Tag Archives: National Government Debt

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
firm.
    "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
support.
    "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
Chartered.
    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
 (interbank)                            
                                        
 
    
 (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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Australia, the New Zealand dollar hovers near multi-year highs amid a commodity boom | Instant News


SYDNEY, Feb 23 (Reuters) – The Australian and New Zealand dollars were little changed on Tuesday, hovering near multi-year highs amid surging commodity prices and a weak dollar, while bond yields were steady.

The Aussie dollar is up 0.14% higher at $ 0.7925 after crossing the $ 0.79 mark for the first time since early 2018 the previous day. The currency’s next target is $ 0.80, said the strategist.

The kiwi dollar fell 0.05% against the greenback to $ 0.7324, having stretched as far as $ 0.7343 in the previous session, the highest since April 2018, as yields surged and S&P upgraded New Zealand’s rating to AA +, citing surprising strength from the economy.

Rising prices for materials from oil and copper to wood and powdered milk have pushed currencies such as the Australian and New Zealand dollars to their highest levels in nearly three years.

Copper prices surged above $ 9,000 per tonne for the first time since 2011 on Monday, while nickel traded above $ 20,000 per tonne for the first time since 2014.

“Dividend announcements for Australian mining companies that are likely to declare in US $ and offer payouts in A $, and the prospect of a larger dividend at the end of the year adds to the A $ demand story,” Westpac analysts said in a note.

The ten-year bond yield in Australia fell four basis points to 1.55% on Tuesday after rising sharply in recent days as fears of faster global inflation have hit bond markets.

The three-year bond is up 2 ticks to 99.7550, and the 10-year bond is up 4 ticks 98.4350.

In New Zealand, the 10-year yield was up one basis point at 1.65%, after hitting 1.72%, the highest since March 23 as markets await this year’s first monetary policy meeting on February 24.

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THE EMERGING MARKET-Brazil stocks hit by fears of government interference, FX falls | Instant News


    * Petrobras, Bovespa set for worst day since March
    * Coronavirus aid extension in Brazil to be discussed this
week
    * Mexican peso down for sixth straight session 
    * Chile's peso sole gainer 

 (Adds details, updates prices)
    By Susan Mathew and Ambar Warrick
    Feb 22 (Reuters) - Brazil's benchmark Bovespa index tanked
on Monday as oil major Petrobras plummeted 21% following the
ouster of its investor-backed chief executive, while Latin
American stocks and currencies fell as higher inflation
expectations hurt sentiment. 
    After weeks of sparring between CEO Roberto Castello Branco
and Brazilian President Jair Bolsonaro on fuel prices, former
Defense Minister and retired army general Joaquim Silva e Luna,
who has no oil and gas experience, was appointed to take over.

    Branco's ouster could force a broader shakeup at Petrobras,
which has steered toward more market-friendly and less
politically driven policies in recent years.
    Petrobras shares were on course to
post their sharpest one-day decline since March last year, as
was the Bovespa, which sank nearly 4%.  
    "The reversal of these types of practices by Bolsonaro early
in his administration was a key credit positive for Brazil's
quasi-sovereigns," said Citigroup strategists. 
    "A reversal of this policy is a clear credit negative."
    Banco do Brasil, caught up in a spat with
Bolsonaro over branch closings, slumped 11%, while power company
Eletrobras skidded nearly 3% amid signs of the
president's interference in the power sector.

    Brazil's real fell as much as 2.8%, hitting
lows not seen since November last year, while the cost to insure
exposure to Brazil's sovereign debt jumped 22 basis points from
Friday's close.
    "Local assets will underperform across the board in the very
short-term," Citigroup warned, adding that a break in the key
5.50 level of dollar-real pair could see further continuation of
weakness in the real.  
   Investors also have their eyes on a discussion regarding an
extension of Brazil's emergency aid bill this week, with eyes on
cost cuts elsewhere to keep spending within the limit.

