Tag Archives: Monetary / Fiscal Policy / Policy Maker

Australian, NZ shares rose as Biden’s transition, increasing the risk assets of the vaccine | Instant News


* Australian finances record their highest levels since March 5

* Australian energy stocks advanced for the third session

* Fletcher NZ Building recorded highest level in more than 2 years (Renewal closed)

November 25 (Reuters) – Australian stocks closed higher on Wednesday, lifted by the start of US President-elect Joe Biden’s official transition to the White House and as investors also expected a rapid economic revival due to advances in the coronavirus vaccine.

The S & P / ASX 200 index ended 0.6% higher at 6,683.300 points.

“Thanks to the many vaccines that will be available soon,” Joy to the World “is ringing earlier than expected,” wrote Stephen Innes, head of global market strategy at Axi in a note.

The Dow Jones Industrial Average broke the 30,000 level overnight for the first time on optimism surrounding vaccine progress and Biden’s transition.

“Get a glimpse of the current market and there’s not much to say about those worries. It’s like a positive risk nirvana has gone down in the stock market and traders have little trouble other than going with the flow ”, said Chris Weston of Pepperstone.

Meanwhile, Australia’s most populous state of New South Wales is set to loosen social distancing restrictions and allow restaurants and pubs to increase capacity starting December, after recording nearly three weeks of no local transmission of COVID-19.

Up by 4%, energy companies were the biggest percentage gainers on the benchmark as crude oil prices rose for the fourth straight session.

Finance added more than 2% with the “Big Four” bank ending in black. Analysts at UBS expect the bank to increase its payout ratio and potentially return the excess capital from fiscal 2021.

Miners also gained as benchmark iron ore futures snapped two consecutive sessions of losses with Lynas Corp and BHP Group topping the sub-index with more than 3% gains each.

In New Zealand, the benchmark S & P / NZX 50 was up for the third straight session to be 0.9% higher.

The central bank said Wednesday it will reimpose mortgage restrictions next year amid growing fears of a housing bubble.

The country’s biggest construction company surged to its highest level since November 2018 on an optimistic profit outlook and dividend payback plans. (Reporting by Deepali Saxena, Editing by Sherry Jacob-Phillips)

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Analysis: Brazil faces a $ 112 billion refinancing gap in early 2021 | Instant News


BRASILIA (Reuters) – Brazil’s debt has swelled to unprecedented levels due to the COVID-19 pandemic and the government faces a $ 112 billion refinancing gap early next year, with April funding needs the highest for one month.

Publicly, at least, Treasury officials in Latin America’s top economies insist there will be no problems getting investors to lend to them. The so-called liquidity cushion can cover at least three months of the loan.

In addition, nearly all of Brazil’s debt is denominated in reais and more than 90% of it is held by domestic investors, many of whom are forced to hold it by banking regulations.

Financial analysts also see little risk of a boycott by lenders, which is likely to trigger a serious crisis and wreak havoc on Brazilian financial markets.

But the likelihood that the Ministry of Finance may have difficulty repaying debts, due to sudden unfavorable political, economic or market conditions, is not zero. And it will likely pay a premium to shift so much debt at once, analysts say.

According to Treasury Department figures, about 605 billion reais ($ 112 billion) of domestic federal debt is due in the first four months of next year. That’s 14.1% of Brazil’s 4.82 trillion reais pile of domestic debt.

The month to watch is April, when the 283 billion reais of debt will need to be extended. That is 6.6% of Brazil’s debt and will be the largest single month of maturity debt on record, according to the Ministry of Finance.

Graph: April 2021 debt rollover – IIF,

Graph: Monthly debt maturity -% of GDP,

“It’s a big number, and if people want to reduce their exposure a little bit for whatever reason, that’s a significant amount,” said Sergi Lanau, deputy chief economist at the Washington-based Institute of International Finance (IIF).

“It’s not a good situation, but it would be much worse if it was foreign debt. We don’t really care about a bunch of maturity. If something goes wrong at that time, then you will be exposed, ”he said.

The IIF analysis shows that the government’s domestic debt maturing in April amounts to 3.7% of GDP, also an all-time high for a month.

