March 8 (Bloomberg) -- Japan’s 10-year bonds fell for the first time in three days as signs the global recovery is gaining momentum hurt demand for the safety of government debt.
Ten-year bonds extended last week’s drop after a report showed Japan posted a wider-than-expected current-account surplus in January, signaling overseas consumption is buoying the economy. Demand for bonds also waned as stocks gained following a U.S. report last week that showed the world’s biggest economy lost fewer jobs than economists forecast.
“The better U.S. employment data is a factor weighing on bond prices,” said Masaru Hamasaki, chief strategist at Tokyo- based Toyota Asset Management Co., which oversees the equivalent of $14 billion.
The yield on the 1.4 percent bond due March 2020 rose one basis point to 1.315 percent at the 11:05 a.m. morning close in Tokyo at Japan Bond Trading Co., the nation’s largest interdealer debt broker. The price fell 0.089 yen to 100.750.
Ten-year bond futures for March delivery dropped 0.05 to 140.14 at the Tokyo Stock Exchange.
The Nikkei 225 Stock Average gained 1.8 percent to 10,551.30. The yen fell 0.2 percent after slumping the most in three months on March 5.
‘Hard to Buy’
“The advance of the Nikkei to above 10,500 and the weak yen makes it hard to buy bonds,” said Takafumi Yamawaki, a senior strategist in Tokyo at BNP Paribas Securities Japan Ltd., a unit of France’s largest bank.
Japan posted a current-account surplus of 899.8 billion yen ($9.95 billion) for January, the Ministry of Finance said in Tokyo. The surplus was forecast to be 783.9 billion yen, according to a Bloomberg News survey. Exports grew at the fastest pace in more than 30 years in January and industrial production rose the most since May, reports showed last month.
“Yields are likely to rise given the better-than-expected U.S. payrolls,” said Jun Ishii, chief fixed-income strategist in Tokyo at Mitsubishi UFJ Securities Co., a unit of Japan’s largest banking group. The 10-year rate will probably rise to 1.325 percent today, Ishii said.
Ten-year U.S. Treasury yields climbed eight basis points to 3.68 percent on March 5 after the Labor Department said payrolls dropped by 36,000 last month, less than the 68,000 decline predicted by economists.
The extra yield offered by 10-year Treasuries over similar-maturity Japanese debt expanded to 2.38 percentage points today, the widest since Feb. 22.
“The JGB market is likely to react to the snapback in U.S. yields following last Friday’s stronger-than-expected U.S. employment data,” Chotaro Morita, head of fixed-income strategy research at Barclays Capital, wrote in a note to clients.
Sunday, March 7, 2010
N.Z. Manufacturing, Construction Add to Fourth-Quarter Growth
March 8 (Bloomberg) -- New Zealand manufacturing sales increased the most since 2002 in the fourth quarter and home building surged, adding to signs economic growth accelerated in the final months of last year.
Sales volumes adjusted to remove inflation rose 3.1 percent from the previous three months, Statistics New Zealand said in a statement in Wellington today. Residential construction increased 7.4 percent in the same period, the statistics agency said in a separate report.
Stronger construction, manufacturing and retail sales suggest economic growth accelerated in the fourth quarter, buoyed by record-low interest rates and an expansion in Australia, which is the biggest market for New Zealand’s exports. The Treasury Department last week said the currency’s 3.7 percent decline against the U.S. dollar so far this year is providing more confidence for exporters.
“Construction and manufacturing look set to provide a positive contribution to gross domestic product in the quarter,” said Philip Borkin, an economist at Goldman Sachs JBWere Ltd. in Auckland. He estimates the economy grew 1 percent in the three months ended Dec. 31.
New Zealand’s dollar bought 70.01 U.S. cents at 11:55 a.m. in Wellington trading from 69.54 cents immediately before the reports were published.
Economic growth is accelerating after GDP increased 0.2 percent in both the second and third quarters of 2009, ending the nation’s worst recession in three decades. Fourth-quarter GDP figures are published on March 25.
Export Volumes
Economists will complete their GDP forecasts after a report on export and import volumes on March 10 and data on electricity generation due a week later. Retail sales rose 1 percent in the fourth quarter, according to a report on Feb. 12.
Reserve Bank Governor Alan Bollard has kept the official cash rate at 2.5 percent since April last year. He will leave the rate unchanged at his next review on March 11, according to all 13 economists surveyed by Bloomberg News.
