|Bid||4.96 x 45900|
|Ask||5.06 x 42300|
|Day's range||4.97 - 5.11|
|52-week range||3.41 - 10.22|
|Beta (5Y monthly)||1.21|
|PE ratio (TTM)||44.91|
|Forward dividend & yield||N/A (N/A)|
|Ex-dividend date||27 Feb 2020|
|1y target est||6.00|
(Bloomberg) -- Emerging-market stocks and currencies gained last week amid optimism progress is being made toward developing coronavirus vaccines, and as more nations roll back lockdowns. Sentiment was tempered as the week progressed by signs U.S.-China tensions increasing once again, with the Chinese foreign minister warning some in the U.S. are pushing relations into a “New Cold War” on Sunday. This followed escalating rhetoric from President Donald Trump and Senate legislation that may lead to delisting of Chinese companies from American stock exchanges following China’s announcement of plans to impose a national security law on Hong Kong, which was was rocked again by heavy protest Sunday.The following is a roundup of emerging-market news and highlights for this week through May 22:Highlights:The U.S. threw its weight behind one of the fastest-moving experimental solutions to the coronavirus pandemic, pledging as much as $1.2 billion to AstraZeneca Plc to help make the University of Oxford’s Covid vaccineAn experimental vaccine from the U.S. biotechnology company Moderna Inc. showed signs it can create an immune-system response to fend off the coronavirusRead: U.S. Raises Ante in Vaccine Race With $1.2 Billion for Astra (2)Leading Chinese vaccine developer CanSino Biologics Inc. has signed a deal to test and sell a separate Canadian vaccine candidateFederal Reserve Chairman Jerome Powell said the central bank is prepared to use its full range of tools and leave the benchmark lending rate near zero until the economy is back on track; he reiterated that more fiscal aid may be neededFed policy makers saw the coronavirus posing a severe threat to the economy when they met last month and were also concerned by the risks to financial stabilityChina has abandoned its usual practice of setting a numerical target for economic growth this year due to the turmoil caused by the coronavirus; it reiterated a pledge to implement the first phase of its trade deal with the U.S.China projected defense spending growth of 6.6% this year, the slowest increase since at least 1991; the nation is pushing ahead with major investment in new infrastructure, assigning it top importance this yearChina announced plans to rein in dissent by writing a new national security law into Hong Kong’s charter, prompting democracy advocates to call for protestsProtesters held their biggest rally in months on Sunday, with more demonstrations planned for later in the weekPresident Donald Trump escalated his rhetoric against China, suggesting that leader Xi Jinping is behind a “disinformation and propaganda attack on the United States and Europe”The U.S. Senate overwhelmingly approved legislation that could lead to Chinese companies such as Alibaba Group Holding Ltd. and Baidu Inc. being barred from listing on U.S. stock exchangesU.S. Secretary of State Michael Pompeo broke with past U.S. practice and issued a statement congratulating Taiwan President Tsai Ing-wen ahead of her inauguration. China denounced the message as “wrong and very dangerous”Tsai urged China’s Xi Jinping to “find a way to co-exist” with the island’s democratic government as she started her second termArgentina will improve the terms of its offer to restructure $65 billion of overseas bonds after sinking into default when it failed to make an interest paymentSouth Africa’s Reserve Bank cut its benchmark rate for the fourth time in four months to support an economy forecast to slump deeper into recession; Turkey’s central bank delivered a ninth straight rate cut in less than a year after measures to prop up the lira drove out foreign investors; Indonesia’s central bank unexpectedly left its benchmark unchanged to bolster the currency; Bank of Thailand cut its key rate to a record and said it was ready to use additional policy tools if neededIndia’s central bank cut interest rates in an unscheduled announcement, ramping up support for an economy it expects will contract for the first time in more than four decadesBrazil overtook the U.K. to become the world’s third most-infected nation and reported record daily deaths; government still hasn’t picked a new health minister following Nelson Teich’s resignationRussia sees its economy contracting 5% this year, according to updated forecast from Russian Economy MinistryPresident Vladimir Putin may announce a snap ballot within weeks on proposed changes to the constitution that allow him to sidestep term limits, said people familiar the matterAsia:Chinese President Xi Jinping pledged to make any coronavirus vaccine universally available once it’s