|Bid||N/A x N/A|
|Ask||N/A x N/A|
|Day's range||14.50 - 15.25|
|52-week range||12.80 - 32.23|
|Beta (5Y monthly)||1.57|
|PE ratio (TTM)||4.93|
|Earnings date||06 May 2020|
|Forward dividend & yield||N/A (N/A)|
|Ex-dividend date||26 May 2020|
|1y target est||43.49|
Name of issuer: Société Générale S.A. – French public limited company (“SA”) with a share capital of 1,066,714,367.50 euros Registered under nr.552 120 222 R.C.S. PARIS Registered office: 29, Boulevard Haussmann, 75009 ParisInformation about the total number of voting rights and shares pursuant to Article L.233-8 II of the French Commercial Code and Article 223-16 of the AMF General Regulations DateNumber of shares composing current share capitalTotal number of voting rights 31st March 2020853,371,494 Gross: 923,237,923 Attachment * Societe Generale shares & voting rights as of 31-03-2020
(Bloomberg Opinion) -- How can we determine the state of the housing market when we lack data? That is the challenge facing those in the real-estate industry today, says this week's guest on Masters in Business, Jonathan Miller, co-founder of Miller Samuel and a master appraiser and consultant to the industry. The contract data we do have reflects transactions entered into a month or so ago, before most of the shelter-in-place orders were adopted.Miller’s expertise on real-estate appraisals and transactions comes from the data he assembles and analyzes. He has created a variety of real-estate data analytics for regional and national markets. He is sought after as the go-to appraiser for the most expensive dwellings in Manhattan. Miller, who also writes at the Matrix Blog, explains how real estate is responding to the lockdown: The industry move to online listing services, such as Street Easy and Zillow, is all but complete. But some online sites are removing crucial data from their listings, including “days since listed” that show how long a property has been on the market. We also discuss the challenges appraisers are having doing interiors inspections, now in New York City but eventually the rest of the country. Appraisals that are “desktop” by computers, or “curbside” drive-bys are becoming more common, he said.Part of the problem the residential market is facing is that the spring selling season most likely is lost; how soon the market returns to normal won't be known until the pandemic passes. Although virtual tours and live videos are an option for some buyers, the human element requires being physically present to see, walk through and even smell a home, which is usually a person’s largest purchase.His favorite books are here; a transcript of our conversation is available here. Our 2014 conversation with Miller can be found here; our 2016 MiB is here.You can stream and download our full conversation, including the podcast extras, on Apple iTunes, Spotify, Overcast, Google, Bloomberg and Stitcher. All of our earlier podcasts on your favorite pod hosts can be found here.Next week, we speak with James Montier, a member of GMO UK Lt.’s asset allocation team. Before joining GMO in 2009, he was co-head of global strategy at Societe Generale. He is the author of several books including “Behavioural Investing: A Practitioner’s Guide to Applying Behavioural Finance”; “Behavioural Finance: Insights into Irrational Minds and Markets” and “The Little Book of Behavioural Investing.”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 Opinion) -- Banks insist they’re in much better shape than they were during the run-up to the 2008 financial crisis. This time, as the coronavirus lockdowns wreck output, lenders can be “doctors of the economy,” in the words of one industry executive. True, banks have much larger capital buffers and better access to funding than was the case 12 years ago. How smart they've been at running their trading businesses remains to be seen.Some of Europe’s biggest banks have gone into the worst economic contraction since the Second World War sitting on huge piles of complex, risky trades whose fair value is hard to determine. These are the so-called Level 2 and Level 3 assets, the types of instruments that blew up in 2008.Valuations of Level 2 assets — mainly over-the-counter derivatives and illiquid stocks — are derived from using observable external measures, such as the price of similar instruments traded in the market. Level 3 assets are the most illiquid instruments, whose prices depend on inputs that aren’t observable to outsiders. Unlike Level 1 assets, which have easily viewed market prices, investors have to rely on banks’ internal models, and own judgments, to get a handle on the Level 2 and Level 3 exposure. Fair values for the same instrument might easily differ from firm to firm.The absolute size of these risky asset pots — totaling several hundred billions of dollars at many of the largest banks — is eye-watering. They dwarf the lenders’ capital by many multiples. Take Deutsche Bank AG: Its stock of Level 2 and Level 3 assets is more than 11 times its common equity Tier 1 capital. At Britain’s Barclays Plc, it is just shy of 11 times, at France’s Societe Generale SA it’s seven times and at Switzerland’s Credit Suisse Group AG it’s almost eight times. While plenty has been written about the inevitable build-up of