By Cordell Eddings and Daniel Kruger - Apr 7, 2012
Treasuries rose, with 10-year note yields falling the most since December, as less-than-forecast job growth renewed speculation the Federal Reserve will provide more monetary stimulus to support the economic recovery.
The benchmark note gained for a third consecutive week after the Labor Department said yesterday that employers added 120,000 jobs in March and the jobless rate fell to 8.2 percent. Treasuries rallied on concern the European debt crisis is worsening as rising borrowing costs make it more difficult to finance deficits in nations such as Spain. The U.S. will sell $66 billion in three-, 10-, and 30-year debt next week.
“Things were not quite as rosy as previous numbers led us to believe, and we are seeing some payback for that,” said Jay Mueller, who manages about $3 billion of bonds at Wells Fargo Capital Management in Milwaukee. “One number won’t determine the Fed’s action, but it does give them more cover to remain dovish.”
The benchmark 10-year note yield fell this week 15 basis points, or 0.15 percentage point, to 2.05 percent in New York, according to Bloomberg Bond Trader prices. Thirty-year bond yields fell 12 basis points, the most since December, to 3.22 percent.
The increase in payrolls, the fewest in five months, followed a revised 240,000 gain in February that was bigger than first estimated, Labor Department figures showed in Washington. The March increase was less than the most pessimistic forecast in a Bloomberg News survey, in which the median estimate called for a 205,000 rise.
Additional Stimulus
Unemployment fell to the lowest since January 2009, from 8.3 percent. The data also showed Americans worked fewer hours and earned less on average per week.
Investors continue to price in some probability that the Fed may initiate a third round of asset purchases, or quantitative easing, amid signs that the pace of the recovery remains subject to risks, including rising oil prices and continued turmoil in Europe.
“A couple of members” of the Federal Open Market Committee indicated that additional stimulus could become necessary if the economy lost momentum or if inflation stayed below 2 percent, according to minutes of its March 13 meeting released April 3. Fed Chairman Ben S. Bernanke said last week that, while he’s encouraged by the unemployment rate’s decline, continued accommodative monetary policy will be needed to make further progress.
‘On the Table’
“QE3 is firmly on the table again,” said Alan De Rose, head of Treasury trading at Oppenheimer & Co. Inc. “In terms of the economic backdrop, it’s not as strong as many people thought.”
After buying $2.3 trillion of assets to support the economy in two rounds of quantitative easing from December 2008 to June, the central bank has been replacing shorter maturities in its holdings with longer-term debt to cap borrowing costs without increasing holdings on its balance sheet. The $400 billion program, known as Operation Twist, is due to end in June.
The 10-year yield rose 10 basis points to 1.92 percent Feb. 3 after Labor Department data showed the economy added 200,000 jobs, 60,000 more than the consensus forecast. The yield fell 14 basis points to 1.99 percent on Sept. 2 after the government said there had been no job growth in August, compared with a forecast for a gain of 68,000 positions.
‘In Play’
“It keeps the Fed in play,” said Jason Brady, who manages bonds in Santa Fe, New Mexico, at Thornburg Investment Management, which oversees $72 billion. “We had bought into a story, as a market, that was about continuous improvements in the employment situation. This definitely puts that into question.”
The Treasury Department will sell $32 billion in three-year notes, $21 billion in 10-year notes, and $13 billion 30-year bonds from April 10 to April 12.
Yields fell earlier in the week after Spain’s borrowing costs climbed as the yield on the country’s 10-year bonds gained 13 basis points to 5.82 percent. The yield difference, or spread, between Spanish 10-year securities and similar-maturity German bunds rose to more than 400 basis points for the first time since Dec. 12.
Spain, the euro region’s fourth-largest economy, is in “extreme difficulty,” Prime Minister Mariano Rajoy said April 4, raising the likelihood of a bailout for the second time this week. ECB President Mario Draghi said April 4 that the economic outlook remained subject to “downside risks.”
Ten-year yields will increase to 2.51 percent by year-end, according to the average forecast in a Bloomberg survey of banks and securities companies, with the most recent projections given the heaviest weightings.
To contact the reporters on this story: Cordell Eddings in New York at ceddings@bloomberg.net; Daniel Kruger in New York at dkruger1@bloomberg.net
To contact the editor responsible for this story: Dave Liedtka at dliedtka@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Saturday, April 7, 2012
Friday, April 6, 2012
Jewelers in India End Three-Week Strike on Minister Assurance
By Prabhudatta Mishra - Apr 6, 2012
Jewelers in India, the biggest bullion buyer, suspended the longest nationwide strike after the government assured them it will consider their concerns on a tax on non-branded gold ornaments.
