|Day's range||0.4500 - 0.6500|
(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 firstname.lastname@example.org;Ruth Carson in Singapore at email@example.com;Vassilis Karamanis in Athens at firstname.lastname@example.orgTo contact the editors responsible for this story: Tan Hwee Ann at email@example.com, 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 firstname.lastname@example.org;Chikako Mogi in Tokyo at email@example.comTo contact the editors responsible for this story: Tan Hwee Ann at firstname.lastname@example.org, 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 email@example.com;Jack Pitcher in New York at firstname.lastname@example.org;Susanne Barton in New York at email@example.comTo contact the editors responsible for this story: Dana El Baltaji at firstname.lastname@example.org, 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 email@example.comTo contact the editor responsible for this story: Mark Gongloff at firstname.lastname@example.orgThis 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 email@example.com;Tom Schoenberg in Washington at firstname.lastname@example.orgTo contact the editors responsible for this story: Jeffrey D Grocott at email@example.com, ;Winnie O'Kelley at firstname.lastname@example.org, 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.
Bank of America Community Development Banking (CDB) provided a record $4.88 billion in loans, tax credit equity investments, and other real estate development solutions, surpassing last year’s record of $4.7 billion. CDB delivers innovative financing solutions to help create affordable housing for individuals, families, seniors, students, veterans, the formerly homeless, and those with special needs. These efforts are part of the company’s commitment to deploying capital to address global issues outlined in the United Nations Sustainable Development Goals (SDGs).
(Bloomberg) -- Indonesia’s central bank cut its benchmark interest rate after a three-month pause, and lowered the growth forecast as the spread of the coronavirus threatens the outlook for Southeast Asia’s biggest economy.Bank Indonesia lowered the seven-day reverse repurchase rate by 25 basis points to 4.75% Thursday, joining a string of other central banks around the region that have eased policy in recent weeks to counter the impact of the virus. Nineteen of the 31 economists in a Bloomberg survey predicted the central bank’s move while the rest saw no change.Indonesia is yet to record a single case of the deadly virus but officials have become increasingly worried about a slump in trade and tourism after China shut factories to contain the outbreak and both countries restricted travel. Bank Indonesia’s resumption in rate cuts after four reductions last year comes on top of a fiscal boost from the government to cushion the economy, which was already slowing last year because of the U.S.-China trade war.The central bank on Thursday lowered its forecast for global growth to 3% from 3.1%, and sees the domestic economy expanding 5%-5.4% this year compared to a previous range of 5.1%-5.5%.Bank Indonesia will “keep a close watch on global and domestic economic developments in utilizing an accommodative policy mix space,” Governor Perry Warjiyo said, signaling the latest cut may not be the last in the current easing cycle. The board remains concerned about a hit to trade and investment from the virus, he said.Foreign exchange revenue from tourism was likely to fall by $1.3 billion, the governor said, adding that provisions related to the macroprudential intermediation ratio would also be adjusted in a bid to boost lending by commercial banks. The central bank also cut its 2020 forecast for credit growth to 9%-11% from 10%-12% previously.The yield on Indonesia’s 10-year government bonds was little changed after the decision, while the rupiah was headed for its biggest drop in more than two weeks.“The new 2020 growth forecast of BI still looks optimistic to me considering the risks from COVID-19,” said Euben Paracuelles, an economist at Nomura Holdings Inc. in Singapore. “I’m therefore keeping my forecast that BI cuts again by another 25 basis points in the second quarter as growth disappoints, and we’re still not seeing clear indications of more fiscal support.”Finance Minister Sri Mulyani Indrawati said Wednesday the virus outbreak will curb growth and put government revenue under pressure. The Trade Ministry has also warned of a deeper hit to exports, which already slumped in January, putting the current account deficit at risk.“The growth outlook is weak. We have a 5.1% figure but we have highlighted the risk of growth testing the 5% level in the first half of the year,” said Mohamed Faiz Nagutha, an economist with Bank of America Securities in Singapore. “We see the policy rate at 4.5% by mid-year,” he said.While inflation has so far remained subdued, coming in at 2.7% in January, supply disruptions in China are pushing up some food costs, like garlic, which surged almost 70% in Jakarta in just one week.A relatively stable currency provides the central bank with sufficient room to ease policy now. The rupiah, which has weakened in recent weeks, is still up about 0.7% against the dollar since the start of the year, making it the best-performer in Asia.