bad loans in the Covid-19 downturn, these piles of interest-rate swaps and collateralized debt obligations need to be considered too. In the recent market rout, every major asset class was upended. U.S. stocks fell into a bear market at record speed, the dollar soared and safe-haven assets such as government bonds were rocked. How banks’ risky assets fared during the unprecedented turmoil is guesswork from the outside. All the banks listed in the table above declined to comment for this piece. One bank executive, who asked to remain anonymous, said the balances of banks’ Level 2 and Level 3 assets and liabilities may both have increased in the quarter, which would be a welcome sign that hedges have been working in the turmoil.For example, the decline in long-term interest rates would have increased the present value of years-old derivatives that swapped fixed rates for floating rates. Interest-rate derivatives tend to make up the bulk of the portfolios, and they may have offset declines in the prices of equities and loans. (That said, some hedges would have been for interest rates and inflation to rise, so they could be heavily in the red.)Less welcome is that banks will probably have to start moving things from Level 2 to Level 3 as price discovery becomes more difficult. Some may decide that observable measures through mid-to-late February are sufficient to keep assets in the Level 2 pot for the first quarter. Each bank has its own model. Lehman Brothers allegedly shifted mortgage-backed securities and other assets from Level 2 to Level 3 in 2008 in an effort to prop up their values.The market became hugely skeptical about these instruments during the financial crisis. A 2015 study published by the Journal of Accounting and Public Policy showed that investors valued Level 2 assets at 85 cents on the dollar and Level 3 assets at 79 cents during 2008. More troubling for the banks sitting on large stocks of Level 2 instruments is that an analysis by Wharton Research Scholars shows they were discounted even more significantly during the crisis than the more opaque Level 3 stuff.Investors should look at how frequently banks turn over their Level 3 assets, according to analysts at Berenberg, who published a report this week saying that France’s BNP Paribas SA, Credit Agricole SA and SocGen have the lowest turnover of Level 3 instruments among 12 banks they studied, which means the assets are probably “stickier and harder to sell.” Credit Suisse has the highest turnover among the group.The French banks, Credit Suisse, Barclays and Deutsche each hold Level 3 assets that are as large as, if not larger than, those of Citigroup Inc. and Bank of America Corp., even though the latter have much bigger trading businesses.The European Systemic Risk Board, the European Union body that monitors the financial system’s stability, has also noted the Level 2 and Level 3 threat — particularly the prospect for “opportunistic behavior” by managers and the overvaluation of assets. “If several banks were to be affected simultaneously at a time of acute fragility in the financial system, concerns could spread to the macroprudential domain and affect financial stability,” a February report from the board warned.What’s more, banks no longer have to use the crisis-era filters that protected their capital positions from movements in the fair value of assets they hold for sale. Without these filters, fair-value gains and losses are directly recognized in banks’ income statements even if they’re unrealized. And as my colleague Ferdinando Giugliano noted, significant risks may lie in smaller banks that may not have been as transparent in their Level 2 and Level 3 disclosures.Equally concerning is the faith being placed in banks’ risk management practices, especially since regulators started loosening the rules because of the Covid-19 crisis. In its 2019 review, the European Central Bank’s Single Supervisory Mechanism, its bank oversight arm, observed a worsening of internal governance, especially among the larger lenders. Regulator’s plans to tackle this area of weakness with a new set of capital rules for trading desks — known as the Fundamental Review of the Trading Book — was pushed back a year to January 2023 as part of the response to the coronavirus lockdowns. By then, it could be glaringly obvious how clever banks have been at managing risk.This column does not necessarily reflect the opinion of Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- Societe Generale SA and Credit Agricole SA, two of the biggest French banks, added billions of dollars of hard-to-value assets in the years before the market carnage triggered by the coronavirus, according to Berenberg.The lenders are the only two out of a dozen large European and U.S. banks to increase their holdings of the most illiquid securities -- known as Level 3 assets -- since 2015, Berenberg analyst Eoin Mullany wrote in a note to clients. Credit Agricole now holds more than Wall Street giants such as Citigroup Inc. and Bank of America Corp.While Deutsche Bank AG has cut its holdings, the German lender still has more of them than any of its rivals and has “little room for error on capital,” according to the note.European banks have tumbled since the spreading coronavirus began to upend financial markets in February. Investors, already worried about how the lenders will fare in a possible global recession, may increasingly focus on Level 3 assets as a measure of financial health, Mullany wrote.