developed, part of an effort to defuse criticism of his government’s response to a pandemicChina’s regulator and some lenders have discussed extending loan relief beyond a June 30 deadline for corporates hurt by the virus outbreakChina is considering targeting more Australian exports including wine and dairy, according to people familiar with the matterShanghai Stock Exchange has started a trial program to allow companies to issue short-term local bondsChina’s house-price growth accelerated in April as the central bank’s credit easing gave the property market a lift out of the coronavirus shutdownBank of Korea said it will provide 80% of a special purpose vehicle’s 10 trillion won ($8.1 billion) of funds to buy corporate debt including lower-rated bonds and commercial paperSouth Korean students are returning to their classrooms after a five-month break as government health officials declared the country may have avoided a second wave of infectionsInitial South Korea trade figures for May signaled deep global trade weakness as the coronavirus smothers global economic activity. Though the value of shipments to China fell 1.7%, this was far less than in previous monthsIndia’s coronavirus infections crossed the 100,000 mark and are escalating at the fastest pace in Asia, just as Prime Minister Narendra Modi further relaxed the country’s nationwide lockdownThe biggest cyclonic storm over the Bay of Bengal in two decades wreaked havoc along India’s east coast and in Bangladesh, flooding low-lying areas and affecting power supplyIndia’s capital market regulator has allowed some categories of debt mutual funds to invest more in government bonds and treasury billsIndia’s government said the central bank will increase support for troubled shadow lenders, to stave off defaults as record repayments come due next monthIndonesian President Joko Widodo ruled out an immediate easing of social distancing rules and ordered officials to strictly enforce a ban on travel during the busy holiday season to prevent a spike in new coronavirus casesIndonesia will extend $10 billion in financial support to a dozen state-owned companies to tide over the impact of the coronavirus, Finance Minister Sri Mulyani Indrawati saidThailand sees its economy contracting as much as 6% this year as the coronavirus outbreak cuts travel to the tourism-reliant nation and shutters commerceGovernment agreed to extend state of emergency as suggested by National Security Council, Deputy Prime Minister Somkid Jatusripitak saidThe Philippine central bank sees “no apparent and immediate” need to avail itself of the new short-term liquidity line being offered by IMF to members as part of pandemic response, according to Governor Benjamin Diokno; policy space is still sufficient, he said separatelyThe Philippines is considering downsizing lockdowns to villages from regions, as it balances further reopening its economy with stemming the virus outbreakMalaysia’s king warned lawmakers against resorting to hostility and slander, as he spoke at the country’s first parliament sitting since its chaotic change of government two-and-a-half months agoThe trial of Malaysia’s former leader Najib Razak resumed on Tuesday, as a settlement deal by his stepson spurred concern over how the new government is handling the 1MDB casesTaiwan’s unemployment rate has reached the highest level in more than 6 years, according to government data released today. The coronavirus pandemic sent April’s jobless rate to 4.1% leaving over 480,000 people unemployedEMEA:Russia sold the most debt on record in its weekly bond auctions, benefiting from low borrowing costs to fund stimulus plansRussia’s Finance Ministry placed 112 billion rubles ($1.6 billion) of bonds due in October 2027 at its first auction on Wednesday, the most ever for a single offeringTrump has decided to withdraw from the Open Skies treaty, an arms-control pact designed to promote transparency between U.S. and Russia, claiming Russian violationsTurkey secured a fresh source of foreign exchange from Qatar, leaning again on the gas-rich Gulf nation that’s consistently come to the rescue as part of an alliance born after a coup attempt against President Recep Tayyip ErdoganRomania’s surprise first-quarter economic growth may help the country avoid a credit-rating downgrade next month as investors rush to buy its debt, the finance minister saidAbu Dhabi raised more money from international debt markets just weeks after a $7 billion bond sale as it took advantage of a drop in borrowing costs to bolster its financesThe emirate sold an additional $3 billion of its three-tranche deal priced in April, according to people familiar with the matterEgypt may reduce financing in local markets over coming weeks as it tries to cut debt-service costs for one of the Middle East’s most indebted