(Updates with market reaction in seventh paragraph)\--With assistance from Rieka Rahadiana and Yoga Rusmana.To contact the reporters on this story: Karlis Salna in Jakarta at email@example.com;Arys Aditya in Jakarta at firstname.lastname@example.org;Eko Listiyorini in Jakarta at email@example.comTo contact the editors responsible for this story: Nasreen Seria at firstname.lastname@example.org, Karthikeyan Sundaram, Thomas Kutty AbrahamFor 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) -- Federal Reserve officials indicated they could leave interest rates unchanged for many more months amid concerns about a persistent undershoot of their inflation goal, potential room to further boost employment and risks stemming from the coronavirus and trade.Minutes of the Jan. 28-29 Federal Open Market Committee meeting, released Wednesday in Washington, showed that several officials might support a mild overshoot of the 2% inflation target, indicating they see little need to pre-empt rising prices. What’s more, new shocks such as the coronavirus are more likely to keep prices subdued as global demand weakens.“Several participants suggested that inflation modestly exceeding 2% for a period would be consistent with the achievement of the committee’s longer-run inflation objective and that such mild overshooting might underscore the symmetry of that objective,” according to the minutes.The Fed’s preferred price measure rose 1.6% last year, and central bankers have failed to achieve their target on a sustainable basis since the target was announced in 2012.“There are a few doves on the committee that are implicitly saying they want to do a make-up strategy,” where a central bank compensates for undershoots with overshoots on inflation, said Joseph Song, senior U.S. economist at Bank of America Corp. in New York.The bank forecasts the Fed will maintain the federal funds rate in its current range of 1.5% to 1.75% through 2021. However, “most participants think that the insurance cuts they did last year will put the economy in a place where inflation will pick up again,” he said.Futures traders maintained expectations for the Fed to lower interest rates at least once this year, pricing in about 40 basis points of easing by the end of December. The 10-year Treasury yield were little changed at 1.56%, while the Bloomberg dollar index and the S&P 500 held gains.The U.S. economy began 2020 on solid footing with payrolls rising by 225,000 in January. The jobless rate edged up to 3.6%, still near a half-century low, while average hourly earnings climbed 3.1% from a year earlier. The coronavirus has raised questions about global growth, including the potential for spillovers affecting the U.S.Fed Chairman Jerome Powell told lawmakers in semi-annual testimony last week “it’s too uncertain to even speculate” on how the outbreak would impact the economy or if it could present a “material change” to the outlook, though he said the impact on China should be “substantial.”U.S. central bankers are counting on household consumption -- aided by low interest rates -- to sustain growth and help lift inflation back to the 2% target.Officials saw consumption spending as likely to remain on a firm footing, “supported by strong labor-market conditions, rising incomes, and healthy household balance sheets.”Elsewhere in the minutes, policy makers grappled with a variety of issues: Inflation ranges as a tool to achieve their 2% target, how to adapt policy to combat financial-stability risks, and how they would wind down ongoing repurchase agreement and Treasury-bill purchases.Repos, BillsThe staff official in charge of open-market operations told policy makers that in the second quarter, reserve conditions would “support slowing the pace of Treasury bill purchases.”U.S. central bankers are buying $60 billion of bills per month to boost reserve balances and plan to continue the operation into the second quarter. They are also conducting term and overnight repurchase agreements at least through April to offset seasonal demands for payments and cash.Within their ongoing framework review, officials held their most substantive discussion to date about the possibility of transforming their inflation target into a range. The review began in early 2019 and is meant to assess whether the Fed has the right tools and strategies to deal with persistently low interest rates and low inflation.The committee considered inflation ranges based on three concepts: an “uncertainty” range, meant to communicate how wide inflation outcomes might vary and still be considered consistent with the target; an “indifference” range, emphasizing that policy need not respond to deviations within the range; and an “operational” range that could be used when officials wanted inflation to favor one side.\--With assistance from Jordan Yadoo, Christopher Condon and Benjamin Purvis.To contact the reporter on this story: Craig Torres in Washington at email@example.comTo contact the editors responsible for this story: Margaret Collins at firstname.lastname@example.org, Ana Monteiro, Scott LanmanFor 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.