“In this environment, certainty about asset values is key,” Mullany wrote. “As such, we believe Level 3 assets will become more of a focus for the market.”Level 3 assets include investments that gained notoriety in the 2008 financial crisis, such as bespoke derivatives and some mortgage-backed bonds. While their opacity can make them lucrative for lenders, they are a headache for regulators. Scrutiny has increased since the European Central Bank took over supervision of the euro area’s biggest banks from national authorities in late 2014.Credit Agricole, based in the Parisian suburb of Montrouge, increased its Level 3 assets by half to about 15 billion euros while Societe Generale boosted its holding 14% to just over 10 billion euros, according to Berenberg. Deutsche Bank’s fell to under 25 billion euros.A spokesman for Deutsche Bank declined to comment on the report. Officials for the two French lenders didn’t immediately respond to a request for comment.The two French banks, along with Paris-based rival BNP Paribas SA, also have the lowest turnover of Level 3 assets, according to the note. This means that they are rarely traded and are likely to be “stickier and harder to sell,” Mullany wrote. Credit Suisse Group AG, which has about 15 billion Swiss francs of the holdings, has the highest turnover.Societe Generale, overseen by Chief Executive Officer Frederic Oudea, is among the world’s biggest players in equity derivatives, complex contracts that derive their value from stocks. Credit Agricole, run by CEO Philippe Brassac, has pulled back from that business but is active in structuring derivatives linked to interest rates, corporate debt, foreign exchange and precious metals.Banks split their assets into three categories including Level 1 for those with transparent prices, like stocks, and Level 2 for assets where some external data is available, including over-the-counter derivatives such as interest-rate swaps.There is little market data available for Level 3 assets and banks thus get to value them themselves based on historical data and risk assumptions.‘Mark-to-Myth’“Level 3 assets are the most contentious,” Mullany wrote. “These assets have been affectionately known as ‘mark-to-myth’ given the leeway banks and their auditors have in their valuation of them.”Last year, the ECB continued its efforts with a series of visits to euro-area banks to examine risks in their trading businesses, including monitoring the areas most exposed to valuation risk. While Level 3 assets make up just 2% of trading book assets, 82% of them are located at just three banks, the ECB said in its annual report, without identifying the firms.The ECB said a campaign it started on valuation risk last year will continue this year and next, although the central bank has subsequently said it will delay inspections to help banks focus on tackling fallout from the coronavirus.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.
You can share your thoughts with Thyagaraju Adinarayan (email@example.com), Joice Alves (firstname.lastname@example.org) and Julien Ponthus (email@example.com) in London. Shares in European banks have taken a beating after they bowed to regulatory pressure by scrapping their dividends and keep the cash aside as an precautionary capital buffer. Analysts at Jefferies looked at asset managers Amundi and DWS, which are both majority-owned by Credit Agricole and Deutsche Bank respectively.
French banks, Societe Generale and Natixis joined a cohort of European peers that announced plans to skip 2019 dividends following the European Central Bank's guidance to direct profits toward supporting the economy during the coronavirus crisis. France's third-largest bank Societe Generale said on Tuesday its board has decided to cancel dividend distribution for the 2019 financial year and to drop 2020 financial targets. The bank added it was currently analyzing potential scenarios and their impact on the bank's results from the crisis, as well as "potential corrective measures".
Banks and their supervisors must remain vigilant in light of the evolving nature of the COVID-19 epidemic to ensure that the global banking system remains financially and operationally resilient, global regulators said on Friday. The Basel Committee of banking supervisors from the world's main financial centres said it held a teleconference on Friday and supported measures taken by members so far.
Changes to how shares are traded off an exchange in the European Union have been delayed by three months because of the impact of the coronavirus epidemic on banks, the bloc's markets watchdog said on Friday. The European Securities and Markets Authority (ESMA) said enforcing the new "tick" size regime or size of share trades executed at "systemic internalisers", typically big banks, should be delayed to 26 June. Tick size refers to the increments a stock can move up or down, and the new regime formally comes into effect on March 26 to avoid off-exchange venues having a competitive advantage over exchanges.