Manufacturing sales rose in the three months through December by the most since the third quarter of 2002, when volumes jumped 4.1 percent. Eleven of 15 industries recorded gains, the statistics agency said.
Meat and dairy sales advanced 4.6 percent, led by meat. That offset a fall in milk powder, butter and cheese volumes. More than half the meat and dairy production is exported, the statistics agency said.
Excluding those categories, manufacturing climbed 3.6 percent, the agency said. Analysts use the figure excluding meat and dairy as a guide for the contribution of manufacturing to New Zealand’s GDP.
GDP Contribution
“Adjusting for changes in inventory levels, we estimate that manufacturing production rose around 4 percent” in the quarter, said Borkin. “This emphasizes a turn in performance after a period of significant weakness.”
Before the latest period, manufacturing had declined for five of seven quarters.
Demand for exports is being buoyed by global growth, led by China and other Asian economies. In Australia, which buys 23 percent of New Zealand exports, growth was 0.9 percent in the fourth quarter.
The increase in home construction followed two quarters of declines, while non-residential construction fell 6.1 percent, the statistics agency said in a second report.
“We expect residential construction activity will continue to recover over the coming quarters,” said Jane Turner, an economist at ASB Bank Ltd. in Auckland. “Non residential was significantly weaker than our expectation.”
Construction lags behind home-building approvals, which surged 21 percent in the fourth quarter from the three months through September, according to a report on Jan. 29.
Sales volumes adjusted to remove inflation rose 3.1 percent from the previous three months, Statistics New Zealand said in a statement in Wellington today. Residential construction increased 7.4 percent in the same period, the statistics agency said in a separate report.
Stronger construction, manufacturing and retail sales suggest economic growth accelerated in the fourth quarter, buoyed by record-low interest rates and an expansion in Australia, which is the biggest market for New Zealand’s exports. The Treasury Department last week said the currency’s 3.7 percent decline against the U.S. dollar so far this year is providing more confidence for exporters.
“Construction and manufacturing look set to provide a positive contribution to gross domestic product in the quarter,” said Philip Borkin, an economist at Goldman Sachs JBWere Ltd. in Auckland. He estimates the economy grew 1 percent in the three months ended Dec. 31.
New Zealand’s dollar bought 70.01 U.S. cents at 11:55 a.m. in Wellington trading from 69.54 cents immediately before the reports were published.
Economic growth is accelerating after GDP increased 0.2 percent in both the second and third quarters of 2009, ending the nation’s worst recession in three decades. Fourth-quarter GDP figures are published on March 25.
Export Volumes
Economists will complete their GDP forecasts after a report on export and import volumes on March 10 and data on electricity generation due a week later. Retail sales rose 1 percent in the fourth quarter, according to a report on Feb. 12.
Reserve Bank Governor Alan Bollard has kept the official cash rate at 2.5 percent since April last year. He will leave the rate unchanged at his next review on March 11, according to all 13 economists surveyed by Bloomberg News.
Manufacturing sales rose in the three months through December by the most since the third quarter of 2002, when volumes jumped 4.1 percent. Eleven of 15 industries recorded gains, the statistics agency said.
Meat and dairy sales advanced 4.6 percent, led by meat. That offset a fall in milk powder, butter and cheese volumes. More than half the meat and dairy production is exported, the statistics agency said.
Excluding those categories, manufacturing climbed 3.6 percent, the agency said. Analysts use the figure excluding meat and dairy as a guide for the contribution of manufacturing to New Zealand’s GDP.
GDP Contribution
“Adjusting for changes in inventory levels, we estimate that manufacturing production rose around 4 percent” in the quarter, said Borkin. “This emphasizes a turn in performance after a period of significant weakness.”
Before the latest period, manufacturing had declined for five of seven quarters.
Demand for exports is being buoyed by global growth, led by China and other Asian economies. In Australia, which buys 23 percent of New Zealand exports, growth was 0.9 percent in the fourth quarter.
The increase in home construction followed two quarters of declines, while non-residential construction fell 6.1 percent, the statistics agency said in a second report.
“We expect residential construction activity will continue to recover over the coming quarters,” said Jane Turner, an economist at ASB Bank Ltd. in Auckland. “Non residential was significantly weaker than our expectation.”