Economy Minister Paulo Guedes said he saw “no problem” for the Ministry of Finance to reimburse the debt. About half of the 600 billion reais due early next year may already be covered by cash inflows from central banks and public sector banks, he said.

STEP CURVE

The government’s surprisingly aggressive fiscal response to the pandemic, particularly through direct income transfers to the poor, has driven its deficits and debt to records that are far above most other developing economies.

Brazil’s main deficit, excluding interest payments, is estimated at nearly 12% of GDP this year, with overall debt rising to around 95% of GDP, according to the government.

That has forced the Treasury Department to borrow more, more and more in short dated paper because it’s cheaper and as growing concerns around the fiscal outlook mean investors are reluctant to lend to the government long-term loans.

While reducing average long-maturity debt and posting low official interest rates has brought average interest costs down to a record low, the so-called “roll over risk” for the Treasury has increased sharply.

“The problem is if we can’t sell any bonds. But we don’t need to worry too much, there is money in the system, ”said an interest rate specialist at a hedge fund in Sao Paulo.

“The treasury won’t run out of cash: that’s not the case. But it will continue to pay higher rates and see a steeper curve, “he said.

The difference between long-term and short-term interest rates has widened sharply. Before the pandemic, the difference between the January 2022 and January 2027 futures rates was 180 basis points or less. That tripled to 460 basis points in September, and is now creeping back to that all-time peak.

Chart: Brazil interest rate spread,

The Treasury has failed to sell the full allocation of bonds offered at several auctions in recent weeks, both the fixed rate ‘LTN’ note and the floating rate ‘LTF’ note linked to the central bank’s official Selic rate.

To attract buyers, the Ministry of Finance has to pay a higher premium. It also relies on other sources of financing, including a recent transfer of 325 billion reais from the central bank.

Waldery Rodrigues, special secretary for the economy ministry, said last week that a central bank selling part of its foreign currency reserves to pay debt is “on the menu” for next year, although the decision is in the hands of the central bank.

Reporting by Jamie McGeever; Edited by Tom Brown

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After a surge in lending, Sunak Britain announced more spending | Instant News


LONDON (Reuters) – UK finance minister Rishi Sunak, who has pledged more than 200 billion pounds ($ 267 billion) to fight the COVID-19 crisis, will free more money on Wednesday against the backdrop of the heaviest public borrowing since World War Two. .

FILE PHOTOS: Chancellor of the United Kingdom Rishi Sunak speaks during a TV interview in London, England November 22, 2020. REUTERS / Simon Dawson

Sunak will announce extra investment to ease a buildup in the health system, fight a surge in unemployment and build new infrastructure in a one-year Expenditure Review which he will present to parliament around 1230 GMT.

With Britain’s complete exit from the European Union on December 31 – and no new trade agreement yet guaranteed – Sunak is likely to announce more spending on customs operations and possibly replacement subsidies for farmers.

But the loan forecast that accompanies the blueprint will likely dwarf spending plans.

Britain is on track for a record economic crash this year – the Bank of England forecasts an 11% decline – and its recovery is weaker than any other major economy.

Its budget deficit is expected to surge to around 20% of economic output, nearly double its level after the global financial crisis that took nearly a decade of unpopular spending cuts to bring it down.

Sunak said now was not the time to control spending or raise taxes to tackle the deficit.

The UK economy will return to contraction in the last three months of this year, albeit less than in the spring, after the second wave of COVID-19 prompted the closure of new businesses across the UK.

But Sunak is expected to signal his first steps to offset at least part of his spending by announcing a freeze on public sector wages and a reduction in Britain’s foreign aid budget.

In a newspaper interview over the weekend, the 40-year-old former Goldman Sachs analyst said he would start “looking forward” in the spring to fix the deficit, if vaccines and infection tracking turned the tide of the pandemic.

But Paul Johnson, director of the Institute for Fiscal Studies think tank, says the sheer demand for Sunak in the coming years means spending will only increase.

“Given what’s happening with the size of the economy, that can only mean one thing for taxes. They, too, could be set on an inevitable trajectory, if delayed, by the decisions made this week, ”he said in an article published in the Sunday Times.