The 21-day strike ended after their meeting with Finance Minister Pranab Mukherjee, who imposed a 1 percent levy for non- branded jewelery for the first time and doubled import duties on gold bars, coins and platinum in his March 16 budget speech, according to an e-mailed statement from the All India Gems & Jewellery Trade Federation.
“The minister assured that he would consider the demand for the rollback of excise duty favorably,” Bachhraj Bamalwa, chairman of the trade body, told reporters in New Delhi after meeting with Mukherjee. The strike cost the industry about 200 billion rupees ($4 billion) in lost revenue, he said.
The end to the shutdown may boost Indian imports, helping sustain this year’s 4.5 percent rally in gold prices. Bullion is rising for a 12th year as Europe’s debt crisis and concerns that global economic growth may slow fueled demand for a protection of wealth.
Mukherjee raised the import tax on gold for a second time this year as part of steps to curb the current account-deficit, partly stoked by record bullion purchases. He raised the import duty on gold bars and coins and platinum to 4 percent from 2 percent, after doubling the tax in January.
A levy on gold ore, concentrate and so-called dore bars for refining will be doubled to 2 percent and an excise tax on refined gold will climb to 3 percent from 1.5 percent, he said.
India’s current-account deficit widened to $19.6 billion in the three months to Dec. 31 from a revised $18.4 billion in the prior quarter, the central bank said in a report on March 30. That’s the widest quarterly gap since at least 1949, data compiled by Bloomberg show, threatening to revive pressure on the rupee. The currency fell 16 percent last year.
Gold for immediate delivery rose 0.2 percent to $1,633.85 an ounce today.
To contact the reporter on this story: Prabhudatta Mishra in New Delhi at pmishra8@bloomberg.net
To contact the editor responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Jewelers in India, the biggest bullion buyer, suspended the longest nationwide strike after the government assured them it will consider their concerns on a tax on non-branded gold ornaments.
The 21-day strike ended after their meeting with Finance Minister Pranab Mukherjee, who imposed a 1 percent levy for non- branded jewelery for the first time and doubled import duties on gold bars, coins and platinum in his March 16 budget speech, according to an e-mailed statement from the All India Gems & Jewellery Trade Federation.
“The minister assured that he would consider the demand for the rollback of excise duty favorably,” Bachhraj Bamalwa, chairman of the trade body, told reporters in New Delhi after meeting with Mukherjee. The strike cost the industry about 200 billion rupees ($4 billion) in lost revenue, he said.
The end to the shutdown may boost Indian imports, helping sustain this year’s 4.5 percent rally in gold prices. Bullion is rising for a 12th year as Europe’s debt crisis and concerns that global economic growth may slow fueled demand for a protection of wealth.
Mukherjee raised the import tax on gold for a second time this year as part of steps to curb the current account-deficit, partly stoked by record bullion purchases. He raised the import duty on gold bars and coins and platinum to 4 percent from 2 percent, after doubling the tax in January.
A levy on gold ore, concentrate and so-called dore bars for refining will be doubled to 2 percent and an excise tax on refined gold will climb to 3 percent from 1.5 percent, he said.
India’s current-account deficit widened to $19.6 billion in the three months to Dec. 31 from a revised $18.4 billion in the prior quarter, the central bank said in a report on March 30. That’s the widest quarterly gap since at least 1949, data compiled by Bloomberg show, threatening to revive pressure on the rupee. The currency fell 16 percent last year.
Gold for immediate delivery rose 0.2 percent to $1,633.85 an ounce today.
To contact the reporter on this story: Prabhudatta Mishra in New Delhi at pmishra8@bloomberg.net
To contact the editor responsible for this story: Sam Nagarajan at samnagarajan@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Wednesday, April 4, 2012
Indian Court Accepts State Appeal on Phone-Permit Cancellation
By Pratap Patnaik and Andrew MacAskill - Apr 4, 2012
India’s Supreme Court accepted the government’s appeal against a judgment that scrapped mobile- phone licenses awarded in an allegedly corrupt sale, a move that may allow companies to operate till a final decision.
The government in its review petition questioned the court’s jurisdiction over policy matters and also sought time till March next year for conducting fresh phone-license sales. Judges G.S. Singhvi and K.S. Radhakrishnan will hear the government’s argument on April 13, according to the order on the court’s website yesterday.
The acceptance of the appeal may throw a lifeline to companies such as Emirates Telecommunications Corp. (ETISALAT) and Russia’s AFK Sistema (AFKS), said Madhu Narayan, a Supreme Court lawyer not connected with the case. The companies’ permits were among the 122 canceled two months ago after the Supreme Court said the sale was “flawed” and had been influenced by those with “money power.” The cut-price permit sale in 2008 may have lowered government revenue by $31 billion, according to a report by India’s chief auditor.
Allowing the government’s appeal “is good for companies that want to continue their operations in India,” said Narayan. “If the court grants time till March 2013, it will help them to participate in the auction and tie up with new partners.”