countries, the Finance Ministry saidEgypt raised $5 billion in its first sale on international bond markets since NovemberLebanese banks urged the government to sell state assets and defer maturities to avoid defaulting on its domestic debt and driving the country’s finances into an even deeper crisisSaudi Aramco became the first major global oil producer to see its stock recover to the level it traded at before the price war between Russia and Saudi ArabiaZambia is seeking to restructure its debt after years of “over-ambition” in borrowing to plug an infrastructure deficit, the Finance Minister saidBank of Zambia cut its key interest rate for the first time in more than two years to counter the impact of the coronavirus on the economy, even as inflation surged to a 43-month high in AprilMoeketsi Majoro became Lesotho’s new prime minister, a day after his predecessor resigned amid an investigation into the murder of his ex-wifeZimbabwe’s supply of foreign exchange has increased by 35% since restrictions on using the U.S. dollar for domestic payments were eased, the central bank Governor saidSouth African factory output contracted for the ninth month in February even before a nationwide lockdown aimed at limiting spread of the coronavirus pandemic shuttered all non-essential activityInvestors declined to take up all of the five-year bonds on offer at an auction in Kenya this weekRwanda plans to increase budget spending for the coming fiscal year by 8%, saying it needs more money to fend off the Covid-19 pandemic, the Finance Minister saidNigeria’s early move to tap cheap loans improved its risk perception among foreign investors, leading to a decline in the country’s borrowing costsLatin America:Argentina’s economic activity slid 9.8% in March, a record biggest monthly decline, amid a nationwide lockdownA video of a controversial meeting between Brazil’s Jair Bolsonaro and members of his cabinet became public on Friday, fueling a political crisis that embroils the president just as the coronavirus pandemic grips the countryBrazil overtook Russia and is now second in number of virus cases in the world, trailing only the U.S.Health Ministry loosened protocols for the use of chloroquine, under orders of the president, who ordered the military to ramp up production of the drugThe city of Sao Paulo brought forward holidays to increase social isolation rates, which are typically higher on weekends and holidaysBolsonaro asked for state governors and congress to support his veto on an increase in public servants wagesCentral bank President Roberto Campos Neto promised to step up currency intervention if neededInvestors holding debt protection for Ecuador are in line to share compensation of about $60 million after the nation struck a deal with creditors to suspend coupon payments on its foreign debtAshmore Group Plc and BlackRock Inc. are joining together to present a united front for restructuring talks in EcuadorIDB approved a $250 million loan to Ecuador and nation is launching a $1.2 billion program to revive the economyEcuador is launching a program with $1.15 billion of funding from international partners to support workers and entrepreneurs, the Finance Minister saidChile’s economy is bracing for a contraction even after activity unexpectedly grew in the first three months of the year during the onset of the coronavirus pandemicQuarantine in capital Santiago was extended for a weekMexico’s President Andres Manuel Lopez Obrador said he is working on a new indicator to measure growth and progress as the country’s economy heads to its biggest contraction in almost a centuryMexico’s interest rates will continue to be cut, central bank board member Jonathan Heath saidInflation quickened more than expected in early May as food prices jumpedPeru’s economy contracted in the first quarter as the country entered what may be its deepest slump since the 1880s. GDP fell 3.4% from a year earlierCountry extended its nationwide quarantine for five weeks, while the reopening of the economy will enter its second phase as planned(Updates with Chinese foreign minister response and details of Hong Kong protests)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) -- Not too long ago, BlackRock Inc. was super bullish on the prospect of exchange-traded bond funds. While it took 17 years for these passive vehicles to reach $1 trillion in assets under management, doubling that would take a fraction of the time, the investment manager predicted. These funds have become “disruptors” of the once opaque and difficult-to-access global bond market, it said. Passive funds have indeed become popular. More than 60% of institutional investors used debt ETFs last year, up from 20% in 2017. Meanwhile, emerging market bond ETFs represent the fastest growing segment, rising at an annualized