Construction lags behind home-building approvals, which surged 21 percent in the fourth quarter from the three months through September, according to a report on Jan. 29.
Hewlett-Packard, Sybase, YRC Worldwide: U.S. Equity Preview
March 7 (Bloomberg) -- Shares of the following companies may have unusual moves in U.S. trading tomorrow. Stock symbols are in parentheses, and prices are as of 5:23 p.m. in New York on March 5.
Standard & Poor’s 500 Index futures expiring in March rose 1.3 percent to 1,136.50.
AT&T Inc. (T:US): The largest U.S. telephone company said core wireline employees in its southeast region voted to ratify a three-year agreement with the Communications Workers of America covering about 30,000 people.
BCE Inc. (BCE:US): Canada’s largest telephone company may rise as much as 10 percent during the next year as it cuts costs and improves profitability, Barron’s reported.
C.H. Robinson Worldwide Inc. (CHRW:US): The freight- shipment manager may rise to $66 in the next year as the economy rebounds and boosts demand for deliveries, Barron’s reported, citing money manager Lisa Dong.
Hewlett-Packard Co. (HPQ:US) fell 0.2 percent to $51.93. The world’s largest personal-computer maker revised its first- quarter results, cutting profit by 3 cents a share, after a lawsuit against its Electronic Data Systems unit increased legal costs.
Imax Corp. (IMAX:US): “Alice in Wonderland” earned $11.9 million at 188 Imax 3-D theaters this weekend, the most ever in its history, according to Hollywood.com Box-Office.
OAO Mobile TeleSystems (MBT:US): Russia’s largest mobile- phone company may rise 25 percent during the next year as it bundles more telecommunications services for consumers, Barron’s reported, citing analyst Pieter Stalenhof.
Sybase Inc. (SY:US): The mobile software maker said it boosted its share repurchase by $150 million, and said it will use cash and stock to pay for the conversion of about $390 million of its 1.75 percent convertible notes due 2025.
Walt Disney Co. (DIS:US): “Alice in Wonderland,” the classic Lewis Carroll tale re-imagined in 3-D by director Tim Burton, earned $116.3 million this weekend. The film had the sixth-best opening ever, the best March debut, and was the first movie to cross the $100 million in the January-to-March period, Hollywood.com Box Office said.
Wipro Ltd. (WIT:US): The India-based international outsourcing company may decline along with Infosys Technologies Ltd. (INFY:US) as customers delay orders on lingering questions about the economic recovery and competition increases, Barron’s reported.
YRC Worldwide Inc. (YRCW:US): The largest U.S. trucker said it expects to complete a reverse stock split during the second quarter after the Nasdaq Stock Market notified the company it was not in compliance because shares closed at a per-share bid price of less than $1 for 30 consecutive business days.
Standard & Poor’s 500 Index futures expiring in March rose 1.3 percent to 1,136.50.
AT&T Inc. (T:US): The largest U.S. telephone company said core wireline employees in its southeast region voted to ratify a three-year agreement with the Communications Workers of America covering about 30,000 people.
BCE Inc. (BCE:US): Canada’s largest telephone company may rise as much as 10 percent during the next year as it cuts costs and improves profitability, Barron’s reported.
C.H. Robinson Worldwide Inc. (CHRW:US): The freight- shipment manager may rise to $66 in the next year as the economy rebounds and boosts demand for deliveries, Barron’s reported, citing money manager Lisa Dong.
Hewlett-Packard Co. (HPQ:US) fell 0.2 percent to $51.93. The world’s largest personal-computer maker revised its first- quarter results, cutting profit by 3 cents a share, after a lawsuit against its Electronic Data Systems unit increased legal costs.
Imax Corp. (IMAX:US): “Alice in Wonderland” earned $11.9 million at 188 Imax 3-D theaters this weekend, the most ever in its history, according to Hollywood.com Box-Office.
OAO Mobile TeleSystems (MBT:US): Russia’s largest mobile- phone company may rise 25 percent during the next year as it bundles more telecommunications services for consumers, Barron’s reported, citing analyst Pieter Stalenhof.
Sybase Inc. (SY:US): The mobile software maker said it boosted its share repurchase by $150 million, and said it will use cash and stock to pay for the conversion of about $390 million of its 1.75 percent convertible notes due 2025.