The cancellations meant operators had to close their businesses within four months, which would affect 69 million users. The court yesterday rejected appeals by seven individual companies that had their permits rescinded, including Telenor ASA’s (TEL) local partner Unitech Ltd. (UT)
‘Curative Petition’
“By entertaining the review petition and hearing the case again, the Supreme Court would have been able to appreciate arguments and evidence that challenges the very basis of its order,” according to an e-mailed statement by Uninor, the joint venture between Telenor and Unitech. “We are disappointed that the court has declined to do so.”
The company said it will file a curative petition and ask the court to keep its order in abeyance until a new bench hears the case afresh.
The mobile-phone license scandal contributed to an 18-month slowdown in policy making by Prime Minister Manmohan Singh’s government. In local elections last month, Singh’s ruling Congress party suffered heavy defeats as it was punished for alleged corruption two years before a national election.
Former Telecommunications Minister Andimuthu Raja, officials and business executives are charged with conspiring to award permits to ineligible companies in the 2008 sale. All of the accused have denied the charges.
To contact the reporters on this story: Pratap Patnaik in New Delhi at ppatnaik2@bloomberg.net; Andrew Macaskill in New Delhi at amacaskill@bloomberg.net
To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
India’s Supreme Court accepted the government’s appeal against a judgment that scrapped mobile- phone licenses awarded in an allegedly corrupt sale, a move that may allow companies to operate till a final decision.
The government in its review petition questioned the court’s jurisdiction over policy matters and also sought time till March next year for conducting fresh phone-license sales. Judges G.S. Singhvi and K.S. Radhakrishnan will hear the government’s argument on April 13, according to the order on the court’s website yesterday.
The acceptance of the appeal may throw a lifeline to companies such as Emirates Telecommunications Corp. (ETISALAT) and Russia’s AFK Sistema (AFKS), said Madhu Narayan, a Supreme Court lawyer not connected with the case. The companies’ permits were among the 122 canceled two months ago after the Supreme Court said the sale was “flawed” and had been influenced by those with “money power.” The cut-price permit sale in 2008 may have lowered government revenue by $31 billion, according to a report by India’s chief auditor.
Allowing the government’s appeal “is good for companies that want to continue their operations in India,” said Narayan. “If the court grants time till March 2013, it will help them to participate in the auction and tie up with new partners.”
The cancellations meant operators had to close their businesses within four months, which would affect 69 million users. The court yesterday rejected appeals by seven individual companies that had their permits rescinded, including Telenor ASA’s (TEL) local partner Unitech Ltd. (UT)
‘Curative Petition’
“By entertaining the review petition and hearing the case again, the Supreme Court would have been able to appreciate arguments and evidence that challenges the very basis of its order,” according to an e-mailed statement by Uninor, the joint venture between Telenor and Unitech. “We are disappointed that the court has declined to do so.”
The company said it will file a curative petition and ask the court to keep its order in abeyance until a new bench hears the case afresh.
The mobile-phone license scandal contributed to an 18-month slowdown in policy making by Prime Minister Manmohan Singh’s government. In local elections last month, Singh’s ruling Congress party suffered heavy defeats as it was punished for alleged corruption two years before a national election.
Former Telecommunications Minister Andimuthu Raja, officials and business executives are charged with conspiring to award permits to ineligible companies in the 2008 sale. All of the accused have denied the charges.
To contact the reporters on this story: Pratap Patnaik in New Delhi at ppatnaik2@bloomberg.net; Andrew Macaskill in New Delhi at amacaskill@bloomberg.net
To contact the editor responsible for this story: Peter Hirschberg at phirschberg@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Saturday, March 31, 2012
Oil Rises on U.S. Economic Data, Decision on Sanctions
By Mark Shenk - Mar 31, 2012 1:45 AM GMT+0530
Oil climbed, capping a second quarterly gain, after reports showed U.S. consumer sentiment and spending rose and President Barack Obama cleared the way for new sanctions targeting Iran.
Futures increased 24 cents as an index of consumer sentiment rose in March and U.S. purchases gained the most since July. Crude reached its intraday peak when Obama determined that world oil supplies were sufficient to proceed with sanctions on banks in countries that import Iranian oil.
“The economic numbers today were mostly bullish,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “They point to pretty solid growth of both the economy and demand.”
Crude oil for May delivery settled at $103.02 a barrel on the New York Mercantile Exchange. Prices increased 4.2 percent for the quarter after a gain of 25 percent in the last quarter of 2011.
Brent oil for May settlement gained 49 cents, or 0.4 percent, to end the session at $122.88 a barrel on the London- based ICE Futures Europe exchange. The contract climbed 14 percent this quarter. The European benchmark contract’s premium to New York-traded West Texas Intermediate oil was at $19.86, the most at the close since Oct. 24.