rate of 38% over the last decade, to $82 billion in assets under management. As much as BlackRock’s marketing executives may tout “disruption,” instability is one thing developing markets can do without — especially now that they’re issuing debt left and right. Investors are understandably starting to ask who will pay when things go pear-shaped. If they bail, the passive funds they’ve gobbled up could well kill emerging-market investing. Take a look at BlackRock’s $13 billion iShares J.P. Morgan USD Emerging Markets Bond ETF. It’s well-liked by investors because it tracks sovereign dollar issues, which takes the problem of currency volatility off the table. But its exposure doesn't accurately reflect the gross domestic product of its constituents. China, for instance, has a weighting of just 3.8%, making it the eighth-largest component of the ETF. Meanwhile, Argentina, Turkey, South Africa, Egypt and Colombia — the new Fragile Five according to Bloomberg Intelligence — together have a 14% weight, data compiled by Bloomberg show. Add the next five in line, and about 35% of your ETF’s holdings are vested with the most vulnerable nations.(1) BlackRock is simply tracking the widely followed J.P. Morgan index, which is by no means the only one with a heavy tilt toward troubled countries. The Bloomberg Barclays EM USD Aggregate Sovereign Index, for instance, also has more than a third of its weight behind the Fragile 10. Since the collapse of Lehman Brothers Holdings Inc., quantitative easing has driven billions of dollars of capital into emerging markets. With rates near zero in the developed world, investors have eagerly taken on extra risk in the pursuit of yield. As a result, nations with current account and fiscal deficits, such as Indonesia, ended up issuing plenty of dollar bonds. Meanwhile, healthier ones, like export-oriented China and South Korea, developed their domestic government bond markets instead. After all, it’s cheaper to raise money in your own currency. Beijing only raises dollar bonds when it feels like showing off its prime rating abroad.Now, the virus is raising uncomfortable questions. Economies big and small are on lockdown, facing large shortfalls in government revenues and big fiscal spending plans. How will the most vulnerable ones meet their debt obligations?In mid-April, the Group of 20 agreed to halt repayments for the poorest countries. That won’t be enough. African economies, for instance, have the largest external funding gap among the low-income group analyzed by Moody’s Investors Service Inc. That amounts to around $40 billion to $50 billion this year, or about 4% to 5% of their combined GDP. The G-20 debt relief is worth only $10 billion.If, say, a few African countries lit up the global news headlines by walking a tad too close to default, would ETF investors sell out of their positions altogether? It wouldn’t be irrational. Thanks to passive funds’ transparency, we know at least one-third of our positions are vested with some of the most fragile emerging economies.BlackRock created retail products from an asset class once preserved for professionals. This great democratization experiment is a double-edged sword. Sure, it helps struggling nations raise money. But in times of distress, contagion becomes the word. Stock pickers — value investors, in particular — have long argued ETFs distort equity markets. That assessment isn’t far off for fixed income, either.(1) Bloomberg Intelligence has assigned a vulnerability rating based on current account balance, short-term external debt, reserve coverage, government effectiveness and deviation from inflation targets.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Shuli Ren is a Bloomberg Opinion columnist covering Asian markets. She previously wrote on markets for Barron's, following a career as an investment banker, and is 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) -- The Bank of England is studying how low U.K. interest rates can be cut amid the coronavirus crisis and isn’t excluding the idea of taking borrowing costs below zero, according to Governor Andrew Bailey.