Written by William Schomberg; edited by Jonathan Oatis

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UPDATE, 3-NZ government asks cenbank to include red-hot housing that tames, NZ $ jump | Instant News


* NZ fin min sends letter to RBNZ governor regarding housing crisis

* The proposal includes housing in the RBNZ remit

* Says high house prices lead to financial stability risks (Added RBNZ Governor response and analyst comments)

WELLINGTON, Nov 24 (Reuters) – The New Zealand government has asked the central bank to consider factoring house prices as part of its monetary policy, Finance Minister Grant Robertson said, increasing the local dollar on market bets of less stimulus over the next year. .

As policymakers grapple with soaring house prices and the risk of a property bubble, Robertson said the government is reviewing housing policies, and has written to the Reserve Bank of New Zealand (RBNZ) asking what it can do to help slow the property boom.

He proposes to take house prices into account when formulating monetary policy, along with the bank’s existing inflation mandate and maximum employment.

“I think this move threatens bank independence and questions what areas the Reserve Bank needs to focus on right now,” said Brad Olsen, a senior economist at Wellington-based economic consulting firm Infometrics.

The New Zealand dollar surged to $ 0.6985, the highest since mid-2018, as the government’s move is seen as bolstering expectations the central bank will refuse to move towards negative interest rates next year.

“I am concerned that the recent rapid rise in house prices, and the forecast for them to continue, will affect the government’s ability to meet the economic goals set out under the authority,” the finance minister said in a letter to RBNZ Governor Adrian Orr.

In response, Orr said the bank would consider the suggestion, but added that monetary policy and financial regulation alone cannot solve the problem because there are “long-term structural problems” affecting housing affordability.

MARKET TOO HOT?

Historically low interest rates, along with other monetary and fiscal stimulus to support the pandemic-hit economy have inflated the New Zealand housing market, misguided many economists who forecast a slowdown after years of rising prices.

Robertson’s letter comes amid mounting pressure to contain a booming property market – home values ​​have surged by about 90% in the last decade – and calls from opposition parties to ‘rein’ the central bank.

While the RBNZ is pumping another NZ $ 28 billion into the banking system this month, raising fears this will further inflame house prices, it is also considering reintroducing restrictions on mortgage lending that took off after COVID-19 slowed economic activity.

“With an extended period of low interest rates, and some time before housing supply can catch up with demand, now is the time to consider how the Reserve Bank can contribute to a stable housing market,” said Robertson. (Reporting by Praveen Menon; Editing by Kim Coghill & Shri Navaratnam)

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The German economy grew 8.5% in the third quarter, but recession fears grew | Instant News


FILE PHOTOS: The new Mercedes-Benz S-Class production plant pictured at the Daimler plant in Sindelfingen near Stuttgart, Germany, 2 September 2020. REUTERS / Ralph Orlowski

BERLIN (Reuters) – Germany’s gross domestic product grew by a record 8.5% in the third quarter as Europe’s largest economy partially recovered from an unprecedented slump caused by the first wave of the COVID-19 pandemic in spring, the statistics office said on the day. Tuesday.

The stronger-than-expected rebound was mainly driven by higher household spending and surging exports, the office said.

“This allows the German economy to cover most of the massive decline in gross domestic product caused by the coronavirus pandemic in the second quarter of 2020,” he added.

The reading marks an upward revision to the previous flash of 8.2% growth, and follows a 9.8% decline in the second quarter.

The prospect was masked by a second wave of coronavirus infections and partial lockdowns to slow the spread of the disease. Restaurants, bars, hotels and entertainment venues have been closed since November 2, but shops and schools remain open.

Chancellor Angela Merkel and regional state prime ministers plan to extend the “lockout light” on Wednesday to December 20, according to a draft prepared for their meeting.

The contraction in the services sector is expected to weigh heavily on gross domestic product in the fourth quarter, while lockdown measures in other countries are also likely to impact export-oriented producers.

DIW economist Claus Michelsen said the decline in economic output was therefore forecasted, with preliminary estimates suggesting a decline in GDP of about 1% in the last quarter.

“Germany and many of its important trading partners are likely to return to recession,” said Michelsen.

Reporting by Michael Nienaber and Rene Wagner; Edited by Riham Alkousaa and EKevin Liffey

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