Tag Archives: Debt Market / Fixed Income

UPDATE 1-RBNZ The governor said the inflation target needed to be met before it tightened | Instant News

(Adding comments and details)

WELLINGTON, February 25 (Reuters) – New Zealand’s central bank governor said on Thursday that inflation must continue to be in the midpoint range of its target before tightening monetary conditions are considered.

“We need to be patient … We need to ensure that actual inflation is sustained at that midpoint before we jump into tightening conditions,” Governor Adrian Orr told a parliamentary committee.

The Reserve Bank of New Zealand (RBNZ) kept interest rates unchanged on Wednesday and said it will continue to do so until it believes inflation is maintained at its 2% per annum target midpoint and employment is at its maximum sustainable rate.

Orr said the RBNZ wanted to ensure the economy did not experience a “deflationary and disinflationary spiral.”

New Zealand’s success in tackling the coronavirus has helped usher in a faster economic recovery, with critical data such as jobs, inflation and business confidence posting better than expected results.

But the RBNZ said risks remained for the New Zealand economy focused on trade and tourism until the pandemic spreads globally.

“You can only be so confident in what New Zealand can do on its own … We need the whole world to come join the party as well so that we are on a strong sustainable path,” said Orr.

“Until that happens, further monetary stimulus is needed,” he added. (Reporting by Praveen Menon; Editing by Jonathan Oatis and Hugh Lawson)


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UPDATE 2-New Zealand’s central bank to consider the impact of monetary policy on housing | Instant News

* Housing is added to RBNZ authority, but not mandate

* The RBNZ needs to explain its impact on housing on a regular basis

* Mortgage debt-to-income and interest-only ratio considered (Adding background, comments from analysts and opposition leaders)

WELLINGTON / SYDNEY, February 25 (Reuters) – The New Zealand government on Thursday tasked the country’s central bank with considering the impact of its monetary and financial policy decisions on housing prices, a move to help calm the country’s fiery property market.

Finance Minister Grant Robertson said the Reserve Bank of New Zealand (RBNZ) should consider government policies regarding more sustainable housing prices.

“Today’s announcement is just the first step as the government weighs broader suggestions on how to cool the housing market,” Robertson said in a statement. “We know the rapid improvements we’ve seen in recent months are not sustainable, which means many first-time home buyers have a hard time accessing the market.”

The government’s authority ceases to impose new monetary policy objectives in the RBNZ, the first step in the world that RBNZ Governor Adrian Orr warned late last year when the government first pitched the idea.

Orr argued that adding housing to the bank’s mandate could make monetary policy less effective and affect the efficiency of financial markets, adding that monetary policy alone cannot fix the housing problem.

Orr on Thursday welcomed the addition of remits, which take effect March 1, noting that monetary and financial policy is one of the “many influences on house prices.” He also stressed the monetary policy committee’s targets – maintaining price stability and maximizing sustainable employment – remain unchanged.

Prime Minister Jacinda Arden’s government is under pressure to fix the country’s housing crisis, especially after the failure of its flagship public housing program failed. Property prices have skyrocketed in the past six months due to severe housing shortages and low interest rates.

Like many central banks during the coronavirus pandemic, the RBNZ has pushed interest rates to record lows, relaxed mortgage lending restrictions and incorporated NZ $ 100 billion ($ 70.4 billion) into quantitative easing programs.

These measures, while boosting the economy, have sparked an unprecedented housing market boom. In its latest forecast, the RBNZ sees house price inflation rising to 22.4% by the middle of this year, much higher than the November forecast of 7.9% for this year to June.


The New Zealand dollar touched its highest level since August 2017 following the government’s announcement, as it reinforces the view that monetary policy will be tighter. The ten-year New Zealand government bond yield was 1.82%, the highest since May 2019.

“Paying attention to housing may make the Reserve Bank more inclined towards meeting its inflation and employment targets … that means monetary policy is tighter than expected in the near term,” said Westpac senior economist Michael Gordon.

An immediate impact on the housing market itself is unlikely, said Gordon.

“The thing that is going to lower house prices are higher interest rates,” said Gordon. “It’s still cheaper to borrow now because it’s been going on for decades.”

Under the amendment, the RBNZ will retain autonomy over how its decisions take into account potential housing consequences, but will need to explain regularly how it takes into account the housing market outcomes.

Banks should also consider the government’s goals to support more sustainable housing prices, including by reducing investor demand for existing housing stocks to help increase the affordability of first-home buyers.