“Given what we’ve done in past few weeks, it should come as no surprise to learn that of course, we’re keeping the tools under active review in the current situation,” Bailey told lawmakers on Wednesday when asked about negative rates. “We do not rule things out as a matter of principle. That would be a foolish thing to do. That doesn’t mean we rule things in either.”The comments come amid a growing debate about the possibility of negative interest rates in the U.K., which intensified Wednesday after a report showed inflation slowed to the lowest level since 2016 and the nation sold debt with a sub-zero yield for the first time. Bailey said his position on going below zero had changed since entering the pandemic, but the policy had received “pretty mixed reviews” elsewhere.While officials have repeatedly emphasized such a move isn’t imminent, and would be tricky to implement in the U.K., they’ve also stressed nothing is off the table in their efforts to fight the impact of coronavirus. The fallout could push the economy into the deepest recession in three centuries.Interest-rate swaps, which are used to gauge where the benchmark may be, are just below 0% for December, and get progressively lower in 2021.Still, a full 10 basis-point cut below zero is yet to be fully priced in. That means that rather than outright bets on a negative rate, those moves might represent traders hedging against the prospect of a worsening economic situation making easier policy more likely.“In investors’ minds even a small probability of negative interest rates in the dollar and pound is a big change”, said Antoine Bouvet, rates strategist at ING Groep NV. “That the possibility remains open, even if small, and might cause some investors to pre-hedge.”Read More:U.K. Inflation Rate Drops Below 1% Amid Negative Rate Debate Negative Interest Rates Are Last on BOE List, Barclays SaysU.K.’s First Negative-Yielding Bond Sale Fuels Debate Over RatesBailey said the BOE was keen to observe the impact of its previous U.K. rate cuts, bearing in mind arguments that they become less effective the closer to zero they are. It’s also examining the experience of other central banks that have cut below zero, he said, adding the financial system in an economy is an important factor.The governor has previously expressed a stronger opposition than other policy makers to the tool, saying they would present a communications challenge and prove difficult for banks. Others have been more sanguine, with Silvana Tenreyro saying they’ve had a positive effect elsewhere and Chief Economist Andy Haldane noting they were something officials were examining among other unconventional tools.Cutting interest rates below zero is the last policy option that BOE officials would currently choose to further stimulate the economy, according to Barclays, which sees more asset purchases as the most likely next step.What Our Economists Say:“Would negative rates really be a game changer if the economy needed a lift? Probably not. The reality is the BOE is at the limits of its powers to boost spending. If demand did need a lift further down the line, we think a more potent policy mix would be for the BOE to continue with QE while fiscal policy does the heavy lifting.”\-- Dan Hanson, U.K. economistAnother side effect would be to further weaken an already beleaguered pound, making imports more expensive. While exports would typically get a boost, the impact of the pandemic on trade means that’s less likely this time.“I can’t think of an economy where negative rates are a worse idea than the U.K.,” wrote Kit Juckes, a strategist at Societe Generale. “How on earth does it make sense to even consider adding negative rates to the mix?”(Adds further comments from Bailey in 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.
(Bloomberg) -- Turkey’s push for faster credit growth is inadvertently eroding returns on lira savings, a consequence of pro-growth policies that officials fear might fuel demand for dollars.The government last month set ambitious targets for banks to boost lending and mitigate the economic fallout from the coronavirus pandemic.But instead of rolling out new loans, some private lenders began aggressive cuts to interest rates on deposits after the banking regulator said they must raise a newly defined asset ratio to above 100%. Policy makers are now concerned lower rates might result in a rush for more dollars and create another source of imbalance as they try to stimulate the $750 billion economy, according to officials with direct knowledge of the matter.“Lira deposit rates follow policy rates very closely,” Barclays Plc economist Ercan Erguzel said in an emailed note. “Bigger cuts on top of current levels, without a further drop in inflation expectations and/or actual inflation, would likely affect the dollarization trend, which has been stable for a while.”Sudden changes in saving patterns can act as a destabilizer for emerging economies such as Turkey, where more than half the savings in the banking sector is already denominated in foreign currencies. Additional demand for foreign exchange could present a particular challenge at a time of declining reserves, which is putting pressure on the currency and amplifying the burden on companies holding foreign debt.Central bank data on deposits underscore officials’ growing concern. Following the new regulation, the average rate lenders offer for lira accounts dropped to 8.4%, the lowest level since November 2013, according to most recent data.The drop