Walt Disney Co. (DIS:US): “Alice in Wonderland,” the classic Lewis Carroll tale re-imagined in 3-D by director Tim Burton, earned $116.3 million this weekend. The film had the sixth-best opening ever, the best March debut, and was the first movie to cross the $100 million in the January-to-March period, Hollywood.com Box Office said.
Wipro Ltd. (WIT:US): The India-based international outsourcing company may decline along with Infosys Technologies Ltd. (INFY:US) as customers delay orders on lingering questions about the economic recovery and competition increases, Barron’s reported.
YRC Worldwide Inc. (YRCW:US): The largest U.S. trucker said it expects to complete a reverse stock split during the second quarter after the Nasdaq Stock Market notified the company it was not in compliance because shares closed at a per-share bid price of less than $1 for 30 consecutive business days.
Retail Sales Probably Fell in February: U.S. Economy Preview
March 7 (Bloomberg) -- Sales at U.S. retailers probably declined in February as blizzards kept Americans away from malls and auto-dealer showrooms, economists said before a government report this week.
Purchases dropped 0.2 percent after a 0.5 percent gain the prior month, according to the median estimate of 56 economists surveyed by Bloomberg News before Commerce Department figures on March 12. Other reports may show the trade gap widened in January and consumers grew more confident this month.
Figures last week showing the U.S. lost fewer jobs in February than anticipated, overcoming the effects of the snowstorms that caused some companies to temporarily close, signals employment is on the verge of accelerating. More hiring and wage increases will be critical in lifting consumer spending, the biggest part of the economy.
“Retail sales likely would have squeaked out a modest gain if not for the severe snowstorms,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. Nonetheless, “consumers will have to spend more freely for the recovery to sustain itself.”
A Labor Department report March 5 showed the economy lost 36,000 jobs in February and the unemployment rate held at 9.7 percent for a second month, indicating the labor market is stabilizing.
President Barack Obama, speaking at a Washington-area energy company, said the job report was “actually better than expected.” Even so, he said the number of unemployed is “more than we should tolerate” and urged Congress to pass a jobs bill to help lower unemployment.
Auto Sales
Auto sales fell last month to an annual pace of 10.4 million vehicles from 10.8 million in January, according to industry data last week. Toyota Motor Corp. sales fell 8.7 percent from a year earlier as it struggled with global recalls that halted demand for some models. Ford Motor Co., overcoming the snowstorms that curbed showroom traffic, beat General Motors Co. in monthly sales for the first time since 1998.
Excluding automobiles, retail sales were probably little changed after a 0.6 percent gain the prior month, according to the Bloomberg survey.
Chain stores turned in a better-than-forecast performance last month, compared with a low point last year, industry figures showed last week. Macy’s Inc., Abercrombie & Fitch Co. and Gap Inc. beat analysts’ estimates in February as holiday sales and spring collections tempted consumers to go shopping in a month of record snowfalls.
Same-Store Sales
February comparable-store sales climbed 4.1 percent, topping the Retail Metrics 3 percent estimate. It was the sixth straight monthly gain and the biggest in 27 months. Purchases fell 4.1 percent in February 2009, Ken Perkins, president of Swampscott, Massachusetts-based Retail Metrics, said last week.
TJX Corporation Inc., an off-price apparel chain, reported a 16 percent sales increase in the four weeks ended Feb. 27 from a year earlier.
“We achieved these sales despite the harsh snowstorms that affected many regions in the country,” said Sherry Lang, investor vice president, in a teleconference on March 4. “The month ended on a stronger note than we had anticipated.”
Households are feeling less pessimistic. The Reuters/University of Michigan preliminary index of consumer sentiment for March probably rose to 73.8 from 73.6 a month earlier, according to the Bloomberg survey before the March 12 release.
Fewer Claims
In a sign that job losses are abating, a report from the Labor Department on March 11 may show initial jobless claims fell to 460,000 last week from 469,000 the previous week, according to economists surveyed.
Stocks have recovered from a January slump prompted by concerns of a possible Greek default and government plans to boost oversight over banks. The Standard & Poor’s 500 Index has gained 6 percent since the end of January.
The economy grew at a 5.9 percent annual pace in the fourth quarter, the strongest showing in more than six years as companies tried to stabilize inventories, the government reported last month. Economists surveyed by Bloomberg early last month forecast growth will slow to 3 percent in this quarter.
