Good morning New York,
FT ALPHAVILLE
USTs and the Chinese premium: Or how Abenomics prompted an official portfolio shift which could now be putting significant pressure on China's yuan to devalue. Izzy wonders what the consequences of a major yuan devaluation might be the global assets.
The negative pledge saga? Joseph considers one last crossover between Grenada and Argentina in the current pari passu saga. It just happens to involve a different piece of bond contract… the negative pledge clause and how it could be ripe for reanimation by clever necromancers of the holdout trade.
Pari passu: judgment day... is not a reference to the Second Circuit's imminent ruling in the Argentina case, nor the Argentine government's late-night petitioning to the Supreme Court over pari passu. Although it could be. This is Joseph's very thorough attempt to show how Grenada's legal battle with the Taiwanese government-owned Export-Import Bank of the Republic of China might echo into the future.
Days of future pari passu: This is Joseph's opening dive into the travails of one Taiwanese development bank and its Caribbean island borrower, fighting each other over $32m of defaulted loans in The Export-Import Bank of the Republic of China v Grenada. As he said, it's a kind of back to the future.
NEWS
Bond rout threatens to hit bank funding: EU banks' average bond spreads – the difference between what banks can borrow at compared with a benchmark government treasury such as the US or Germany – hit 95 basis points this month amid investor expectations that the US Federal Reserve would wrap up quantitative easing, according to figures from Dealogic. (Financial Times)
US rate volatility sparks surge in junk-rated debt yields: The average yield for lower-quality rated company bonds was on the cusp of rising above 7 per cent on Wednesday for the first time in almost a year, after a jump from 4.95 per cent in early May, according to Barclays data. (Financial Times)
US states need $980bn to fill pension gap, says Moody's: US states would need to raise $980bn to cover the aggregate shortfalls in their retirement schemes for public sector workers, according to an analysis of state obligations. Moody's Investors Service, which provides credit ratings for states and municipalities, looked at the detailed financial accounts for each state and its schemes in the most recent financial year available. (Financial Times)
Saudi prince 'refused' to pay fee on Gaddafi jet sale: Prince Al-Waleed Bin Talal, one of the world's richest men, "simply refused" to pay $10m commission to a Jordanian businesswoman who arranged the $120m sale of his private jet to Colonel Muammer Gaddafi, the former Libyan leader, it has been claimed in the London High Court. (Financial Times)
BP accused of intimidating spill claimants: Lawyers representing claimants seeking compensation for the 2010 Deepwater Horizon disaster have accused BP of "hollow intimidation tactics", after the company stepped up its attempt to stop what it describes as "inflated" or "absurd" payments for business losses. (Financial Times)
German unemployment unexpectedly drops in recovery sign: The number of people out of work dropped by a seasonally adjusted 12,000 to 2.94m, after a revised gain of 17,000 in May, the Nuremberg-based Federal Labor Agency said today. Economists predicted a June increase of 8,000, according to the median of 35 estimates by Bloomberg (Bloomberg)
Vodafone launches bid for Kabel Deutschland: The British Telecoms group has launched a formal €7.7bn cash offer for Kabel Deutschland Germany's biggest cable operator. The deal signals Vodafone's ambitions to grow in Europe again. Vodafone put forward an all-cash offer of €87 a share, made up of €84.50 for the company and Kabel's previously announced €2.50 dividend. (Wall Street Journal)
Business feels pinch of swift rate rise: Sharp increases in long-term interest rates, triggered by Federal Reserve statements last week, threaten sales of homes, cars and other big-ticket items that have helped drive the US economic recovery, according to economists. (Wall Street Journal)
Markets: Stocks and commodities rallied as the recent market fretting over reduced Federal Reserve stimulus and a credit crunch in China continued to fade. The FTSE All-World equity index was up 0.5 per cent as the FTSE Eurofirst 300 saw a 0.1 per cent gain and after the Asia-Pacific region rose 1.9 per cent. US index futures showed Wall Street's S&P 500 would add 2 points to 1,605. Gold bounced off its near three-year low as the dollar weakens, while Treasury prices firmed. Some analysts reckoned the more bullish mood – stronger growth-focused and fixed income assets – is the result of investors recalibrating their expectations for the Fed's timeline for curtailing its $85bn a month of bond buying (known as quantitative easing) following a flurry of dovish central bank comments in recent days. (Financial Times)
