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Monday, November 23, 2009


Major Asian markets advance as gold price boosts miners
While markets in Japan were closed for a holiday, other major Asian share markets gained Monday. Hong Kong's Hang Seng Index jumped 1.4%, China's Shanghai Composite climbed 0.9% and Australia's S&P/ASX 200 added 0.7%. Taiwan's Taiex inched up 0.1%, India's Sensex was up 0.8% and Singapore's Straits Times Index added 1.3%. Meanwhile, New Zealand's NZX 50 closed flat, South Korea's Kospi Composite slid 0.1% and shares in the Philippines dropped 0.7%. The Wall Street Journal (23 Nov.)

Wall Street finds profit in buying home mortgages
Wall Street funds apparently found a way to make big money from the residential-mortgage crisis and leave U.S. taxpayers with most of the risk. The process begins with a hedge fund or a private-equity fund buying a block of mortgages at a deeply discounted price. Then homeowners are offered a principal reduction on their mortgages in return for refinancing the debt into new mortgages backed by government-sponsored entities such as the Federal Housing Administration. The mortgages can then be sold to another government-backed entity, such as Ginnie Mae. The New York Times (21 Nov.)

U.S. Treasury on thin ice with short-term debt coming due
The U.S. Treasury is scrambling to swap its short-term debt for long-term bonds before interest rates start climbing. "What a good country or a good squirrel should be doing is stashing away nuts for the winter. The United States is not only not saving nuts, it's eating the ones left over from the last winter," said Bill Gross, managing director of Pimco. The New York Times (22 Nov.)

2010 growth forecast for U.S. increased by business economists
The National Association for Business Economists ramped up its economic forecast for next year, predicting that businesses will stop eliminating jobs and start creating ones in a matter of months. The association said GDP in the U.S. will increase 2.9% in 2010, compared with a 2.6% expansion predicted last month. "While the recovery has been jobless so far, that should soon change," said Lynn Reaser, the group's president. "Within a few months, companies should be adding instead of cutting jobs." Reuters (23 Nov.)

Deficit has Obama wary of large program to create jobs
U.S. President Barack Obama is trying to avoid a big-ticket job program favored by some Democrats in Congress. He does not want to drive up the record-high deficit or raise taxes on the middle class. Instead, Obama signaled that he would support modest initiatives targeted at areas of the economy most likely to generate hiring. "There are two engines to our economic message, two ways to generate jobs," White House Chief of Staff Rahm Emanuel said. "One is small business, the other is energy." The U.S. could stimulate hiring in both by expanding tax credits or lending, he said. The Wall Street Journal (23 Nov.)

Economist: Potential wave of speculative capital threatens China
Uncertainty about the future value of China's currency raises the risk that the country will be hit with a wave of speculation that could trigger inflation, UBS economist Wang Tao said. She called for an immediate, one-time increase in the yuan's value to deal with the threat. "China's economic fundamentals mean that the yuan should strengthen," Wang said. "The central bank will find it harder to manage liquidity and inflation when a flood of speculative funds returns, betting on the yuan's appreciation." China Daily (Beijing) (23 Nov.)

Complexity results in sale of only a few "Super-BABs"
Issuers have flocked to capitalize on the U.S. government's offer to subsidize interest payments on Build America Bonds. However, few have taken advantage of recovery-zone economic-development bonds, even through they offer an even higher subsidy. The "Super-BABs" have a reputation for being overly complicated, but those involved in the few deals that have been made said issues can be easily overcome. The Bond Buyer (free content) (23 Nov.)

Investors increasingly bet rich nations will default on bonds
Concerns about the public finances of the U.K., Japan and the U.S. have caused the volume of activity in credit default swaps linked to those nations to double. The Depository Trust & Clearing Corp. said Italy's CDS volume is the highest of any individual nation. Of developed economies, Italy's debt burden is one of the highest. Meanwhile, the outstanding volume of CDS tied to Brazil, Russia, Indonesia and other emerging nations has fallen or remained flat during the past year. Financial Times (tiered subscription model) (22 Nov.)

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