(Bloomberg Opinion) -- The coronavirus outbreak is costing hedge funds billions, as a massive dislocation across asset classes causes a breakdown in traditional relationships. In the past 10 days, bonds, stocks and even gold — a hedge against the prospect of central banks’ helicopter money — are falling in tandem. Funds that rely on computer algorithms and historical global macro trends are hurting.Take the risk parity trade, made popular by Bridgewater Associates LP. Such strategies bet on a near-perfect match between stock rallies and bond sell-offs — and it has worked out very well for the past decade. As of early March, the weekly correlation between the S&P 500 and 10-year Treasury bonds was minus 0.84, the lowest since early 2015, Goldman Sachs Group Inc. estimates. A score of minus 1 would mean there is perfect negative correlation — that is, when stocks rise, bonds would always fall.But the coronavirus shook that landscape. The yield on 10-year Treasuries has doubled in recent days, from 0.54% on March 9 to 1.14% Thursday, even as the Federal Reserve slashed its benchmark rate to zero. We’re seeing the same thing in Japan. Stocks and bonds are falling, dragging the underlying thesis of the risk parity trade down with it.To make matters worse, these trades tend to use leverage to amplify bond exposure, because stocks have historically been more volatile. Risk parity — as the name implies — seeks to equalize a portfolio’s risk exposure in both asset classes. And boy, whoever said bonds are stable hadn't seen anything like the coronavirus. Take a look at the ICE BoA MOVE Index — the bond-market equivalent to the Chicago Board Exchange Volatility Index, or VIX — which is at its most volatile since 2009. It turns out even U.S. government bonds aren’t that safe.Or consider those statistical arbitrage funds that use computer algorithms to scour markets for tiny mispricings. These funds rely heavily on leverage to juice gains. But dollar funding is freezing up as banks hunker down for corporate clients and add to reserves to buffer against market volatility, margin calls and flash crashes. If a fund was only making, say, 10 basis points on illiquid trades, and its broker is now raising lending rates to pare back counterparty risk, it now faces the uncomfortable question of whether to liquidate its position.And forget about relative value trades, which seek to find arbitrage opportunities in mispriced pairs of highly correlated assets. In the currency world, this has unraveled as investors rush to the haven of the U.S. dollar. A sharp weakening of the Australian dollar this month, for instance, might seem overdone, as it tends to follow the Chinese yuan, which has been eerily stable lately. But as Societe Generale SA's currency strategist Kit Juckes wrote, the current market makes a mockery of overthinking trade ideas.Industry titans are getting caught wrong-footed. Bridgewater’s All Weather fund, which pioneered the risk parity trade, is down 12% so far this year. Meanwhile, Izzy Englander’s Millennium Management has closed more than 10 of its “trading pods.” Millennium relies heavily on relative value trades.And these are the pros, who have been through the Long-Term Capital Management bailout in 1998 and the Lehman Brothers Holdings Inc. bankruptcy a decade later. For those too young to remember such violent market dislocations, the bloodbath has probably been even worse. Considering the benchmark S&P Risk Parity Index already tumbled 16.5% this year, Bridgewater’s All Weather fund isn’t even doing that badly.Global markets managed to breathe a little Thursday as major central banks took out the big guns. The Federal Reserve revived a few emergency lending facilities put to sleep after the global financial crisis, and established currency swap lines with emerging markets such as Brazil and Mexico. But is it enough? We have all agreed central banks can’t stop the virus; at best, they can only blunt the blow to financial markets.Ray Dalio, Bridgewater’s founder, famously said that cash is trash. Now, Dalio, who is revered in China, has to get associates there to dispel rumors that his funds have “crashed.” As we’ve argued, the coronavirus is turning all of us — people and companies — into hoarders. All we want is cash. The hedge funds that borrowed piles of the stuff to buy everything around the world can't be feeling too comfortable about the weeks ahead.This column does not necessarily reflect the opinion of 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 world’s reserve currency surged, with a dollar gauge rising to a record high, amid a rush for cash in anticipation of a prolonged coronavirus pandemic.All Group-of-10 currencies tumbled, with the oil-linked Norwegian krone suffering the most heavy losses. Even traditional safe assets, such as the yen, dropped as much as 1.4% as liquidity evaporated with investors rushing to meet margin calls.