A Commerce Department report on March 12 may show business inventories rose 0.2 percent in January after dropping 0.2 percent the prior month, according to economists surveyed.
As companies begin rebuilding stockpiles and consumer purchases recover, demand for imports is rising. That probably caused the trade deficit to widen to $41 billion in January from $40.2 billion in December, according to the survey median before a March 11 report from the Commerce Department. The collapse in trade earlier last year brought the deficit down to a near- decade low of $25.8 billion in May.
Bloomberg Survey
================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
Whlsale Inv. MOM% 3/10 Jan. -0.8% 0.2%
Federal Budget $ Blns 3/10 Feb. -193.9 -210.0
Trade Balance $ Blns 3/11 Jan. -40.2 -41.0
Initial Claims ,000’s 3/11 27-Feb 469 460
Cont. Claims ,000’s 3/11 20-Feb 4500 4495
Retail Sales MOM% 3/12 Feb. 0.5% -0.2%
Retail ex-autos MOM% 3/12 Feb. 0.6% 0.0%
Retail exauto/gas MOM% 3/12 Feb. 0.6% 0.3%
U of Mich Conf. Index 3/12 March P 73.6 73.8
Business Inv. MOM% 3/12 Jan. -0.2% 0.2%
================================================================
Purchases dropped 0.2 percent after a 0.5 percent gain the prior month, according to the median estimate of 56 economists surveyed by Bloomberg News before Commerce Department figures on March 12. Other reports may show the trade gap widened in January and consumers grew more confident this month.
Figures last week showing the U.S. lost fewer jobs in February than anticipated, overcoming the effects of the snowstorms that caused some companies to temporarily close, signals employment is on the verge of accelerating. More hiring and wage increases will be critical in lifting consumer spending, the biggest part of the economy.
“Retail sales likely would have squeaked out a modest gain if not for the severe snowstorms,” said Ryan Sweet, a senior economist at Moody’s Economy.com in West Chester, Pennsylvania. Nonetheless, “consumers will have to spend more freely for the recovery to sustain itself.”
A Labor Department report March 5 showed the economy lost 36,000 jobs in February and the unemployment rate held at 9.7 percent for a second month, indicating the labor market is stabilizing.
President Barack Obama, speaking at a Washington-area energy company, said the job report was “actually better than expected.” Even so, he said the number of unemployed is “more than we should tolerate” and urged Congress to pass a jobs bill to help lower unemployment.
Auto Sales
Auto sales fell last month to an annual pace of 10.4 million vehicles from 10.8 million in January, according to industry data last week. Toyota Motor Corp. sales fell 8.7 percent from a year earlier as it struggled with global recalls that halted demand for some models. Ford Motor Co., overcoming the snowstorms that curbed showroom traffic, beat General Motors Co. in monthly sales for the first time since 1998.
Excluding automobiles, retail sales were probably little changed after a 0.6 percent gain the prior month, according to the Bloomberg survey.
Chain stores turned in a better-than-forecast performance last month, compared with a low point last year, industry figures showed last week. Macy’s Inc., Abercrombie & Fitch Co. and Gap Inc. beat analysts’ estimates in February as holiday sales and spring collections tempted consumers to go shopping in a month of record snowfalls.
Same-Store Sales
February comparable-store sales climbed 4.1 percent, topping the Retail Metrics 3 percent estimate. It was the sixth straight monthly gain and the biggest in 27 months. Purchases fell 4.1 percent in February 2009, Ken Perkins, president of Swampscott, Massachusetts-based Retail Metrics, said last week.
TJX Corporation Inc., an off-price apparel chain, reported a 16 percent sales increase in the four weeks ended Feb. 27 from a year earlier.
“We achieved these sales despite the harsh snowstorms that affected many regions in the country,” said Sherry Lang, investor vice president, in a teleconference on March 4. “The month ended on a stronger note than we had anticipated.”
Households are feeling less pessimistic. The Reuters/University of Michigan preliminary index of consumer sentiment for March probably rose to 73.8 from 73.6 a month earlier, according to the Bloomberg survey before the March 12 release.
Fewer Claims
In a sign that job losses are abating, a report from the Labor Department on March 11 may show initial jobless claims fell to 460,000 last week from 469,000 the previous week, according to economists surveyed.
Stocks have recovered from a January slump prompted by concerns of a possible Greek default and government plans to boost oversight over banks. The Standard & Poor’s 500 Index has gained 6 percent since the end of January.