The Thomson Reuters/University of Michigan consumer sentiment index rose to 76.2 from 75.3 at the end of last month. It was projected to come in at 74.5 after a preliminary figure of 74.3, according to the median of 63 estimates from economists in a Bloomberg News survey.
U.S. consumer purchases gained 0.8 percent in February, the Commerce Department said, exceeding the 0.6 percent median gain forecast in a Bloomberg News survey of economists.
Additional Sanctions
Obama’s decision cleared the way for the imposition of congressionally mandated sanctions, according to a memorandum released by the White House. The law allows banks that settle petroleum-related transactions through Iran’s central bank to be cut off from the U.S. banking system.
Obama and world leaders including French President Nicolas Sarkozy are trying to use sanctions to keep Iran from developing nuclear weapons. Obama and Sarkozy are seeking re-election this year.
“This is a continuation of what we’ve been doing for a while,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.3 billion. “Obama and Sarkozy have the same problem. They want to hurt Iranian exports while preventing a spike in prices that hurts the global economy and their re-election campaigns.”
Oil in New York reached $110.55 on March 1, the highest level since May 4, amid speculation that Western sanctions would disrupt shipments from the Middle East.
‘Alarming’ Rhetoric
The Persian Gulf nation is breaching United Nations resolutions and increasing the size of its nuclear program amid an “alarming” escalation in global rhetoric toward its atomic plans, Russia’s Deputy Foreign Minister Sergei Ryabkov said yesterday in an interview in New Delhi.
Iranian (OPCRIRAN) crude output fell 65,000 barrels a day to 3.385 million this month, the lowest level since June 2002, according to a Bloomberg News survey of oil companies, producers and analysts. The Islamic republic is the second-biggest oil producing country in OPEC after Saudi Arabia.
Oil also rose as European officials agreed to increase a rescue lending fund to 800 billion euros ($1.07 trillion), according to a statement after a meeting in Copenhagen today. Efforts to raise it will succeed in tempering the debt crisis, German Finance Minister Wolfgang Schaeuble said yesterday.
Equities Gain
The Standard & Poor’s 500 Index rose 0.4 percent. The dollar was down 0.3 percent against the euro. A weaker dollar and stronger common currency boost the appeal of commodities as an investment alternative.
“The oil price rise today coincided with the dollar’s move lower,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “The U.S. economic data this morning gave the market a bit of a boost.”
Crude prices fell 2.5 percent yesterday, the biggest drop since December, and decreased 3.6 percent this week after U.S. stockpiles climbed to the highest level since August and Western countries discussed tapping emergency reserves.
“There appears to be a concerted effort to drive down the price of oil,” O’Grady said. “We will have to wait and see whether it will have the desired impact.”
Oil output in March by the Organization of Petroleum Exporting Countries rose to a three-year high, led by a Libyan production gain, the Bloomberg News figures show. Production increased by 110,000 barrels, or 0.4 percent, to 31.22 million barrels a day from a revised 31.11 million in February.
Electronic trading volume on the Nymex was 405,840 contracts as of 3:27 p.m. in New York. Volume totaled 578,776 contracts yesterday, 10 percent below the three-month average. Open interest was 1.56 million.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net
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Showing 5 comments on Oil Rises on U.S. Economic Data, Decision on Sanctions
michael stevenson 16 minutes ago
Not done yet, we must understand that inflated energy prices have pushed energy company stocks higher thereby supporting the DOW. Housing was the last bubble supporting the markets, in a last ditch effort energy was the only tool left in the tool box to keep inflation in the global economic system as deflation has been the greatest risk to the global economy. I understand Iran ids a serious issue with radicals operation the government of Iran, that said it is convenient to cut Iran out of the energy business as to allow emerging energy markets in the US to take in part market share from Iran. Could be that the grand plan is to eliminate the competition such as Iran and Syria to name two problem countries in the middle east and reduce the market share of Iran and Syria permanently. The reasoning is that we have to stop Iran from gaining a nuclear weapon, sounds like a plan to me .However it is interesting that France and the USA would draw the line in the sand at this point in time when the global economy is in a fragile state? Could be that France and the USA are also manipulating the energy market given the fact that the new bubble supporting the current monopoly game is energy and perhaps without the energy play the global economy would already be in a massive depression leading to global unrest and the super wealthy elite to the poor house?
Just a thought.