“Everything is getting sold,” said Chris Rands, portfolio manager at Nikko Asset Management Ltd. “We’re doing the absolute bare minimum because offering to sell anything in these markets is just crazy -- we’re trying our best to hang on and see where it all shakes out. I don’t see this dollar stampede going away.”The rush for dollars is gaining pace despite every attempt by the Federal Reserve and its peers to provide liquidity through swaps, repurchase operations and emergency rate cuts. As the virus spreads and the death toll mounts, countries from Italy to Malaysia have locked down borders, strangling commerce and trade, and leading to a cash flow crunch for companies.Sovereign bonds from France and Italy to Greece rocketed after the European Central Bank announced a huge boost in its efforts to stabilize the economy and capital markets. Yet that offered little relief for the beleaguered euro, which fell as much as 1% on Thursday and the region’s international equities benchmark, the Stoxx 600, failed to hold gains.Meanwhile, the Bloomberg Dollar Spot Index gained as much as 1.1% to touch an all-time high, according to data going back to 2004.“Simply put, it’s a liquidity mismatch as there are far more U.S. dollars in demand than currently on offer,” said Stephen Innes, chief market strategist at Axicorp Ltd., adding that government and central bank policy appears “mostly defenseless against the super steamroller of extreme weakness across equity, bond, and credit markets.”Intervention TalkThe sell-down is raising talk of coordinated intervention in the foreign exchange markets. The Group of Seven’s last joint currency intervention was in the wake of the 2011 Japan earthquake, when a statement was issued.“We may start to hear talk of intervention in foreign-exchange markets – at least an attempt to calm disorderly markets,” ING’s Chris Turner wrote in a note to clients. “The biggest fans of currency intervention will be the White House.”So far, policy makers have acted independently, with the bulk of their measures aimed at providing dollar liquidity and calming bond markets. The Federal Reserve, which has slashed rates twice and pledged to buy more bonds, is debating whether to expand the scope of its interventions, according to Philadelphia Federal Reserve Bank President Patrick Harker.The Bank of Japan on Thursday offered to buy 1 trillion yen ($9.2 billion) of bonds in an unscheduled operation, and followed up with offers to buy more. Hours later, the Reserve Bank of Australia said it would buy bonds across the yield curve to “address market dislocations.” It also announced that it would target a level of around 0.25% for the three-year bond yield.Meanwhile, the Swiss National Bank is stepping up currency interventions to stem the haven franc’s advance, which has strengthened by almost 3% against the euro this year.“We are seeing an unprecedented situation where the more central banks ease, the more dollars are being stacked,” said Min Gyeong-won, an economist at Shinhan Bank in Seoul. “The Fed’s bid for victory has failed, with markets not listening, worsening the dollar chaos and extending losses in Asian currencies.”Emerging-markets are bearing much of the brunt from the dollar’s supremacy as they try to cope with collapsing exchange rates and plunging demand. With businesses and governments bracing for soaring costs on their dollar-denominated debt, EM central banks must grapple with slashing interest rates which could support growth but also destabilize their currencies further.Read: Surging U.S. Dollar Is Next Big Headache for World EconomyTurkey, South Korea, Chile, Vietnam, Sri Lanka and Pakistan have all eased this week, with more expected to follow in the coming days and weeks. Since Jan. 20 -- in the early stages of the virus concern in Asia -- the Russian ruble and the Mexican peso have tumbled more than 20%.“The biggest thorn in central bankers’ sides is the lack of liquidity and the shortage of dollars across markets,” said Kit Juckes, chief currency strategist at Societe Generale SA. “It makes G-10 currencies trade like EM ones and supports the dollar irrespective of any other fundamentals.”(Updates throughout.)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) -- The fallout from the worst rout in credit markets since the global financial crisis is spreading, threatening everything from mortgage debt in Australia to local government bond markets in the U.S.As the deadly coronavirus pandemic brought more grim headlines Wednesday, risk gauges in the U.S. and Europe pushed out further in another volatile session. The crisis has also closed in on Japan’s $650 billion local credit market, which had been an oasis of calm.In the U.S., even the $3.9 trillion state and local government bond market, which usually functions as a haven, has seen yields surge as investors pull out their cash, triggering waves of forced selling by fund managers who need to raise money. That has saddled investors with their biggest losses since 1987 and effectively locked states and cities at least temporarily out of the bond market, with all the big sales planned for this week on hold.Treasuries and other sovereign bond yields have marched higher ahead of trillions of dollars in expected stimulus globally. The U.S. Senate passed a second major relief bill, separate from an additional economic rescue package that President Donald Trump’s administration estimates will cost $1.3 trillion. The European Central Bank launched an extra emergency bond-buying program worth 750 billion euros ($820 billion) to calm the worsening financial crisis.