Forex Blog

March 27, 2014

Rising Borrowing Costs Driving Chinese Developers To Non-Traditional Financing Means

China’s property developers are turning to commercial mortgage-backed securities and looking at other alternative financing as creditors grow more discriminating in the face of rising concerns about the country’s real estate and debt markets.

Bond buyers are shying away from second-tier developers because property sales have cooled as the economy slows. The expected bankruptcy of a local developer and the country’s first domestic bond default this month have heightened scrutiny of borrowers.

The property companies have a renewed sense of urgency to raise capital after U.S. Federal Reserve Chairman Janet Yellen indicated the central bank, which sets the tone globally for borrowing costs, may raise interest rates as early as the spring of 2015, sooner than many investors had anticipated. Higher rates mean higher borrowing costs, both for the companies and for their home-buying customers.

Highlighting the search for alternative funding avenues, property fund MWREF earlier this month issued the first cross-border offering of commercial mortgage-backed securities (CMBS) since 2006. The offer was priced at a yield lower than two dollar bonds issued last week, IFR, a Thomson Reuters publication, said.

CNBC

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March 5, 2014

BoC Hold Steady – Ukraine Increases Uncertainty

The Bank of Canada says the Ukrainian crisis has added a jolt of “geopolitical uncertainty” to its economic outlook and roiled financial markets.

The central bank nonetheless kept its key overnight interest rate unchanged at 1 per cent Wednesday, exactly where it’s been since September 2010.

At the same time, the bank also dialed back its recent anxiety about disinflation on the home front, noting only that “downside risks to inflation remain important.”

“Excess supply in the economy and competition in the retail sector will keep inflation well below the two per cent target this year,” the bank said in its second rate announcement of 2014.

Bank of Canada Governor Stephen Poloz has previously warned about worsening disinflation risks, sparking speculation about a possible rate cut to boost the economy. The bank uses monetary policy to try to keep inflation running at or near a two per cent annual rate.

Many economists say a rate cut is likely off the table for now. Most expect the bank’s next move will be rate hike, sometime next year.

The central bank also dismissed recent warnings from about a possible crash of Canada’s housing market. “Recent data support the bank’s expectations of a soft landing in the housing market” and stabilizing household debt levels, the statement said.

The bank acknowledged that a number of key measures of the economy are starting to look better, including inflation, GDP growth and exports.

The Globe & Mail

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January’s US Private Employment Disappoints

The forecast for last month’s number of new workers in the private sector was expected to be around 155,000. The report this morning showed 139,000 new jobs. There was also a a slew of downward revisions to the January report. The weather was blamed – Fed Chair Janet Yellen warned the market about the effect this unusually cold winter could have on the economy.

– Private sector employment increased by 139,000 jobs from January to February according to the February ADP National Employment Report®.
Broadly distributed to the public each month, free of charge, the ADP National Employment Report is produced by ADP®, a leading global provider of Human Capital Management (HCM) solutions, in collaboration with Moody’s Analytics. The report, which is derived from ADP’s actual payroll data, measures the change in total nonfarm private employment each month on a seasonally-adjusted basis.

For the Full report visit the ADP website

The Fed’s prepared the market for a slow employment numbers due to the cold weather. ADP does not have perfect correlation to Friday’s NFP number but given the previous report there is not a lot of optimism for employment recovery during the winter.

The post January’s US Private Employment Disappoints appeared first on MarketPulse.

February 21, 2014

October 31, 2013

Major Central Banks Extend Currency Swap Agreements

Six of the world’s leading central banks, including the US Federal Reserve, say they will provide each other with ready supplies of their currencies on a standing basis, extending arrangements set up to steady the global financial system during post-2007 turbulence.

The decision, announced on Thursday, extends currency swap arrangements that until now had been considered temporary measures.

The central banks are: the Fed, the European Central Bank, the Bank of Japan, the Bank of England, the Bank of Canada and the Swiss National Bank.

The so-called swap lines enable those central banks to make sure banks in their home countries can always borrow ready cash from them in any of the currencies involved, should they need it.

via theguardian.com

The post Major Central Banks Extend Currency Swap Agreements appeared first on MarketPulse.