Bird Dog Out
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michael stevenson 43 minutes ago
Again the geopolitical hype is used by the traders to push oil futures higher. The rise in oil prices began after Katrina which did affect oil production in the USA, after Katrina the traders bet crude prices higher on the next hurricane that just formed off of Africa.Oops then the hurricanes never returned to destroy the gulf oil platforms. Oh but hold on a minute Nigeria came into play and then Iraq and then Iran and then geeze you know what ? The global economy has never been affected by a disruption in the strategic oil supplies it relies on, the global economy has only been damaged by the traders crying the sky is falling the sky is falling therefor we must all pay more for energy! It is the traders that cause the real damage while lining pockets with billions in illegal profits or should be. Last time I checked on things falling from the sky is softball sized hail and tornadoes sucking up the mid west? Interesting that we never receive much feed back on real time events affecting Americans today. Hey what about all that gasoline and diesel the refiners are exporting to South America and the EU.Interesting that we have builds in crude oil and massive declines in refined petroleum products every other week.With WTI cost point lower than Brent Crude it is said America is the China of exporting refined petroleum products and all this while we pay more at the pump? No doubt demand destruction is biting the US market place and consumers amazingly enough seem to be spending more, yes on inflated prices due to higher energy and the consumers are again receiving less for every dollar spent. Then we have the consumers that have started putting less in the tank and more into consumer goods for pleasure. Has anyone noticed an increase in plastic gas can sales and more stranded motorists with a plastic gas can in hand either walking away from the vehicle or standing along side poring a precious five gallons that cost 22.50 to fill. Lets multiply that by 2 / 10 gallons cost 45.00 dollars multiply by 2 again 20 gallons = 90.00 x 2 for 40 gallons - 180.00 US dollars ? And imagine the refiners are exporting our fuel products at a profit to make up for the loss in the US market due to the fact the American consumer live in poverty just so they can go to work and be happy that they have jobs again even though everyone is still living a third world life style, and lets add one more slap in the face, our federal government has mandated that we have to pay for health insurance or else you get a ticket in the mail. Americans already cannot afford to pay for gas, how are they supposed to pay for health insurance? I have an idea, lets have the energy companies pay for our health care and subsidize our energy costs and buy us all Chevy Volts too! How long have we subsidized the oil companies? In Alaska the residents receive annual dividend checks. So why are the rest of us not receiving our dividend checks, its our oil and gas that the oil companies pump from the ground and to hell with the so called mineral rights that was just another con job against the citizens of America. The US government collects all the dividends from the oil companies that should be ours, perhaps the US government should pay for a national health care plan in conjunction with the big oil companies?
Really the whole event is comical!
Bird Dog Out
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eobserver 18 hours ago
If these sanctions are intended against the free world driving public they are achieving their goals. How much has the price at the pump increase due to the impending sanctions, which will only go into effect in July? We have three more months or may be even more to fully feel the sanctions in our own pockets.
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Thomas Rajan in reply to eobserver 10 hours ago
The July sanctions have already been priced in - remember that we're talking about May oil here already. It's only new sanctions that will drive up the price more. Hopefully some progress will be made at the meeting scheduled in mid-April with Iran. At least they're talking... But angry rhetoric coming out of that would not be good.
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jrt63oil 1 day ago
HOW DO YOU PRICE OIL FOR MAY WHEN WE ARE STILL IN MARCH.THANKS WASHINGTON,WALL STREET,AND PRESIDENT OBAMA PLEASE HELP OUR OIL PRICES,
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Oil climbed, capping a second quarterly gain, after reports showed U.S. consumer sentiment and spending rose and President Barack Obama cleared the way for new sanctions targeting Iran.
Futures increased 24 cents as an index of consumer sentiment rose in March and U.S. purchases gained the most since July. Crude reached its intraday peak when Obama determined that world oil supplies were sufficient to proceed with sanctions on banks in countries that import Iranian oil.
“The economic numbers today were mostly bullish,” said Jason Schenker, president of Prestige Economics LLC, an Austin, Texas-based energy consultant. “They point to pretty solid growth of both the economy and demand.”
Crude oil for May delivery settled at $103.02 a barrel on the New York Mercantile Exchange. Prices increased 4.2 percent for the quarter after a gain of 25 percent in the last quarter of 2011.
Brent oil for May settlement gained 49 cents, or 0.4 percent, to end the session at $122.88 a barrel on the London- based ICE Futures Europe exchange. The contract climbed 14 percent this quarter. The European benchmark contract’s premium to New York-traded West Texas Intermediate oil was at $19.86, the most at the close since Oct. 24.
The Thomson Reuters/University of Michigan consumer sentiment index rose to 76.2 from 75.3 at the end of last month. It was projected to come in at 74.5 after a preliminary figure of 74.3, according to the median of 63 estimates from economists in a Bloomberg News survey.
U.S. consumer purchases gained 0.8 percent in February, the Commerce Department said, exceeding the 0.6 percent median gain forecast in a Bloomberg News survey of economists.