was driven by private lenders, where lira deposits fell 3.4% within the first 3 weeks of the new asset-ratio requirement. State banks saw their local-currency deposits rise 7.9% during the same period as they chased credit growth more aggressively.Deposit rates well below consumer inflation are only one factor among many that determine how much foreign exchange Turks might want to hold. But lower rates for a sustained period might eventually force savers to buy more dollars, according to the officials, who asked for anonymity to discuss policy makers’ concerns.Officials at the regulator and the treasury declined to comment.President Recep Tayyip Erdogan and Treasury and Finance Minister Berat Albayrak have repeatedly slammed private banks for failing to support companies even before the coronavirus outbreak paralyzed economic activity. With the economy likely falling into a recession, the focus remains on credit even at the risk of growing vulnerabilities elsewhere.(Updates with economist comment in fourth 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) -- Britain sold bonds with an average yield below zero for the first time, intensifying a debate on negative rates hours before testimony from the head of the Bank of England.The U.K. Debt Management Office raised 3.75 billion pounds（$4.6 billion) by tapping existing bonds maturing in 2023. While the yield at minus 0.003% is little surprise to market watchers -- given that the existing bonds were already trading at roughly the same level -- what makes the auction precarious is the timing.That’s because if Governor Andrew Bailey repeats his opposition to negative interest rates when testifying before Parliament’s Treasury Select Committee Wednesday at 2:30 p.m. in London, buyers could see the value of their gilt holdings plummet.“If he was overtly hawkish, yields on short gilts would be likely to rise,” said John Wraith, head of U.K. and European rates strategy at UBS Group AG. “But I suspect whatever he says will be aimed at reassuring the market and wider public that the BOE stands ready to do anything and everything it thinks could help if the economic situation worsens.”Gilts have rallied this week after BOE policy makers Andy Haldane and Silvana Tenreyro raised the prospect of further easing, with Brexit fears and the coronavirus lockdown pushing Britain toward its worst recession in three centuries. Yet Bailey has pushed back against negative rates, saying last week that although nothing should be ruled out forever, they were not under consideration.In March, the BOE announced it would add 200 billion pounds of gilts and corporate bonds to its asset-purchasing program, expanding it by 45%. Barclays Plc, which sees negative rates as the last policy tool the BOE would choose, expects a further 100 billion pounds of quantitative easing in June.Economic WoesAdding fuel to the fire, U.K. inflation in April fell to the lowest since 2016 amid a drop in energy prices and an economic slowdown induced by the lockdown.“This morning’s release of the U.K. CPI inflation data shows that price pressures are way below where the Bank of England would like them to be,” Jane Foley, a strategist at Rabobank. “This adds interest into the debate about negative interest rates.”While the nation’s economic outlook is bleak, the sale highlights that the government’s huge spending plan to support the U.K. hasn’t spooked investors. That’s largely thanks to the BOE’s asset-purchase scheme, which has kept the cost of borrowing close to historically low levels.It’s one reason why demand outstripped the amount of bonds on offer more than two fold. Even though existing bonds due July 2023 saw their yield fall more than 60 basis points this year to 0%, Citigroup Inc. strategists including Jamie Searle say the issue looked cheap compared to peers with similar maturities.“If anything, this also shows that despite the additional gilt issuance, there is still a structural shortage,” said Antoine Bouvet, senior rates strategist at ING Groep NV.On Tuesday, investors piled into the U.K.’s syndicated bond sale, with orders for the 7-billion-pound offering exceeding 53 billion pounds.Negative RatesOvernight interest-rate swaps are pricing in sub-zero rates by December’s BOE meeting, yet are only just below 0%. The contracts fall progressively lower through 2021, reflecting caution in the market about how to interpret the BOE’s messaging, concern about the consequences of lifting the lockdown too soon and the risk of a messy divorce from the European Union.Sterling traders are also watching Bailey for clues, with the currency snapped two days of gains ahead of his testimony. The price of insuring against a swing in the pound against the dollar overnight is hovering near regular highs seen since early April, as traders position for turbulence after he speaks.