fed would need to be careful with such a program, and it could be problematic to pick and choose which debt to buy, just as European authorities have struggled with purchasing sovereign debt.Small BusinessesAs for small business lending, the Fed would need to set up a “brand new program,” which would be time consuming so it would make more sense to use existing small business lending programs or to have Congress guarantee bank loans, he said.Bullard said with an aggressive government response, activity should begin to bounce back. “I would see the third quarter as a transitional quarter” with the fourth quarter and first quarter next year as “quite robust” as Americans make up for lost spending. “Those quarters might be boom quarters,” he said.Read more: Top Economists See Some Echoes of Depression in U.S. Sudden StopThe goal should be to support American workers and businesses across the board, rather than picking individual companies or industries, such as the airline industry or hotels, for support. The U.S. shouldn’t lose companies or industries because of lack of support, he said.‘Totally Stupid’“It is totally stupid to lose a major industry because of a virus,” he said. “Why would you want to do that?”Bullard urged that unemployment insurance cover 100% of lost income for workers, and call it “pandemic insurance” since the disruption is intended to block the spread of the coronavirus.The St. Louis Fed’s view of the virus-related shutdowns on the economy is more dire than Wall Street. JPMorgan Chase & Co. expects gross domestic product to shrink at an annualized rate of 14% in the April-June period while Bank of America Corp. and Oxford Economics both see a 12% drop. Goldman Sachs Group Inc. sees a 24% plunge.(Updates to add additional comments from third paragraph)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.
Stocks wiped out earlier gains and closed at a three-year low Friday as investors weighed a rising coronavirus case count against massive stimulus measures from global policymakers.
While most of corporate America has been forced to dramatically scale back operations due to the quickly spreading coronavirus outbreak, banks have been under pressure to keep critical infrastructure like ATMs, bank branches and trading floors open for business and to offer relief for customers adversely affected by the pandemic. Bank of America announced several relief measures for small businesses and consumers, including deferred payments on credit cards, auto loans and mortgages as well as refunds for checking account fees. "We're going to continue to provide convenient access to the important services they count on, and the additional assistance and support they need during this difficult period," consumer bank head Dean Athanasia said in a statement.Banks have been balancing the need to maintain customer-facing operations with protecting employees and curbing the spread of the pandemic.
(Bloomberg) -- Filings for U.S. unemployment benefits are poised to surge to a record 2.25 million this week, according to a Goldman Sachs Group Inc. analysis of preliminary reports across 30 states.With businesses shutting down because of coronavirus-containment efforts, jobless claims are already climbing -- by 70,000 to 281,000 for the week through last Saturday, Labor Department data showed Thursday. That was the biggest increase since Hurricane Sandy in 2012. The level Goldman projects for the week through March 21 is more than triple the prior peak of 695,000, in 1982.“Many U.S. states have reported unprecedented surges in jobless claims this week,” economist David Choi wrote in a note late Thursday. “While it is possible that claims were front-loaded to start off the week -- implying a slower pace of claims for the week as a whole -- or that our sample is biased toward states with a larger increase in claims, even the most conservative assumptions suggest that initial jobless claims are likely to total over 1 million.”Elsewhere on Friday, Bank of America Corp. saw even greater carnage across the American labor market, projecting that the next week’s release could show a spike to 3 million. “It is due to get very bad in April,” economists led by Michelle Meyer wrote. “We expect that the jobs report will show job loss of 1 million in the month.”In Ohio, the Department of Job and Family Services said Friday that filings rose to 139,468 in the Sunday-to-Thursday period from 4,815 a week earlier.California Governor Gavin Newsom said Wednesday that the most populous state, which typically sees about 2,000 claims daily, fielded 190,000 over a three-day period, according to a Sacramento Bee report that Choi cited. That would follow a surge in claims of more than a third, to over 58,000 on an unadjusted basis, according to Labor data released Thursday.Newsom on Thursday issued a statewide order to stay at home, following such moves by the state’s municipal leaders.Separately, the New York Times reported Thursday that the Trump administration is asking state labor officials to hold off on releasing precise figures for unemployment filings until the federal government issues national totals.The Labor Department’s Office of Unemployment Insurance emailed state officials to ask that they only “provide information using generalities to describe claims levels (very high, large increase)” until the federal government releases the national claims total next Thursday, the Times reported.(Updates to add BofA estimate in fourth paragraph and Ohio claims in fifth paragraph)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.
