Asian markets decline after Fed increases discount rate
Most markets across the Asian-Pacific region fell Friday after a decision by the U.S. Federal Reserve to increase its discount rate. Japan's Nikkei 225 dropped 2.1%, Hong Kong's Hang Seng Index gave up 2.6% and Australia's S&P/ASX 200 inched down 0.4%. South Korea's Kospi Composite slid 1.7%, New Zealand's NZX 50 inched up 0.2% and Singapore's Straits Times Index slipped 1%. India's Sensex was down 0.8% in afternoon trading. Markets in Taiwan, China and Vietnam were closed for Lunar New Year. The Wall Street Journal (19 Feb.)
Fed aims to calm markets after surprise increase in lending rate
Ben Bernanke, chairman of the U.S. Federal Reserve, indicated last week that the central bank might increase its emergency lending rate to widen the spread between that and the main policy rate. Still, markets were caught off guard when the Fed raised the discount rate, prompting officials to say borrowing costs will remain low. "The modifications are not expected to lead to tighter financial conditions for households and businesses and do not signal any change in the outlook for the economy or for monetary policy," the Fed said. The Wall Street Journal (19 Feb.)
*The stock markets don't really like it but don't worry, the PPT will make sure the market won't go back down to March lows, but GS is in decline, so PPT has alot of resistance to beat. The volume is too low to get the run up that they will be seeking, but if I have learned nothing else over the past year and a half it's that one never knows.
Fed is not truly tightening policy yet, Pimco's Gross says
The U.S. Federal Reserve's move to increase its discount rate does not signal the start of a serious tightening of monetary policy, said Bill Gross, co-chief investment officer at Pacific Investment Management. "I don't think it's the beginning, really, of a tightening from the standpoint of monetary policy," he said. "I don't think it is the beginning of an increase in the fed-funds rate or in terms of interest on reserves that has been discussed as well." Reuters (19 Feb.)
China might be secretly buying U.S. Treasuries, analysts say
While the U.S. Treasury Department reported a sharp cutback in China's investment in U.S. debt, China might be still buying Treasuries but through anonymous channels that hide its identity, analysts said. Shifting to such channels, including foreign banks, makes it difficult for other nations to track China's pattern of investment or analyze its intentions, experts said. The Globe and Mail (Toronto) (19 Feb.)
Social Security is best way to secure retirement income, Volcker says
The Social Security system should be reformed to guarantee that all Americans receive a safe retirement income, said former Federal Reserve Chairman Paul Volcker, an economic adviser to President Barack Obama. Changes that are necessary would be "doable," Volcker said. Bloomberg (19 Feb.)
*As if the muni problem weren't bad enough
Analysts warn of foreclosure crisis in commercial real estate
Analysts said a wave of foreclosure on commercial properties in the U.S. likely will hit community banks especially hard. "There's been an enormous bubble in commercial real estate, and it has to come down," said Elizabeth Warren, chairwoman of the Congressional Oversight Panel. "There will be significant bankruptcies among developers and significant failures among community banks." The Washington Post (19 Feb.)
*more on the muni bond crisis
Muni-bond insurers face losses tied to infrastructure projects
With more local governments in the U.S. seeking bankruptcy protection for infrastructure projects, companies that insure municipal bonds are facing soaring losses, analysts said. "It is a worst-case scenario if the dynamics of the municipal bond market change," said Rob Haines, an analyst at CreditSights. "The companies have modeled in virtually no losses." Bloomberg (19 Feb.)
*Greece's problem have been the US' problem for a year now. It's just that no one bothered to tell you, except me!
Investors wonder whether Greece's problems will reach U.S.
Bond buyers are thinking about the odds of Greece's debt crisis spreading to Portugal, Ireland and Spain, then eventually to Britain and the U.S., according to The Economist. While the possibility of U.S. Treasuries losing their "risk-free" image cannot be rejected, a more likely outcome is higher interest rates on U.K. and U.S. government debt. "That demands a credible medium-term plan to cut deficits," The Economist notes. "Otherwise Greece's problems could be the start of something much bigger." The Economist (18 Feb.)