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) -- Having suffered the worst economic performance in a decade last year, Mexican Finance Minister Arturo Herrera sees reasons to be more optimistic about Latin America’s second-largest economy in 2020.In his first sit-down interview with English-language media this year, Herrera says that after almost a decade of expansion since the global financial crisis, last year’s 0.1% contraction was more natural and in line with disappointing economic activity worldwide. Now, things are looking better.His argument goes: inflation and debt levels are in check, the peso is stable, and the troubled state oil company known as Pemex has halted a production decline. The main boost for the country comes from the ratification of the reworked North American free trade agreement.“The Mexican economy’s performance is very different with this agreement,” he told Bloomberg News at the National Palace in Mexico City on Monday. “This is one of the great advantages we have now.”Production chains may invest more in North America based on the certainty created by the treaty, known as USMCA, especially as competitors in Asia are beset by trade wars and a health crisis, he said.Read More: USMCA Ratification More Relief Than Opportunity For MexicoHerrera’s ministry has even kept its 2% growth forecast for the year, although he won’t say whether that will change when it reports a preliminary budget proposal to congress in April.His optimism isn’t fully shared by Mexico watchers. Economists have been steadily reducing the country’s 2020 growth estimates to an average of just 1% from 1.7% six months ago, with Bank of America Corp. even forecasting an expansion as little as 0.5%.Growth in 2020 may be stronger than 2019 due to the recent stabilization in oil output and some recovery in construction, but it won’t return to levels of recent years, said Alonso Cervera, chief Latin America economist at Credit Suisse Group AG in Mexico City, who forecasts a 0.7% expansion.“I’m not too hopeful of a strong recovery, and neither is the market,” Cervera said. “The main issue behind the weakness in the Mexican economy is gross fixed investment, which is a function of fiscal austerity on the public sector side and subdued confidence in the private sector.”Gross fixed investment, which includes company spending in factories and machinery, ran down last year to levels not seen since the 2009 global crisis.Inflation, RatesHerrera says that an area that is likely to provide more stimulus is monetary policy: Subdued inflation and peso stability mean Mexico “clearly” has room to keep cutting interest rates.“I’m not the only one saying it. It’s something that’s said by the Western Hemisphere director of the International Monetary Fund,” Herrera said.Banco de Mexico has been lowering its policy rate since August as declining oil output and uncertainty over President Andres Manuel Lopez Obrador’s policies stalled the economy. Even after reducing the key rate by 1.25 percentage point since August, Mexico has one of the highest inflation-adjusted interest rates in the world.Analysts expect the bank to cut borrowing costs by another half percentage point in the rest of 2020, ending the year at 6.5%.Alejandro Werner, the Western Hemisphere director of the IMF, said last month that Mexico has “significant space” to keep cutting interest rates to bolster growth, noting that other Latin American countries have reduced borrowing costs recently.Herrera said his ministry is informally polling banks and companies on their financing choices, including asking why several bond sales this year have been issued in dollars rather than pesos. He said some have responded that the market is too concentrated in a few large pension funds known as Afores, leaving less space for local issuances.Read More: Zero-Growth Year Is Price AMLO Pays for Mexican ‘Transformation’Inflation ended 2019 at 2.83%, the second-lowest December rate in the 2000s. It has rebounded slightly to 3.24% last month, but is still within the central bank’s target range of 3%, plus or minus one percentage point.The strength of the Mexican peso, which on Monday reached its highest intraday level in almost a year and a half, is explained by factors including the government’s fiscal responsibility and the nation’s relatively high interest rates, Herrera said.He also reiterated the government’s commitment to a “stable” and “flexible” currency. The peso is the best performing major currency against the dollar so far this year.“It’s very risky for somebody to start playing with the exchange rate policy,” he said. “It has cost Mexico a lot of work to understand this and we’re very respectful.”(Updates with comment from analyst in eighth paragraph and ministry’s informal poll in 16th paragraph.)To contact the reporters on this story: Nacha Cattan in Mexico City at email@example.com;Eric Martin in Mexico City at firstname.lastname@example.orgTo contact the editors responsible for this story: Daniel Cancel at email@example.com, ;Juan Pablo Spinetto at firstname.lastname@example.org, Matthew Bristow, Jiyeun LeeFor 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.