The RBNZ said it was investigating government requests for advice on implementation tools such as debt-to-income ratios and interest-specific mortgages. (Reporting by Renju Jose and Praveen Menon; editing by Jonathan Oatis, Rosalba O’Brien and Jane Wardell)


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Northern Ireland’s first minister upped the ante in the UK-EU trade dispute | Instant News

BELFAST (Reuters) – Northern Ireland’s first minister raised the stakes on Wednesday in a dispute between Britain and the European Union over trade with the province, calling on Prime Minister Boris Johnson to “raise and protect Britain”.

FILE PHOTO: Containers stacked at the Port of Felixstowe, England, January 28, 2021. REUTERS / Peter Cziborra

Earlier Britain and the EU held talks and agreed to continue work to resolve difficulties that have hindered the delivery of goods, particularly food, from other parts of the UK to Northern Ireland and caused some shortages in supermarkets.

The dispute, which culminated when the EU involved Northern Ireland in a COVID-19 vaccine ban, has overshadowed a post-Brexit trade deal agreed late last year and threatens to have a worse future relationship between the two neighbors.

Arlene Foster, the province’s first minister, had previously asked London to withdraw from part of the Brexit agreement with the EU, the so-called Northern Ireland protocol, but her remarks after the talks pointed to her criticism of European Commission Vice President Maros Sefcovic. .

“It is clear Maros Sefcovic and his team are not serious,” Foster said in the statement, adding that “it is time for the British government to act unilaterally”.

“With Brussels’ stubborn and inflexible response, it is now a matter of the Government to enhance and protect the UK’s internal market.”

His words contradicted a joint statement by Britain and the European Union, which suggested there was some movement in talks to try to resolve the deadlock.

“The UK noted that they will provide a new operational plan with respect to supermarkets and their suppliers, in addition to additional investment in digital solutions for merchants in accordance with the Protocol,” they said.

Britain and the European Union said they would meet again.

After leaving the European Union last year, Britain agreed to a free trade deal with the bloc, but is no longer part of a single market or customs union.

Northern Ireland, which shares a land border with EU member Ireland, has legs in both camps as part of British customs territory while still aligning with the single market for the bloc’s goods.

Under the protocol, which covers post-Brexit trade between Britain and Northern Ireland, supermarkets selling to the region have a grace period of three months to adapt their supply systems to the new trade realities.

To solve the problem, the British government has asked for concessions from the EU to minimize trade disruptions.

The EU has said it will be pragmatic in finding solutions, but has blamed the disruption on Britain’s decision to exit the bloc and has called on London to implement agreed measures.

Foster, who attended an online meeting between Sefcovic and Britain’s Michael Gove, who is responsible for implementing the Brexit deal, told Northern Irish broadcaster UTV that the EU had rejected a short extension of the grace period.

But Northern Ireland’s First Deputy Minister Michelle O’Neill, a member of the Irish nationalist party Sinn Fein who also attended the meeting, was more positive.

“The two sides restated their commitment to finding practical solutions,” he said in a statement.

Reporting by Ian Graham at BELFAST and Philip Blenkinsop at BRUSSELS; additional reporting by David Milliken at LONDON, written by Conor Humphries and Elizabeth Piper; editing by Grant McCool


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Italy will continue to advance with sales of Monte dei Paschi under Draghi – sources | Instant News

ROME (Reuters) – Italian Prime Minister Mario Draghi’s new government aims to tackle troubled bank Monte dei Paschi by pushing a plan to re-privatize its losing lenders, said sources close to the matter.

FILE PHOTOS: People seen inside the bank of Monte dei Paschi in Siena in Rome, Italy August 16, 2018. REUTERS / Max Rossi

Rome spent 5.4 billion euros ($ 6.6 billion) in 2017 to rescue Tuscan banks, leaving the state with a 64% stake. MPS now needs another 2.5 billion euros to rebuild its capital reserves.

A sale would stop the MPS from becoming a permanent taxpayer drain and would allow Italy to fulfill its commitments to the European Union made at the time of the bailout.

With Italy’s change of government, there is speculation that Draghi, the former head of the European Central Bank, could use his cachet with European authorities to buy more time and delay the sale of MPS.

But a source briefed on the government’s plans said both Draghi and Economy Minister Daniele Franco intend to continue working to seal a merger deal for MPS with stronger rivals.