    Worries about stretched fiscal spending have caused the real
to lag its emerging market peers widely in 2020. This year, the
currency is down about 6% so far.  
    Other currencies in Latin America also
dropped, pressured by rising U.S. Treasury yields and inflation
expectations.
    Higher U.S. yields pressure risk-driven assets by offering
relatively stronger and safer returns. 
    In its sixth straight day in the red, Mexico's peso
hit its lowest since early November as a deep freeze in Texas
continued to raise concerns about a hit to factory activity in
the country.
    A corresponding surge in oil prices failed to support the
peso, while Colombia's peso also dropped.
    Surging copper prices saw Chile's peso as the only
gainer for the day. 
        
    Key Latin American stock indexes and currencies:
    
                              Latest      Daily % change
 MSCI Emerging Markets         1402.48               -1.93
                                        
 MSCI LatAm                    2311.50                -3.8
                                        
 Brazil Bovespa              114019.83               -3.72
                                        
 Mexico IPC                   45035.62                 0.3
                                        
 Chile IPSA                    4569.36               -1.18
                                        
 Argentina MerVal             49446.07              -3.033
                                        
 Colombia COLCAP               1348.63               -0.29 Currencies             Latest      Daily % change
 Brazil real                    5.4412               -1.08
                                        
 Mexico peso                   20.6505               -1.09
                                        
 Chile peso                      706.1                0.27
                                        
 Colombia peso                    3591               -0.60
 Peru sol                       3.6518                0.00
                                        
 Argentina peso                89.4300               -0.30
 (interbank)                            
                                        
 
    
 (Reporting by Susan Mathew in Bengaluru; Editing by Steve
Orlofsky and Dan Grebler)
  

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German Bund yields hit new 8-month highs as reflex trading hit | Instant News


* Eurozone suburban government bond yields tmsnrt.rs/2ii2Bqr

LONDON, Feb 22 (Reuters) – Germany’s benchmark 10-year bond yields climbed to a fresh eight-month high on Monday, as bets on stronger economic growth and inflation in the coming months continue to put pressure on borrowing costs in the region. euro. .

So-called reflex trading was once again led by long-dated US Treasury yields, which on Monday climbed to their highest in about a year.

That set the tone for trading in the European bond market, with the yield on German 10-year Bund rising to -0.28%, a fresh eight-month high. That was up nearly 12 basis points last week, the biggest weekly jump since June.

The sell-off has sharpened Germany’s yield curve, with the gap between 2- and 10-year bond yields widest in nearly a year, at around 39 bps.

“In our view, this is not a buy-on-dip environment in interest rates, and sharp cuts have yet to be carried out,” said analysts at Mizuho in a note.

Perhaps a more worrying sign for policymakers, real or inflation-adjusted bond yields have also risen sharply in the past week. Germany’s 10-year inflation-related yield on Monday rose to -1.28%, the highest since last October.

Analysts at UniCredit say the rise in real yields has gone too far.

“Even general optimism about the global growth prospects will not be enough to justify the current 10-year Bund real rate of return,” they said in a note.

Focus now turns to central bank officials and their thinking about soaring borrowing costs, which could threaten an economy that is slipping into recovery from the coronavirus crisis.

European Central Bank chief Christine Lagarde is expected to speak on Monday evening, while US Federal Reserve Chair Jerome Powell delivers semiannual testimony before Congress on Tuesday.

Most 10-year bond yields in the euro area rose by 2-3 basis points on the day. The yield on Italian 10-year bonds rose 2.5 bps to 0.64%, 22 bps above the record low reached earlier this month.

Europe will decide whether to extend its suspension of rules limiting its budget deficits and debt, known as the Stability and Growth Pact, in the coming weeks, meanwhile Economic Commissioner Paolo Gentiloni said on Monday.

Reporting by Dhara Ranasinghe Editing by Gareth Jones

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