Additional Sanctions
Obama’s decision cleared the way for the imposition of congressionally mandated sanctions, according to a memorandum released by the White House. The law allows banks that settle petroleum-related transactions through Iran’s central bank to be cut off from the U.S. banking system.
Obama and world leaders including French President Nicolas Sarkozy are trying to use sanctions to keep Iran from developing nuclear weapons. Obama and Sarkozy are seeking re-election this year.
“This is a continuation of what we’ve been doing for a while,” said Bill O’Grady, chief market strategist at Confluence Investment Management in St. Louis, which oversees $1.3 billion. “Obama and Sarkozy have the same problem. They want to hurt Iranian exports while preventing a spike in prices that hurts the global economy and their re-election campaigns.”
Oil in New York reached $110.55 on March 1, the highest level since May 4, amid speculation that Western sanctions would disrupt shipments from the Middle East.
‘Alarming’ Rhetoric
The Persian Gulf nation is breaching United Nations resolutions and increasing the size of its nuclear program amid an “alarming” escalation in global rhetoric toward its atomic plans, Russia’s Deputy Foreign Minister Sergei Ryabkov said yesterday in an interview in New Delhi.
Iranian (OPCRIRAN) crude output fell 65,000 barrels a day to 3.385 million this month, the lowest level since June 2002, according to a Bloomberg News survey of oil companies, producers and analysts. The Islamic republic is the second-biggest oil producing country in OPEC after Saudi Arabia.
Oil also rose as European officials agreed to increase a rescue lending fund to 800 billion euros ($1.07 trillion), according to a statement after a meeting in Copenhagen today. Efforts to raise it will succeed in tempering the debt crisis, German Finance Minister Wolfgang Schaeuble said yesterday.
Equities Gain
The Standard & Poor’s 500 Index rose 0.4 percent. The dollar was down 0.3 percent against the euro. A weaker dollar and stronger common currency boost the appeal of commodities as an investment alternative.
“The oil price rise today coincided with the dollar’s move lower,” said Tom Bentz, a director with BNP Paribas Prime Brokerage Inc. in New York. “The U.S. economic data this morning gave the market a bit of a boost.”
Crude prices fell 2.5 percent yesterday, the biggest drop since December, and decreased 3.6 percent this week after U.S. stockpiles climbed to the highest level since August and Western countries discussed tapping emergency reserves.
“There appears to be a concerted effort to drive down the price of oil,” O’Grady said. “We will have to wait and see whether it will have the desired impact.”
Oil output in March by the Organization of Petroleum Exporting Countries rose to a three-year high, led by a Libyan production gain, the Bloomberg News figures show. Production increased by 110,000 barrels, or 0.4 percent, to 31.22 million barrels a day from a revised 31.11 million in February.
Electronic trading volume on the Nymex was 405,840 contracts as of 3:27 p.m. in New York. Volume totaled 578,776 contracts yesterday, 10 percent below the three-month average. Open interest was 1.56 million.
To contact the reporter on this story: Mark Shenk in New York at mshenk1@bloomberg.net
To contact the editor responsible for this story: Bill Banker at bbanker@bloomberg.net
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Showing 5 comments on Oil Rises on U.S. Economic Data, Decision on Sanctions
michael stevenson 16 minutes ago
Not done yet, we must understand that inflated energy prices have pushed energy company stocks higher thereby supporting the DOW. Housing was the last bubble supporting the markets, in a last ditch effort energy was the only tool left in the tool box to keep inflation in the global economic system as deflation has been the greatest risk to the global economy. I understand Iran ids a serious issue with radicals operation the government of Iran, that said it is convenient to cut Iran out of the energy business as to allow emerging energy markets in the US to take in part market share from Iran. Could be that the grand plan is to eliminate the competition such as Iran and Syria to name two problem countries in the middle east and reduce the market share of Iran and Syria permanently. The reasoning is that we have to stop Iran from gaining a nuclear weapon, sounds like a plan to me .However it is interesting that France and the USA would draw the line in the sand at this point in time when the global economy is in a fragile state? Could be that France and the USA are also manipulating the energy market given the fact that the new bubble supporting the current monopoly game is energy and perhaps without the energy play the global economy would already be in a massive depression leading to global unrest and the super wealthy elite to the poor house?
Just a thought.