The prime minister’s office declined to comment.

Finding MPS buyers has proven difficult despite the ample incentives from the Ministry of Finance to sweeten the deal.

Italy has negotiated the sale of MPS to UniCredit but a change at the helm of Italy’s second-largest bank has halted talks.

New UniCredit CEO Andrea Orcel, who started his job after mid-April, may prefer other options in Italy’s consolidated banking sector, sources said.

With the sales prospect fading in the near future, MPS auditors have expressed concern about the bank’s financial future, said three people with knowledge of the matter.

The MPS is working to ensure auditors sign off on its accounts, a formality required for Thursday’s board meeting, the people said.

MPS declined to comment.

Annual losses at Tuscan banks jumped more than 60% to 1.7 billion euros last year.

Reported by Giuseppe Fonte in Rome and Valentina Za in Milan. Edited by Jane Merriman


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EMERGING MARKETS-Asset Latam recovers from recent losses, Petrobras rebound supports stocks | Instant News

    * Drop in U.S. yields helps risk assets
    * Brazil stocks recover from worst day in 10 months
    * Mexican peso rises for first time in 7 sessions

 (Adds details, updates prices)
    By Susan Mathew
    Feb 23 (Reuters) - Brazil shares rose on Tuesday as oil
major Petrobras bounced back from a bruising sell-off, with most
Latin American assets recovering from a slew of recent losses as
pressure from high U.S. yields eased. 
    The Bovespa stock index rose 2.1% after a near 5%
slide on Monday, as shares in Petroleo Brasileiro
recovered 10% from a 22% plunge that wiped out 71 billion reais
($13 billion) in market value. 
    Petrobras' board is set to meet on Tuesday to rule on
Brazilian President Jair Bolsonaro's appointment of former
Defense Minister Joaquim Silva e Luna to helm the state-run
    "Bolsonaro's decision to replace Petrobras' CEO is dashing
hopes of Brazil's return to economic orthodoxy," said
strategists at BCA Research. Analysts broadly note that the
president is adopting populist policies instead of fiscal
consolidation ahead of elections 20 months down the line.
    "The central bank is likely to lift the policy rate in
response... which would keep government borrowing costs above
the nominal GDP growth rate," they said. "A violation of the
fiscal spending rule would weigh further on the real amid higher
inflation expectations, and bonds are likely to underperform as
rates rise." 
    The real rose 0.3% after marking its worst
session in a month on Monday, while dollar bonds and the cost to
insure exposure to Brazil's sovereign debt steadied following
dramatic falls on Monday.
    Charts show that Brazil's weighting is declining in the main
JPMorgan EM bonds index.   
    A recent spike in U.S. treasury yields had weighed on
risk-driven assets, particularly emerging market bonds and
currencies, as investors sought safer investment paths. Latin
American assets fell the most among their peers.
    But yields dropped on Tuesday after Federal Reserve Chairman
Jerome Powell said the economy still needed central bank
    "One reason for Latam FX struggles may be that markets
expect that an inflation overshoot in the U.S. would spill over
to other economies, and would be harder to contain in Latam,
where central bank credibility is perceived to be weaker," said
Ilya Gofshteyn, senior EM macro strategist at Standard
    Mexico's peso rose for the first time in seven days
against a stronger dollar. The peso lost 3.7% over the last six
days on concerns about factory activity as fuel supply from
Texas was impacted by a deep freeze.
    Chile's peso, which has outperformed its regional
peers thanks to strength in the copper price, extended gains
into an eight consecutive session. 
    Key Latin American stock indexes and currencies:
                              Latest     Daily % change
 MSCI Emerging Markets         1393.90             -0.27
 MSCI LatAm                    2330.32              2.07
 Brazil Bovespa              114975.20              2.05
 Mexico IPC                   45274.80              0.73
 Chile IPSA                    4506.23             -1.38
 Argentina MerVal             47672.85            -3.239
 Colombia COLCAP               1351.21             -0.07 Currencies             Latest     Daily % change
 Brazil real                    5.4380              0.30
 Mexico peso                   20.5595              0.75
 Chile peso                      705.4              0.14
 Colombia peso                 3583.72              0.20
 Peru sol                       3.6517              0.00
 Argentina peso                89.5300             -0.10
 (Reporting by Susan Mathew and Sruthi Shankar in Bengaluru,
graphic by Marc Jones in London; Editing by Nick Macfie and
Rosalba O'Brien)


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