- Spain Left Behind in Global Debt Swaps Rally on Bailout Concern. Spain is the only country in the world that hasn’t benefited from the credit rally fueled by central bank cash as investors bet its government will be the fourth in the euro region to request a rescue. Credit-default swaps insuring Spanish bonds surged 21 percent since the start of the year to 461 basis points, according to CMA, signaling a worsening perception of credit quality. That compares with a 1 percent decline in swaps on Portugal, the next worst-performing nation, and more than 40 percent drops for Norway, Sweden and the U.S. Spain is in “extreme difficulty,” Prime Minister Mariano Rajoy said yesterday, raising the likelihood of a bailout for the second time this week. The government has raised its budget deficit target to 5.3 percent of gross domestic product from 4.4 percent and warned public debt will surge to a record 79.8 percent of GDP this year as it imposes the deepest austerity in at least three decades. “The market is slowly coming around to realizing that despite the fact the original target was abandoned, the current target is still ambitious,” said Ralf Preusser, head of European rates research at Bank of America Merrill Lynch. “Without growth, almost any debt burden is unsustainable.”
- Spanish, Italian Bonds Slide. Spanish and Italian bonds led losses among Europe’s higher-yielding government securities on speculation authorities will struggle to stop the region’s debt crisis from spreading. Spain’s 10-year bonds dropped for a third day after demand fell at a debt sale yesterday and an International Monetary Fund spokesman said the nation is facing “severe” challenges. Germany’s two- and five-year note yields dropped to records as investors sought the safest assets. The slide in Spanish securities pushed 10-year yields to the highest since the European Central Bank started providing three-year loans in December in its longer-term refinancing operations. “Spain is still the focus for the markets,” said Peter Chatwell, a fixed-income strategist at Credit Agricole Corporate & Investment Bank in London. “The LTRO bid has faded away, and that was evident from the auction results yesterday. The market is still positioning for event risk, and that has supported the move back to the safest assets.” The Spanish 10-year yield climbed six basis points, or 0.06 percentage point, to 5.75 percent at 4:33 p.m. London time after rising to 5.84 percent, the most since Dec. 13. The 5.85 percent securities due January 2022 dropped 0.44, or 4.40 euros per 1,000-euro ($1,306) face amount, to 100.70. The additional yield investors demand to hold Spanish 10- year bonds instead of similar-maturity German bunds expanded 11 basis points to 402 basis points after reaching 410, the widest since Nov. 30.
- Spain's Economic Woes Rattle Investors; Europe Markets Slide.
- Corporate Bond Risk Rises in Europe, Credit-Default Swaps Show. The cost of insuring against default on European corporate debt rose, according to traders of credit- default swaps. The Markit iTraxx Europe Index of 125 companies with investment-grade ratings climbed 4.25 basis points to 133.75 at 3:30 p.m. in London, JPMorgan Chase & Co. prices show. The gauge is up from 125 basis points March 30 and heading for the biggest weekly increase since Dec. 16. Contracts on the Markit iTraxx Crossover Index of 50 companies with mostly high-yield credit ratings jumped 13 basis points to 650, and is set for a third weekly rise. An increase signals deterioration in perceptions of credit quality. The Markit iTraxx Financial Index linked to senior debt of 25 banks and insurers rose 8.5 basis points to 235 and the subordinated index was 11 higher at 383.
- Obama Assails Ryan Budget Without Giving a Long-Term Alternative. President Barack Obama has rebuked Republicans for their "radical vision" of a scaled-down government and says it's time to "get serious about the deficit." His own budget fails to do that over the long term. White House projections show federal debt as a proportion of gross domestic product growing by more than three-quarters under Obama's plan to a record 124 percent in 2050, well above the 90 percent danger zone identified by economists Carmen Reinhart and Kenneth Rogoff. And the government's share of the economy climbs to levels not seen since World War II, largely because of surging spending on health care. That concerns Rogoff, a professor at Harvard University in Cambridge, Massachusetts, who co-wrote with Reinhart the book "This Time is Different: Eight Centuries of Financial Folly." Countries with excessive government liabilities historically have suffered "very long periods of tepid growth," he said. "You don't have to have a financial crisis" for that to occur, yet one is often "lurking" in the background, he said.