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michael stevenson 43 minutes ago
Again the geopolitical hype is used by the traders to push oil futures higher. The rise in oil prices began after Katrina which did affect oil production in the USA, after Katrina the traders bet crude prices higher on the next hurricane that just formed off of Africa.Oops then the hurricanes never returned to destroy the gulf oil platforms. Oh but hold on a minute Nigeria came into play and then Iraq and then Iran and then geeze you know what ? The global economy has never been affected by a disruption in the strategic oil supplies it relies on, the global economy has only been damaged by the traders crying the sky is falling the sky is falling therefor we must all pay more for energy! It is the traders that cause the real damage while lining pockets with billions in illegal profits or should be. Last time I checked on things falling from the sky is softball sized hail and tornadoes sucking up the mid west? Interesting that we never receive much feed back on real time events affecting Americans today. Hey what about all that gasoline and diesel the refiners are exporting to South America and the EU.Interesting that we have builds in crude oil and massive declines in refined petroleum products every other week.With WTI cost point lower than Brent Crude it is said America is the China of exporting refined petroleum products and all this while we pay more at the pump? No doubt demand destruction is biting the US market place and consumers amazingly enough seem to be spending more, yes on inflated prices due to higher energy and the consumers are again receiving less for every dollar spent. Then we have the consumers that have started putting less in the tank and more into consumer goods for pleasure. Has anyone noticed an increase in plastic gas can sales and more stranded motorists with a plastic gas can in hand either walking away from the vehicle or standing along side poring a precious five gallons that cost 22.50 to fill. Lets multiply that by 2 / 10 gallons cost 45.00 dollars multiply by 2 again 20 gallons = 90.00 x 2 for 40 gallons - 180.00 US dollars ? And imagine the refiners are exporting our fuel products at a profit to make up for the loss in the US market due to the fact the American consumer live in poverty just so they can go to work and be happy that they have jobs again even though everyone is still living a third world life style, and lets add one more slap in the face, our federal government has mandated that we have to pay for health insurance or else you get a ticket in the mail. Americans already cannot afford to pay for gas, how are they supposed to pay for health insurance? I have an idea, lets have the energy companies pay for our health care and subsidize our energy costs and buy us all Chevy Volts too! How long have we subsidized the oil companies? In Alaska the residents receive annual dividend checks. So why are the rest of us not receiving our dividend checks, its our oil and gas that the oil companies pump from the ground and to hell with the so called mineral rights that was just another con job against the citizens of America. The US government collects all the dividends from the oil companies that should be ours, perhaps the US government should pay for a national health care plan in conjunction with the big oil companies?
Really the whole event is comical!
Bird Dog Out
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eobserver 18 hours ago
If these sanctions are intended against the free world driving public they are achieving their goals. How much has the price at the pump increase due to the impending sanctions, which will only go into effect in July? We have three more months or may be even more to fully feel the sanctions in our own pockets.
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Thomas Rajan in reply to eobserver 10 hours ago
The July sanctions have already been priced in - remember that we're talking about May oil here already. It's only new sanctions that will drive up the price more. Hopefully some progress will be made at the meeting scheduled in mid-April with Iran. At least they're talking... But angry rhetoric coming out of that would not be good.
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jrt63oil 1 day ago
HOW DO YOU PRICE OIL FOR MAY WHEN WE ARE STILL IN MARCH.THANKS WASHINGTON,WALL STREET,AND PRESIDENT OBAMA PLEASE HELP OUR OIL PRICES,
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Thursday, March 29, 2012
BRICS Bourses Start Futures Venture Aimed at Wealthy Individuals
By Michael Patterson and Nandini Sukumar - Mar 29, 2012
Exchanges in the biggest emerging economies will begin trading futures based on each other’s benchmark stock indexes today as rising wealth spurs demand for new investment products.
The five members of the BRICS Exchanges Alliance will cross-list futures on Brazil’s Bovespa Index (IBOV), Russia’s Micex Index (INDEXCF), the BSE India Sensitive Index, Hong Kong’s Hang Seng Index, the Hang Seng China Enterprises Index (HSCEI) and South Africa’s JSE Top40 Index. Traders engaged in arbitrage will be able to buy and sell futures based on the same index on multiple venues, boosting liquidity, according to Mumbai-based BSE Ltd.
The products may appeal to the growing number of wealthy individual investors in developing nations who want to access foreign markets, said Bruce Weber, dean of the Lerner College of Business and Economics at the University of Delaware in Newark. Per-capita gross domestic product in emerging markets has jumped 104 percent during the past decade to about $6,980, according to the Washington-based International Monetary Fund.
“The exchanges are doing well in local markets and want to be seen as international for their local investors, who can then go to another BRIC country easily,” Weber, who co-wrote “The Equity Trader Course” in 2006, said in a phone interview. “BRIC countries have generated a lot of growth for investors.”
The grouping joins Brazil, Russia, India and China -- nations identified by the acronym BRIC in 2001 by Goldman Sachs Group Inc.’s Jim O’Neill, representing countries the New York- based bank predicted two years later would join the U.S. and Japan as the world’s biggest economies by 2050 -- with South Africa. The BRIC nations held their first summit in 2009 and invited South Africa to join the group in December 2010.