The economy grew at a 5.9 percent annual pace in the fourth quarter, the strongest showing in more than six years as companies tried to stabilize inventories, the government reported last month. Economists surveyed by Bloomberg early last month forecast growth will slow to 3 percent in this quarter.
A Commerce Department report on March 12 may show business inventories rose 0.2 percent in January after dropping 0.2 percent the prior month, according to economists surveyed.
As companies begin rebuilding stockpiles and consumer purchases recover, demand for imports is rising. That probably caused the trade deficit to widen to $41 billion in January from $40.2 billion in December, according to the survey median before a March 11 report from the Commerce Department. The collapse in trade earlier last year brought the deficit down to a near- decade low of $25.8 billion in May.
Bloomberg Survey
================================================================
Release Period Prior Median
Indicator Date Value Forecast
================================================================
Whlsale Inv. MOM% 3/10 Jan. -0.8% 0.2%
Federal Budget $ Blns 3/10 Feb. -193.9 -210.0
Trade Balance $ Blns 3/11 Jan. -40.2 -41.0
Initial Claims ,000’s 3/11 27-Feb 469 460
Cont. Claims ,000’s 3/11 20-Feb 4500 4495
Retail Sales MOM% 3/12 Feb. 0.5% -0.2%
Retail ex-autos MOM% 3/12 Feb. 0.6% 0.0%
Retail exauto/gas MOM% 3/12 Feb. 0.6% 0.3%
U of Mich Conf. Index 3/12 March P 73.6 73.8
Business Inv. MOM% 3/12 Jan. -0.2% 0.2%
================================================================
Friday, March 5, 2010
AIG Board Said to Approve Sale of Non-U.S. Life Unit to MetLife
March 6 (Bloomberg) -- American International Group Inc.’s board of directors approved the sale of a non-U.S. insurance division to MetLife Inc., according to two people with knowledge of the matter.
An agreement to sell AIG’s American Life Insurance Co. may be announced as soon as this weekend, said the people, who declined to be identified because the vote was private. The price under discussion had been about $15 billion, other people with knowledge of the situation said.
The deal to divest Alico, which operates in more than 50 countries including parts of Europe, Latin America and Japan, would be AIG’s second involving an overseas life unit this month. The insurer said March 1 it will sell AIA Group Ltd., with customers in nations including China, India and Vietnam, to Prudential Plc for $35.5 billion. AIG is auctioning assets to repay a U.S. rescue that swelled to $182.3 billion.
“AIG’s foreign life insurance operations have always been one of the company’s crown jewels,” Chief Executive Officer Robert Benmosche said in a Feb. 26 letter to shareholders. “Alico is a global leader in life insurance, with operations in 54 countries serving 19 million customers.”
AIG’s board met and approved of the sale on March 5, the two people said. Christina Pretto, a spokeswoman for AIG, declined to comment. Christopher Breslin of New York-based MetLife didn’t return a call seeking comment.
Excluding Alico, AIG has secured deals to raise more than $47 billion since its 2008 bailout, including the $35.5 billion sale of AIA. The company has also agreed to sell a U.S. auto insurer, an asset manager and a reinsurer.
AIG’s approval came after it was told by the Internal Revenue Service that it doesn’t owe taxes on life insurance sold to non-U.S. customers through Alico, said a person with knowledge of the matter.
The talks for Alico were stalled in February over uncertainty regarding the tax. Delaware-based Alico had said the tax didn’t apply because more than 80 percent of its business was outside the country, the person said.
An agreement to sell AIG’s American Life Insurance Co. may be announced as soon as this weekend, said the people, who declined to be identified because the vote was private. The price under discussion had been about $15 billion, other people with knowledge of the situation said.
The deal to divest Alico, which operates in more than 50 countries including parts of Europe, Latin America and Japan, would be AIG’s second involving an overseas life unit this month. The insurer said March 1 it will sell AIA Group Ltd., with customers in nations including China, India and Vietnam, to Prudential Plc for $35.5 billion. AIG is auctioning assets to repay a U.S. rescue that swelled to $182.3 billion.
“AIG’s foreign life insurance operations have always been one of the company’s crown jewels,” Chief Executive Officer Robert Benmosche said in a Feb. 26 letter to shareholders. “Alico is a global leader in life insurance, with operations in 54 countries serving 19 million customers.”