- Jobless Claims in U.S. Fall. Jobless claims fell 6,000 to 357,000 in the week ended March 31, the fewest since April 2008, the Labor Department reported today in Washington. The median forecast of 43 economists in a Bloomberg News survey estimated a decrease to 355,000. The number of people on unemployment benefit rolls also dropped, while those getting extended payments increased. The four-week moving average, a less- volatile measure than the weekly figures, decreased to 361,750 last week, from 366,000. In addition to the jobless claims, the number of Americans receiving extended benefits under federal programs increased by about 17,000 to 3.26 million in the week ended March 17. The unemployment rate among people eligible for benefits, which tends to track the jobless rate, held at 2.6 percent, today’s report showed. Twenty-six states and territories reported a decline in claims, while 27 reported an increase.
- Oil Rises for First Time in Three Days. Crude for May delivery gained $1.46, or 1.4 percent, to $102.93 a barrel at 11:24 a.m. on the New York Mercantile Exchange, paring the weekly loss to 10 cents. Brent oil for May settlement rose 68 cents, or 0.6 percent, to $123.02 a barrel on the London-based ICE Futures Europe exchange.
- Seattle Shows Risk of Glut as Apartment Construction Surges. The biggest surge of Seattle-area apartment construction in a quarter century is threatening to undercut the growth in rents, a trend that's also emerging in such U.S. cities as Washington and Houston. Seattle went from “dead last” in rent increases three years ago, following the collapse of mortgage lender Washington Mutual Inc., to 13th out of 88 markets last year, according to Axiometrics Inc., a multifamily real estate research company. The construction boom spurred by rising rents is now stoking concern that revenue growth may stall as an increasing number of units compete for tenants.
- New York Fed Markets Group Chief Brian Sack to Resign. Brian Sack, markets group chief at the Federal Reserve Bank of New York, is resigning this year after leading operations implementing the central bank’s monetary policy since June 2009. Sack, 41, will remain at his current post until June 29, the district bank said today in a statement on its website. He will then be placed on leave until his resignation from the New York Fed effective Sept. 14, according to the statement. As head of the markets group, Sack oversaw the record expansion of the Fed’s balance sheet while policy makers turned to unconventional tools such as two quantitative-easing programs in the aftermath of the credit crisis. Using bond purchases as a stimulus tool, the central bank expanded its assets to a record $2.94 trillion on Feb. 15.
- China's Hawaii to Face Hotel Slump as Supply Triples. China’s resort city of Sanya is expected to face a “huge correction” in its hotel market in the next two years as the supply of luxury accommodation triples by early 2013, the head of its tourism association said. The average hotel occupancy rate in Sanya, located on the tropical island known as China’s Hawaii, will drop about 10 percentage points from last year’s 65 to 70 percent, Michel Goget, Ritz-Carlton Sanya’s general manager and chairman of the city’s Tourism Association, said in an interview yesterday. “There’s going to be a huge correction between now and 2014 because there’s an oversupply,” said Goget, citing new additions by international chains in the city. “The demand is still not there. And the airport is almost saturated, so we are going to be all looking for the same business.”
- Taiwan's Stocks Slump Most in 5 Months on Tax Concern. Taiwan’s stocks slumped the most since December and the currency weakened after the stock exchange chairman said the island is likely to impose a capital- gains tax on share transactions.
- Obama Risks Vote Backlash by Warning Court on Health Law. President Barack Obama has shown a willingness to campaign against the U.S. Supreme Court if the justices strike down his 2010 health-care law. It's a strategy that's as risky as it is rare. Taking on the court would mean fighting an institution that polls show is historically the most admired branch of government. That's one reason no major party nominee has made the court a central issue since 1968, when Richard Nixon tapped into voters' unease about rising crime by attacking the expansion of suspects' rights under Chief Justice Earl Warren. "The risk any president faces is that criticism of the Supreme Court can backfire," said William G. Ross, a constitutional law professor at Samford University in Birmingham, Alabama, who has written about the role of judicial issues in presidential campaigns. "People can perceive it as unduly disrespectful of an institution that commands tremendous amounts of public respect."