“I can’t think of an economy where negative rates are a worse idea than the U.K.,” Kit Juckes, a strategist at Societe Generale, wrote in an emailed note. “How on earth does it make sense to even consider adding negative rates to the mix? The economic benefits are dubious but the power of a cocktail of negative rates and massive QE to weaken the currency seems clear.”(Adds inflation data and Rabobank comment from seventh 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) -- JPMorgan Chase & Co. has hired Barclays Plc credit derivatives trader Benjamin Schaefer, according to people familiar with the matter.Schaefer will join the U.S. bank in London before later relocating to New York, said the people, who asked not to be named discussing personnel moves. At Barclays, he also held roles on both sides of the Atlantic, including head of the high-grade credit-default swaps team, the people said.A spokeswoman for Barclays and a JPMorgan spokesman declined to comment on the hire. Schaefer also declined to comment.He joins following an eventful period for JPMorgan’s credit team. Earlier this year, the bank punished more than a dozen traders for using WhatsApp at work, firing one and cutting bonus payments for the rest. Edward Koo, who was known as one of the bank’s main traders of credit-default swaps tied to individual companies, was dismissed after JPMorgan concluded he broke company rules by creating a WhatsApp group and using it to discuss market chatter with colleagues.Credit swap indexes have been particularly volatile in recent months as the measures taken to stem the coronavirus sent shockwaves through credit markets, causing a gauge of U.S. corporate credit risk to surge by the most since Lehman Brothers collapsed. The cost of credit insurance has declined in recent weeks but remains elevated compared to pre-pandemic levels.(Updates with credit trader departure in fourth 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 Barclays (LON:BARC) share price has risen by 16.0% over the past month and it’s currently trading at 105.18. For investors considering whether to buy, hold...
(Bloomberg) -- India’s rupee declined the most in two weeks, and equities sank as investors were unimpressed by the government’s economic stimulus package.The rupee fell 0.4% to 75.9150 per dollar at the close in the third day of declines. The S&P BSE Sensex and the NSE Nifty 50 Index of shares tumbled 3.4% each in Mumbai. Both measures capped their second-week of losses Friday and ended the day at their lowest levels since early April.“People are more concerned about short-term challenges and not the benefit of these measures in the long run,” said Ajit Mishra, vice president of research at Religare Broking Ltd. in Mumbai. “How these reforms will help improve demand in the near term is what everyone’s worried about.”Read: Goldman Sees Worst India Recession With 45% Second Quarter SlumpIndia extended its lockdown to May 31, while easing restrictions on some businesses after unveiling a rescue package equivalent to 10% of the economy since February. Barclays Plc estimates the actual fiscal impact of stimulus will be only about 0.8% of gross domestic product, while equity strategists and economists are concerned the measures will fall short of tackling the near-term challenges posed by the pandemic, including boosting demand in an already fragile economy.“Markets are factoring in a painful period for the economy that will see corporate earnings falling and bankruptcies rising for small companies and individuals,” said Anindya Banerjee, a currency analyst at Kotak Securities Ltd. in Mumbai.The contagion is accelerating in the South Asian nation of 1.3 billion people, with 96,169 infections and 3,029 deaths, according to data from John Hopkins University.As the earnings season for the quarter through March continues, Bharti Airtel Ltd. is scheduled to report results today. Just five of the 18 Nifty 50 companies that have reported so far have beaten analyst estimates.The NumbersAll except one of 19 sector sub-indexes compiled by BSE Ltd. slipped, led by a gauge of banks.The Bankex Index slumped 6.7% to the lowest level since April 3. Analysts say the government’s rescue package, which focuses on credit to small firms, leans heavily on banks and financial institutions with very little extra budget spending.HDFC Bank Ltd. dropped 5.8% and contributed the most to the index decline, while IndusInd Bank Ltd.’s 10% plunge was the largest. Infosys Ltd. was the biggest boost and had the steepest gain with a 2.1% advance.Related StoriesIndia’s Lockdown Mints More Than a Million New Stock TradersIndia Seen Spending More on Economy After Extending LockdownFor 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) -- 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.