The bank also said it would be paying an additional $200 per pay period to front-line workers in branches, call centers and operation centers effective immediately and enhanced overtime pay, according to a memo seen by Reuters. While most of corporate America has been forced to dramatically scale back operations due to the quickly spreading coronavirus outbreak, banks have been under pressure to keep critical infrastructure like ATMs, branches and trading floors open for business and to offer relief for customers adversely affected by the crisis. Bank of America announced several relief measures for small businesses and consumers, including deferred payments on credit cards, auto loans and mortgages as well as refunds for checking account fees.
Bank of America today announced additional support for its 66 million Consumer and Small Business clients in response to the unprecedented challenges of the coronavirus. The company is offering assistance to clients through its Client Assistance Program and continuing to provide access to the important financial services on which these clients rely.
(Bloomberg) -- A sell-off in the supposedly safe government bond market this week has unnerved investors looking for a haven amid the risk-asset storm. A slump in open positions in bond futures suggests a rush to meet margin calls may be partly responsible.Calculations by Bloomberg show bond futures positions equivalent to $150 billion in 10-year Treasuries were sold Friday through Tuesday, with total outstanding contracts dropping to the lowest since 2018. This week saw a gauge of global stocks slump around 11% amid the worsening coronavirus outbreak, while an equivalent index of government bonds tumbled over 3%, wiping out gains from earlier in the month.“The concomitant sell-off in both the risk-free asset, bunds, as well as in credit and equities can either mean that markets are pricing in unrealistic bond-supply shocks and/or, more likely, mean that markets are de-leveraging,” wrote Erjon Satko, a strategist at Bank of America Merrill Lynch. “Times are exceptional.”Leveraged investors often see margin calls as volatility spikes and can be forced to sell liquid securities, including bond futures, as a result. The change in positions across German, French, Italian, U.S. and Japanese bond futures suggests an enormous de-leveraging has taken place.While the evidence may be circumstantial, leveraged investors such as hedge funds have been under enormous pressure given the volatility in equity and commodities markets. HFRX’s Global Hedge Fund Index, which measures performance in the broader industry, saw its largest one-day loss since the financial crisis on March 16. The gauge is down over 6% this month.That suggests it’s likely some hedge funds have struggled with margin calls during the rout which has led to a shedding of liquid assets.There are signs of “asset managers raising cash to face redemptions in their funds,” Jaime Costero, rates strategist at UBS Group AG, wrote in emailed comments. For these investors it “makes more sense to liquidate sovereign bonds and core bonds than credit exposures because these are more illiquid.”Investors looking for further proof can check out February’s international capital flows report from the U.S. Treasury, due mid-April. Caribbean-domiciled investors are seen as a proxy for leveraged investors, and have been shown to shed Treasuries in the past to pay margin calls or repay clients after draw-downs.Algorithm, retail and high-net-worth investors have capitulated while longer-term investors are holding on, Danny Yong, Dymon Asia Capital (Singapore) Chief Investment Officer, said in an interview with Bloomberg Television. There may also have been some redemptions of hedge fund holdings from sovereign wealth funds as the collapse in oil prices prompted them to shore up reserves, he added.Gold DilemmaGold, another traditional haven, has also been pummeled lately. Prices have dropped about 13% from a peak set early last week, and are going through wild swings with investors caught between the need to free up cash and insurance against the faltering economy.Aggregate open interest, a tally of outstanding contracts, dropped this week on the Comex to the lowest since July.“Many market players have closed long positions and have probably not opened short ones,” said Commerzbank AG analyst Daniel Briesemann. “You’re closing longs to raise cash, but you don’t want to bet on falling gold prices because gold is still seen as a safe haven in such a market environment.”(Updates with quotes in third and seventh paragraphs.)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.