AIG’s board met and approved of the sale on March 5, the two people said. Christina Pretto, a spokeswoman for AIG, declined to comment. Christopher Breslin of New York-based MetLife didn’t return a call seeking comment.
Excluding Alico, AIG has secured deals to raise more than $47 billion since its 2008 bailout, including the $35.5 billion sale of AIA. The company has also agreed to sell a U.S. auto insurer, an asset manager and a reinsurer.
AIG’s approval came after it was told by the Internal Revenue Service that it doesn’t owe taxes on life insurance sold to non-U.S. customers through Alico, said a person with knowledge of the matter.
The talks for Alico were stalled in February over uncertainty regarding the tax. Delaware-based Alico had said the tax didn’t apply because more than 80 percent of its business was outside the country, the person said.
Banks Defend Sovereign Default Swaps at EU Regulators’ Meeting
March 6 (Bloomberg) -- The banking industry argued at a meeting with European Union regulators that trading in sovereign credit-default swaps isn’t large enough to affect Greek bond prices.
Swaps account for “only a small percentage of government bond trading volumes,” so it isn’t likely speculation in the contracts is “dictating price levels in the larger government bond market,” the International Swaps & Derivatives Association, an industry group, said in a statement yesterday. The group said the Brussels meeting offered a chance to address “misconceptions” about credit swaps.
Banks and regulators across Europe were summoned by the European Commission to an informal meeting to discuss regulation of the market for sovereign credit-default swaps in the wake of the Greek debt crisis. European leaders have said the products fuel speculation that can distort market perceptions, making it harder for countries to borrow.
The commission, the EU executive agency, should ban naked swaps speculation, where investors insure bonds they don’t own, because “it is a demonstrably dangerous market,” Richard Portes, founder of the Centre for Economic Policy Research, said in a telephone interview. “If I were the commission, I’d ask the banks to say what social function the trade in naked CDS has.”
The roundtable yesterday was a “technical meeting,” and the discussions will be taken into account for the commission’s planned derivatives proposals later this year, Chantal Hughes, a commission spokeswoman, told reporters in Brussels.
Face Value for Debt
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a country or company default on its debt payments.
“The absence of competition between banks also means that the possibilities of effective cartel behavior in the CDS market have increased,” Portes said.
ISDA defended sovereign swaps, saying in its statement they “can be used to hedge financial, industrial and real estate investments in countries.” The products allow investors to buy and sell default protection “without having access to government bond markets,” the group said.
German Chancellor Angela Merkel’s government is considering ways to tighten rules in the sovereign default swaps market. French Finance Minister Christine Lagarde said Feb. 17 “we should examine the suitability” of credit-default swaps.
The cost of such contracts on Greece rose to a record 428 basis points last month, according to CMA DataVision in London. That meant it cost $428,000 a year to insure $10 million of debt for five years.
Efforts to limit sovereign swaps contracts were criticized by Citigroup Inc. analysts in a note March 2. The analysts said governments should address investor concerns about budget deficits, rather than ban derivatives that hedge against risks.
“We would do better to spend our time addressing the defects the mirror shows than blaming the mirror,” Citigroup analysts, led by Michael Hampden-Turner in London, wrote in a note to investors. “After all, banning mirrors does nothing at all to make the world a prettier place.”
Swaps account for “only a small percentage of government bond trading volumes,” so it isn’t likely speculation in the contracts is “dictating price levels in the larger government bond market,” the International Swaps & Derivatives Association, an industry group, said in a statement yesterday. The group said the Brussels meeting offered a chance to address “misconceptions” about credit swaps.
Banks and regulators across Europe were summoned by the European Commission to an informal meeting to discuss regulation of the market for sovereign credit-default swaps in the wake of the Greek debt crisis. European leaders have said the products fuel speculation that can distort market perceptions, making it harder for countries to borrow.
The commission, the EU executive agency, should ban naked swaps speculation, where investors insure bonds they don’t own, because “it is a demonstrably dangerous market,” Richard Portes, founder of the Centre for Economic Policy Research, said in a telephone interview. “If I were the commission, I’d ask the banks to say what social function the trade in naked CDS has.”
The roundtable yesterday was a “technical meeting,” and the discussions will be taken into account for the commission’s planned derivatives proposals later this year, Chantal Hughes, a commission spokeswoman, told reporters in Brussels.