- Nasdaq Wins Facebook(FB) Listing as Market Fends Off NYSE, NYT Says. Facebook Inc. (FB) plans to list its shares on the Nasdaq Stock Market, according to the New York Times, further cementing the exchange operator’s position as the favored venue for the biggest U.S. technology companies.
- US Retailers Report Strong Momentum For March Sales. Retailers generally reported strong sales for March, as warmer weather, an earlier Easter and appealing fashions drew customers in. Standouts included Gap Inc. (GPS) and Target Corp. (TGT), while Costco Wholesale Corp. (COST) and teen retailer Buckle Inc. (BKE) came up short. Easter falls two weeks earlier this year than in 2011, which provided a sales boost for everything from apparel to seasonal goods. March also benefited from unseasonably high temperatures in many parts of the country, which brought customers into malls and other shopping locations. Compelling fashions also played a role, analysts said, with people more willing to pay fuller prices for fresh merchandise. Retailers were also able to move older merchandise at promotional prices.
- Romney Plays Down Pennsylvania Hopes.
- High Gas Prices Other Victim: The Gas Station Owner. Many Independent Owners Lose Money Amid Falling Demand; Competition From Warehouse Clubs Is Another Challenge.
- Bullard: Fed's Rate Language Too Pessimistic. A top Federal Reserve official said on Thursday that the central bank's projection of late 2014 for the first likely increase in interest rates sends too pessimistic a signal as the economic recovery strengthens.
- LTRO #Fail and Two Types of Credit Losses. (graphs)
- Complete YTD Hedge Fund Performance Summary.
- On The Pain in Spain.
- World Food Prices Rise Further, Raising Fears of Unrest. Global food prices rose in March for a third straight month with more hikes to come, the UN's food agency said on Thursday, adding to fears of hunger and a new wave of social unrest in poor countries. Record high prices for staple foods last year were one of the main factors that contributed to the Arab Spring uprisings in the Middle East and North Africa, as well as bread riots in other parts of the world.
- Gold Rising, Fading Stimulus Hopes Weigh. Gold inched higher on Thursday after falling to a near three-month low the previous day as weaker prices tempted some buyers, but gains were capped by a stronger dollar and fading hopes for a fresh round of monetary stimulus in the United States. Spot gold was up 0.2 percent at $1,622.30 an ounce at 1121 GMT, while U.S. gold futures for June delivery were up $9.60 an ounce at $1,623.70. The metal has fallen nearly 3 percent this week and while prices regained some ground on Thursday, it was still hovering around its lowest since early January.
- Oil Hedge Fund BlueGold to Liquidate. BlueGold Capital, an oil-focused hedge fund that shot to fame in 2008 by calling the peak of the market, told its investors on Thursday it was liquidating after four years. BlueGold is conducting an "orderly closure" of the business and expects to return about 98 percent of investor capital before the end of the year, the London-based fund said in a letter to investors, a copy of which was obtained by Reuters. It did not give a reason for its closure.
- Spanish Bonds/Banks/Bonds/Banks. Beyond Thursday’s back-up in Spanish bond yields — questions about Spain’s banks. How could there not be when they’ve been buying so much sovereign debt since the LTRO. Ever since December’s record jump of €22.5bn in purchases in fact, as banks began washing LTRO cash through the domestic bond market. (Chart via Nomura)
- Employers Attack Italy's Labour Reforms. Italy’s leading industrialists and employers have slammed Mario Monti’s revised labour market reforms as inadequate and counterproductive after initial plans were watered down to appease trade unions and the centre-left Democratic party.
- Existing Housing Index Slips. SHANGHAI'S existing housing index fell for the sixth straight month in March, with nearly 60 percent of monitored areas recording value decreases. The index, which tracks price variations of previously occupied homes, lost 0.13 percent from February to 2,577 points last month, the Shanghai Existing House Index Office said yesterday. "Transaction volume of used homes rebounded last month amid recovering demand from end-users though a sustainable recovery is yet to be confirmed," said Zhang Shu, an analyst at the office. "A revised criteria for 'normal' housing that went into effect in March also helped trigger sentiment among home seekers."