(Bloomberg Opinion) -- President Donald Trump seems to think that states led by Democratic governments are profligate and don’t deserve federal coronavirus relief aid. “I don't think the Republicans want to be in a position where they bail out states that are, that have been mismanaged over a long period of time,” he told the New York Post earlier this month. The worst offenders, he said, mentioning Illinois, New York and California, are debt-burdened places “run by Democrats in every case.” Senate Majority Leader Mitch McConnell has said much the same thing.Actually, no. Governors of both parties have been quick to push back, and commentators pointed out that historically Republican-dominated states like McConnell’s Kentucky tend to receive more from the federal government than they contribute to the national coffers, while states where Democrats usually prevail suffer the reverse fate.When it comes to debt performance, one way to measure fiscal responsibility, blue Democratic states have done better than Republican red ones in the municipal bond market, where their debt was coveted. That’s because they adopted unpopular policies such as raising taxes to shore up underfunded pensions and other burdensome imbalances accumulated after the 2008 financial crisis.Government fiscal policies also helped blue states contribute more to U.S. growth and prosperity than red ones before the pandemic struck, measured by their gross domestic product, personal income, tax revenue, total employment, job growth and labor participation rate.Of the 30 states that voted for Trump in 2016, eight now have Democratic governors; four of the 20 states that went for Hillary Clinton are led by Republicans. But the 2016 presidential balloting generally reflects the states’ partisan leanings, with a smattering of exceptions.The Trump-voting states saw their output grow by a collective $1.775 trillion in the previous five years, to $10.5 trillion at the end of 2019. That’s less than the $2.092 trillion growth in the less numerous Clinton states, according to data compiled by Bloomberg. The more numerous red states, led by Florida and Texas with a combined GDP of $567 billion, generated $317 billion less to the American economy than blue states, led by California and New York with a comparable GDP of $1.046 trillion.Each blue state added 246,000 new jobs on average during the past five years; their red counterparts added 192,000. Employment in blue states increased 6.7% versus 5.4% for red states. Labor participation rose 0.34 percentage points for the blue states and declined 0.07 percentage points for red states. Personal income surged 22.1% for the blue states against 18.8% for the red states. While tax revenue increased 22.2% on average for each blue state, it advanced 19.9% for each red state, according to data compiled by Bloomberg.When he was elected to the third of his four terms as California governor in 2011, Jerry Brown simultaneously reduced spending and raised taxes to the extent that his state perennially outperformed every country and state in the credit default swap market, which measures a borrower's creditworthiness. The largest state's 4.7% increase in GDP last year was more than the 2.3% gain for the U.S. and enabled the state's jobless rate to decline to 3.9%, the lowest on record since such data was first compiled in 1976.As Rhode Island state treasurer and then governor, Gina Raimondo helped transform a small state with the nation’s most unemployment in 2011 by tackling the worst unfunded pension liability in the U.S. She also took the political risk of raising taxes on truckers. When she became governor in 2015, Rhode Island ranked in the lower half of the U.S. in economic health, according to the Bloomberg Economic Evaluation of the States Index, which tracks employment, tax revenue, personal income and other measures. Before her first term ended, Rhode Island climbed to above average and the state's unemployment rate declined to 3.4%, the lowest in 31 years.Investor confidence in these and other blue states is reflected in the change in yield, or how much creditors charge each state during the past five years. California, New York and Illinois saw their borrowing costs decline 55 basis points, 48 basis points and 36 basis points, respectively, compared to declines of 33 basis points for Texas and 21 basis points for Florida, according to Bloomberg Barclays indexes.Maybe Trump and McConnell could learn something about state governments by watching where creditors and investors are putting their money.This column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Matthew A. Winkler is Co-founder of Bloomberg News (1990) and Editor-in-Chief Emeritus; Bloomberg Opinion Columnist since 2015; Co-founder of Bloomberg Business Journalism Diversity Program in 2017. During his 25 years as Editor-in-Chief, Bloomberg News was a three-time finalist and winner of the Pulitzer Prize for Explanatory Reporting and received numerous George Polk, Gerald Loeb, Overseas Press Club and Society of Professional Journalists and Editors (Sabew) awards.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.