Face Value for Debt
Credit-default swaps pay the buyer face value in exchange for the underlying securities or the cash equivalent should a country or company default on its debt payments.
“The absence of competition between banks also means that the possibilities of effective cartel behavior in the CDS market have increased,” Portes said.
ISDA defended sovereign swaps, saying in its statement they “can be used to hedge financial, industrial and real estate investments in countries.” The products allow investors to buy and sell default protection “without having access to government bond markets,” the group said.
German Chancellor Angela Merkel’s government is considering ways to tighten rules in the sovereign default swaps market. French Finance Minister Christine Lagarde said Feb. 17 “we should examine the suitability” of credit-default swaps.
The cost of such contracts on Greece rose to a record 428 basis points last month, according to CMA DataVision in London. That meant it cost $428,000 a year to insure $10 million of debt for five years.
Efforts to limit sovereign swaps contracts were criticized by Citigroup Inc. analysts in a note March 2. The analysts said governments should address investor concerns about budget deficits, rather than ban derivatives that hedge against risks.
“We would do better to spend our time addressing the defects the mirror shows than blaming the mirror,” Citigroup analysts, led by Michael Hampden-Turner in London, wrote in a note to investors. “After all, banning mirrors does nothing at all to make the world a prettier place.”
Thursday, March 4, 2010
Asian Stocks Rise on U.S. Jobs, BOJ Speculation; Sony Advances
March 5 (Bloomberg) -- Asian stocks rose for the fourth time in five days after U.S. jobless claims fell and the Nikkei newspaper reported that the Bank of Japan may further loosen monetary policy.
Billabong International Ltd., a surfwear maker that gets 44 percent of its revenue from the Americas, climbed 2.9 percent in Sydney. Sony Corp., the maker of the PlayStation 3 game machine, rose 2.7 percent as a weaker yen boosted the outlook for export earnings. STX Pan Ocean Co. and Korea Line Corp., South Korea’s biggest bulk-shipping lines, advanced more than 2 percent in Seoul after an index of freight rates rose the most since July.
The U.S. economy is “steadily recovering,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “If implemented, the BOJ’s measures may widen a gap in the U.S.’s and Japan’s borrowing costs and halt a further appreciation of the yen.”
The MSCI Asia Pacific Index advanced 0.7 percent to 120.51 as of 9:46 a.m. in Tokyo. The gauge has fallen 4.9 percent from a 17-month high on Jan. 15 on concern over budget deficits in Europe and speculation governments around the world will start withdrawing economic stimulus policies.
Japan’s Nikkei 225 Stock Average climbed 2 percent and South Korea’s Kospi Index gained 0.7 percent. Australia’s S&P/ASX 200 Index rose 0.5 percent, while New Zealand’s NZX 50 Index lost 0.1 percent, even after the Treasury Department said the nation’s budget cash deficit in the seven months ended Jan. 31 was narrower than forecast.
Billabong International Ltd., a surfwear maker that gets 44 percent of its revenue from the Americas, climbed 2.9 percent in Sydney. Sony Corp., the maker of the PlayStation 3 game machine, rose 2.7 percent as a weaker yen boosted the outlook for export earnings. STX Pan Ocean Co. and Korea Line Corp., South Korea’s biggest bulk-shipping lines, advanced more than 2 percent in Seoul after an index of freight rates rose the most since July.
The U.S. economy is “steadily recovering,” said Juichi Wako, a senior strategist at Tokyo-based Nomura Holdings Inc. “If implemented, the BOJ’s measures may widen a gap in the U.S.’s and Japan’s borrowing costs and halt a further appreciation of the yen.”
The MSCI Asia Pacific Index advanced 0.7 percent to 120.51 as of 9:46 a.m. in Tokyo. The gauge has fallen 4.9 percent from a 17-month high on Jan. 15 on concern over budget deficits in Europe and speculation governments around the world will start withdrawing economic stimulus policies.
Japan’s Nikkei 225 Stock Average climbed 2 percent and South Korea’s Kospi Index gained 0.7 percent. Australia’s S&P/ASX 200 Index rose 0.5 percent, while New Zealand’s NZX 50 Index lost 0.1 percent, even after the Treasury Department said the nation’s budget cash deficit in the seven months ended Jan. 31 was narrower than forecast.
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