“You can’t buy risk,” said Mark Nash, head of fixed income at Merian Global Investors in London. “We need easier financial conditions and some virus light at the end of the tunnel, and we are seeing neither at the moment.”U.S.CDX is approaching financial crisis levels as traders weigh the efficacy of fiscal and monetary stimulus to counter the effect of the coronavirus. That kept borrowers at bay, a stark contrast to Tuesday’s onslaught.Investment-grade bond spreads rose 30 basis points to 285 basis points, the widest level since July 2009, while high yield widened 58 basis points to 904 basis pointsYields on top-rated 10-year municipal bonds have more than doubled since March 9 to 1.86%, according to Bloomberg’s benchmark index. For debt that’s due in three months -- which is among the easiest for fund managers to sell in a hurry -- the yields have more than tripled to 1.6%JetBlue was cut one notch to BB- by S&P and may still be cut further, while Delta’s bonds fellMallinckrodt failed to line up funding for a loan deal designed to ease its debt load and help settle massive legal claims tied to its alleged role in the nation’s opioid crisisMoody’s followed S&P in downgrading Hertz, cutting the company one level to B3, with a negative outlookMoody’s also cut Occidental Petroleum Corp.’s credit rating cut to junk, saying its purchase of Anadarko “continues to burden the company’s balance sheet”The leveraged loan market has plunged to levels not seen since the financial crisis, signaling higher default rates and a potential funding crunch aheadThere’s still plenty of pent-up issuance in the investment-grade market, where borrowers have come forward opportunistically mostly to refinance commercial paper and other debtU.S. investment-grade bonds in the aircraft leasing industry are trading at distressed levelsThe front-end is especially feeling the pain, as pressure builds on companies to meet near-term obligations. Just 72% of short-dated debt now trades above par, versus 99% 10 days ago, according to Deutsche Bank strategist Craig NicolOaktree Capital Management is planning a new distressed debt fund, co-founder Howard Marks said in a note to clientsHere’s how cash-hungry companies could bite $700 billion out of banksEuropeFrance’s financial regulators helped banks including Societe Generale and Credit Agricole respond to the growing coronavirus crisis by eliminating a key capital requirement to keep credit flowingItaly’s Prime Minister Giuseppe Conte has proposed joint EU debt issuance, with German chancellor Angela Merkel saying she’s happy for her finance chief to explore the proposal with other ministersWhile joint EU debt remained a taboo for Germany even at the height of the financial crisis after 2008, Merkel said there are “no conclusions” at this stagePoland and the Czech Republic both announced fiscal stimulus packages aimed at shielding their economies from the impact of the virus. They offered holidays in debt repayments, loan guarantees and co-financing of workers’ wagesThe doors to Europe’s primary bond market slammed shut again on Wednesday, after a trio of borrowers attempted to get deals done a day earlier with mixed success. Toronto Dominion bank halted a sale of pound-denominated covered bonds, citing “adverse market conditions,” while Royal Bank of Canada failed to tighten pricing on a euro-denominated sale of covered notesRegular primary sales will only resume once virus-fueled volatility comes to an end, according to market participants interviewed by Bloomberg News, yet they have no idea when this might beMeasures of credit risk are climbing, with default swaps protecting high-grade European firms jumping as much as 10% today to the highest since June 2013Euro IG bond spreads ended Wednesday at 231 bpsCitigroup has more than doubled its forecasts for euro investment-grade and high-yield bond spreads this year; it now sees euro IG spreads versus swaps at 140 bps, and euro HY spreads ending the year above 600 bpsAsiaGlobal airlines have $29 billion of outstanding debt coming due by the end of the year, with most coming from China Southern and China EasternSpreads on Asian dollar bonds were 5-15 basis points wider, according to traders. That leaves them at their highest in about a decade, according to a Bloomberg Barclays indexThe Markit iTraxx Asia ex-Japan index of credit-default swaps was indicated about 2 basis points wider, according to trader pricesIn Australia, the mortgage-backed security market is “effectively closed” as yields on senior bank debt are up as much as 160 basis points in two weeks, according to Robert Camilleri, co-founder and head of structured credit at Realm Investment HouseIn Japan, S&P cut its outlook on SoftBank to negative late Tuesday, citing the broad market declines and the conglomerate’s plans for a share buybackIn India, the extra yield investors demand to own three-year top-rated corporate bonds over sovereign notes has jumped to a more than four-month high of 109 basis points. Here’s a chart showing that:(Updates U.S. details throughout)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) -- European Central Bank President Christine Lagarde unveiled a calibrated package of stimulus, spearheading the region’s financial response to the coronavirus with measures intended to “surgically” support key parts of the economy.Warning of a “major shock” to prospects for global growth, Lagarde and colleagues crafted what she called a “comprehensive” program to support activity by helping companies to stay in business and banks to keep lending. They promised to buy more bonds, and