September 26, 2013

US Pending Home Drop 1.6 Percent in August

U.S. home buyers signed fewer contracts to purchase existing homes in August, as higher mortgage rates and higher home prices weighed on housing affordability. So-called pending home sales fell 1.6 percent month-to-month, according to the National Association of Realtors, but are still 5.8 percent higher from a year ago.

The Realtors warned earlier this month that the increase in closed home sales in August (signed contracts in June or July) was the, “last hurrah,” as agents were reporting a steep drop in buyer traffic last month. These pending contracts generally take one to two months to close and therefore indicate slower final sales for the fall.

via CNBC

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Indonesia Prepares Defense for Fed Tapering

Indonesia needs to prepare its defense for the day when the Federal Reserve starts to pump less money into global markets, its finance minister said Thursday.
“It’s inevitable that the Fed will one day end quantitative easing,” Muhamuad Chatib Basri told reporters in Hong Kong. “We need to focus on stabilization.”

The southeast Asian nation is grappling with a slowing economy, rising inflation, a weakening currency and a vast current account deficit.
And investors are anxious about next year’s presidential election, which will be the first time the country has shuffled its leadership in a decade.
Fears that the U.S. Federal Reserve would roll back its $85 billion a month bond-buying program as early as September had prompted sharp capital outflows from emerging markets, including Indonesia, in recent months.

via CNN

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US Jobless Claims Drop to Six Year Low

The number of Americans filing new claims for jobless benefits fell last week to a near six-year low, bolstering the case for the Federal Reserve to wind down an economic stimulus program.

Another economic report on Thursday confirmed a solid pace of economic growth in the second quarter, although it also showed a worrisome decline in consumer prices.

Initial claims for state unemployment benefits dropped 5,000 last week to a seasonally adjusted 305,000, the Labor Department said.

That points to a labor market that is continuing to heal from the 2007-09 recession despite this year’s harsh government austerity and mounting concerns that political dysfunction could trigger a sovereign debt crisis.

The drop in claims could bode well for employers adding workers to their payrolls and sooth concerns at the Federal Reserve, which last week said it was postponing a plan to reduce monthly bond purchases aimed at keeping interest rates low to support the labor market.

via Reuters

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August 13, 2013

US Retail Sales Rise in July

Retail sales rose in July for a fourth consecutive month, showing the U.S. economy is breaking free of the effects of higher taxes and federal budget cuts.
The 0.2 percent increase followed a 0.6 percent gain in June that was larger than previously reported, according to Commerce Department figures issued today in Washington. The median forecast of 81 economists surveyed by Bloomberg called for a 0.3 percent advance. The measure of demand that feeds into gross domestic product climbed by the most this year.

Employment gains and rising household wealth tied to higher home values and stock prices are giving Americans the confidence to spend, triggering improving sales at companies such as General Motors Co. and Ford Motor Co. A pickup in household purchases would help counter the fiscal headwinds of taxes and government cutbacks that have held back the world’s largest economy this year.

via Bloomberg

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June 7, 2013

Moody’s cautious over Debt Markets in Nordic region

Scandinavia’s mortgage model is adding risk to the region’s economies as too few homeowners pay down their debt, Moody’s Investors Service said.

While interest-only mortgages in Sweden and Denmark helped households keep up payments during the crisis, consumers now rely too much on the loans, according to Oscar Heemskerk, vice president and senior credit officer at Moody’s.

“We see vulnerability in that model,” he said in a June 5 interview in Stockholm.

At the current pace of amortization, Swedish households will need 140 years on average to repay their home loans, the Financial Supervisory Authority estimates. In Denmark, interest-only loans make up more than half the country’s $490 billion mortgage market, central bank figures show. Danes carry the world’s highest debt burden relative to disposable incomes, at more than 300 percent, the Organization for Economic Cooperation and Development estimates. Debt by that measure in Sweden and Norway hit record levels this year, central bank figures show.

Interest-only mortgages have made housing more affordable, helping send property prices to all-time highs this year in Norway and Sweden. In Denmark, households are still trying to recover from a burst property bubble that’s sent prices down more than 20 percent since their 2007 peak.

Bloomberg

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This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

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