enhanced a loan program with terms that effectively amount to an interest-rate cut for banks that use it to pump money into the economy.The move failed to stem a global stock rout however, which resumed even after the U.S. Federal Reserve took aggressive steps to add liquidity to Treasury financing markets. Meanwhile a stumbled comment by Lagarde on bond spreads had already caused Italian yields to surge.Observers were divided on the overall effectiveness of the package. Erik Nielsen, group chief economist at UniCredit, said that it was “pretty good” with enormous liquidity on “amazingly attractive terms.” By contrast, Roberto Perli at Cornerstone Macro said that the stimulus was “not entirely weak, but was not overwhelming either.”Overshadowing the presentation of the package at a press conference in Frankfurt was Lagarde’s observation that “we are not here to close spreads,” a declaration met with alarm by investors focused on Italy, the economy suffering the region’s worst outbreak of the virus. Widening bond spreads are reminiscent of the debt crisis in 2012 that almost splintered the euro zone. “I don’t understand why she said that,” Nielsen told Bloomberg Television. “As the head of the ECB, she should be very concerned about spreads, because spreads prevent the ECB from having a proper transmission mechanism.”Lagarde backpedaled a bit in an interview with CNBC, saying that the ECB is mindful of fragmentation risks and its tools will be completely available to Italy.A centerpiece of her message on Thursday was to urge governments to form “an ambitious and coordinated fiscal policy response” to match the ECB’s new injection of liquidity. She called for “decisive and determined” action by finance ministers as soon as Monday, when they meet.The dramatic escalation in the ECB’s own response after weeks of monitoring the worsening outbreak arrived in parallel with news of a loosening in Germany’s reluctant stance toward fiscal easing, though still laced with caution. One day earlier, the U.K. had delivered a coordinated package including an emergency interest-rate cut, complementing a 30 billion-pound ($38 billion) budget stimulus.European stocks extended a slump in the hours after the ECB announcement, with the Stoxx Europe 50 Index down more than 12% at the close. The euro fell as much as 1.9%. Italian bonds plunged.Questioned on the market reaction, Lagarde said it takes time for such decisions to be analyzed and appreciated.Where she defied investor expectations on Thursday was in keeping the deposit interest rate at minus 0.5%, staving off pressure for a cut deeper below zero. With negative interest rates hurting banks and irking some voters in northern European countries, the arguments in favor of shunning such a move were clearly persuasive.No rate cut was even on the table in the meeting as policy makers considered that there was little that monetary policy alone could do to respond to the crisis, according to people familiar with the matter.Read more: No ECB Officials Suggested Rate Cut Despite Market ExpectationsThe TLTRO measure has possibly created a dual-rate regime through the back door, by allowing the rate offered on the program -- which would be used by banks to lend into the real economy -- to fall by as much as a quarter-point below the deposit rate. The ECB’s package also opens a new dimension to the central bank’s crisis toolkit by marrying liquidity provision with an easing of capital demands.“It looks actually quite promising,” said Anatoli Annenkov, senior economist at Societe Generale SA. “They are clearly sending a signal that liquidity should not be an issue. On that level it’s a positive, and I’m maybe surprised a little bit that the market reaction is so poor.”What Bloomberg’s Economists Say...“We expected Christine Lagarde to heed calls for stimulus and the European Central Bank president did not disappoint. Much more favorable conditions on TLTRO-III will support lending and offer some support to businesses in Europe disrupted by the coronavirus outbreak, though governments will still need to do their part.”\--By Maeva Cousin, David Powell and Jamie RushClick here for the full reportLagarde’s call for governments to take timely action has yet to be heeded throughout Europe. While indebted Italy has added stimulus, Germany in particular has been reticent. Still, it is prepared to abandon its long-standing balanced-budget policy, according to people with direct knowledge of its economic policy.“The central bank acted decisively,” Bundesbank President Jens Weidmann told Bloomberg. “Health and fiscal policy is, however, required to be in the front line of combating the causes and the immediate consequences.”(Updates with Fed move in third paragraph)\--With assistance from Piotr Skolimowski, Jana Randow, Katerina Petroff, Daniel Schaefer, Alexander Pearson, Alexei Anishchuk, Catherine Bosley, Craig Stirling, Fergal O'Brien, Brian Swint, Zoe Schneeweiss, Lucy Meakin, William Horobin, Jeannette Neumann, David Goodman, Guy Johnson, Vonnie Quinn and Iain Rogers.To contact the reporters on this story: Carolynn Look in Frankfurt at firstname.lastname@example.org;Craig Stirling in Frankfurt at email@example.comTo contact the editors responsible for this story: Paul Gordon at firstname.lastname@example.org, Jana RandowFor 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.
More than 50 staff at Societe Generale's London office were working from home on Friday as a precautionary measure against the spread of coronavirus, a source familiar with the matter told Reuters. Citigroup has sent 10% of traders who usually work in its Canary Wharf office to a backup site in Lewisham, a source familiar with the move said.
(Bloomberg Opinion) -- Efforts to contain the spread of the novel Coronavirus are prompting a slowdown that poses the biggest danger to the world economy since the financial crisis, according to the OECD. Stocks last week suffered their biggest selloff since 2008. But the market dislocations aren’t the only virus perils to rattle Wall Street’s traders and their colleagues in overseas financial hubs.Grappling with an outbreak that could become a global pandemic is adding unprecedented complexity to the day-to-day running of banking institutions that are vital to facilitating the exchange of financial assets.Banks everywhere have been testing the ability of their traders to work at specially designated offshoot offices away from city centers, or from home. But with governments talking about more possible lockdowns, this may soon become essential. The breaking up of hubs to shield traders from the virus would be a huge test of the operational resilience of an industry that accounts for at least $160 billion of the big banks’ revenues. Trading depends on access to cutting-edge technology, demands tight regulatory oversight and thrives on the physical proximity of staff.Regulators will also have to decide how far they’re willing to soften controls — by allowing people to trade from home or elsewhere — to ensure the uninterrupted functioning of markets. A serious pandemic would give trading risk a fresh dimension.Calamities such as the 9/11 terrorist attacks on New York have already prompted securities firms to plan for anything from wars, to floods, to cyber-attacks hitting their core activities. But a pandemic is different, given its global nature: Banks have suddenly found themselves having to think about reorganizing businesses on two continents. Shanghai, Hong Kong and Seoul have been at the forefront of these deliberations, with Milan joining them last week. London and New York could follow, with cases emerging in the financial system’s two most important centers.This isn’t to say that pandemic planning has been ignored. In the U.S., the Federal Financial Institutions Examination Council has required banks to create such plans for more than a decade. For the past couple of weeks, some big banks have been rotating teams of trading staff to work remotely to make sure the systems and checks are robust. But this hasn’t been a full real-world test yet.Even if banks can move staff to different venues, away from virus hot spots, to handle transactions typically executed under one roof, they might not be able to process the same volume of deals. Firms may have just one or two disaster recovery sites that fully replicate their main operations. Currency and equity trading rely heavily on electronic execution, which needs state-of-the art communications. Working from home would be harder still. Access to office trading platforms via virtual private networks requires ultra-reliable, high-speed internet connections and cyber-security resilience. Then there’s the issue of controls and compliance. While bankers advising on mergers or fund-raisings can liaise with clients from remote locations, traders operate under strict oversight. Their phone calls are taped in the event of any mistakes, and their conduct is monitored closely. There may be a point beyond which firms’ compliance authorities may constrain their ability to break up groups.Some European banks are already in talks with regulators to allow traders to work from home, according to the Financial Times. In Hong Kong, the Securities & Futures Commission has invited firms to speak up should they have operational difficulties. “There are regulatory oversight challenges associated with working from remote locations,” the Association for Financial Markets in Europe, an industry body, said by email.Regulators will need to weigh up the impact on confidence and liquidity that shutting down parts of the market would have if traders were out of commission, versus the risk of letting banks ease up on their surveillance. The market-rigging scandals that embroiled firms and the multi-billion dollar losses of rogue traders at Societe Generale SA and UBS Group AG will be fresh in supervisors’ minds. There’s a good reason why traders rub shoulders in large, open-plan offices where information flow helps avoid mistakes and behavior is monitored.It could well be that securities firms have it all worked out, and that trading can continue largely unaffected. In China, equity and debt markets haven’t been affected much by remote working. But the splintering of traders will increase costs and vulnerabilities.\--With assistance from Marcus Ashworth and Nisha Gopalan.To contact the author of this story: Elisa Martinuzzi at email@example.comTo contact the editor responsible for this story: James Boxell at firstname.lastname@example.orgThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Elisa Martinuzzi is a Bloomberg Opinion columnist covering finance. She is a former managing editor for European finance at Bloomberg News.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
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