Tripling Assets
Financial assets in developing countries may triple to $141 trillion, or 36 percent of the global total, by 2020 from 21 percent in 2010, according to a December report by the McKinsey Global Institute. Investors in Brazil, Russia, India, China and South Africa have an average 16 percent of their assets in equities, compared with 42 percent in the U.S. and 29 percent in western Europe, McKinsey said.
Emerging-market investors have grown richer as their economies expanded at a mean annual rate of 6.3 percent during the past decade. Growth will probably average 6.5 percent in the next five years, compared with 2.5 percent in developed countries, according to September estimates by the Washington- based International Monetary Fund.
“From a portfolio diversification point of view, it’s certainly a nice strategy,” Bluford Putnam, chief economist at CME Group Inc., which operates the world’s largest futures exchange and owns a stake in Sao Paulo-based BM&FBovespa (BVMF3) SA, said in a March 29 interview in London. “Growth rates in Europe and the U.S. are going to be lower.”
Volatility Concern
The Bovespa (IBOA) has climbed 13 percent this year, while the Micex (MIDA) gained 6.7 percent and the Sensex (JNSA) increased 10 percent. The Hang Seng China Index (BHSA) rose 6 percent and South Africa’s Top40 index advanced 3.9 percent. The MSCI All-Country World Index (MXWD) of shares in developed and emerging countries climbed 10 percent.
New futures products may encourage investors to focus on shorter-term returns and lead to increased volatility in stock markets, said Allan Conway, who oversees about $24 billion as the head of emerging market equities at Schroders Plc in London.
“That could actually be counterproductive,” Conway said in a March 29 phone interview.
Initial trading in the contracts may be “quite light,” Charles Li, the chief executive officer of Hong Kong Exchanges & Clearing Ltd., told reporters at a conference in Boca Raton, Florida on March 13. All the exchanges, except for the Russian bourse, won’t charge users to trade the index products being cross-listed for the first six months, Li said.
‘Combined Index’
Half the revenue from trading futures based on another exchange’s index will be shared with that market operator, Li said. The Hong Kong exchange, for instance, will give half the revenue it eventually produces from trading futures on India’s Sensex Index to BSE Ltd.
Russia’s Micex has delayed listing the index futures until May.
The project’s next phase will include the development of an index representing the member countries, Marta Alves, a senior adviser to BM&FBovespa, said at the March 13 conference. Products such as exchange-traded funds based on that gauge will probably generate more liquidity and interest from investors, she said.
“It shows a good level of partnership and collaboration,” said Weber. “They could move forward with a combined index.”
To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Nandini Sukumar in London at nsukumar@bloomberg.net
To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED
Exchanges in the biggest emerging economies will begin trading futures based on each other’s benchmark stock indexes today as rising wealth spurs demand for new investment products.
The five members of the BRICS Exchanges Alliance will cross-list futures on Brazil’s Bovespa Index (IBOV), Russia’s Micex Index (INDEXCF), the BSE India Sensitive Index, Hong Kong’s Hang Seng Index, the Hang Seng China Enterprises Index (HSCEI) and South Africa’s JSE Top40 Index. Traders engaged in arbitrage will be able to buy and sell futures based on the same index on multiple venues, boosting liquidity, according to Mumbai-based BSE Ltd.
The products may appeal to the growing number of wealthy individual investors in developing nations who want to access foreign markets, said Bruce Weber, dean of the Lerner College of Business and Economics at the University of Delaware in Newark. Per-capita gross domestic product in emerging markets has jumped 104 percent during the past decade to about $6,980, according to the Washington-based International Monetary Fund.
“The exchanges are doing well in local markets and want to be seen as international for their local investors, who can then go to another BRIC country easily,” Weber, who co-wrote “The Equity Trader Course” in 2006, said in a phone interview. “BRIC countries have generated a lot of growth for investors.”
The grouping joins Brazil, Russia, India and China -- nations identified by the acronym BRIC in 2001 by Goldman Sachs Group Inc.’s Jim O’Neill, representing countries the New York- based bank predicted two years later would join the U.S. and Japan as the world’s biggest economies by 2050 -- with South Africa. The BRIC nations held their first summit in 2009 and invited South Africa to join the group in December 2010.
Tripling Assets
Financial assets in developing countries may triple to $141 trillion, or 36 percent of the global total, by 2020 from 21 percent in 2010, according to a December report by the McKinsey Global Institute. Investors in Brazil, Russia, India, China and South Africa have an average 16 percent of their assets in equities, compared with 42 percent in the U.S. and 29 percent in western Europe, McKinsey said.
Emerging-market investors have grown richer as their economies expanded at a mean annual rate of 6.3 percent during the past decade. Growth will probably average 6.5 percent in the next five years, compared with 2.5 percent in developed countries, according to September estimates by the Washington- based International Monetary Fund.
“From a portfolio diversification point of view, it’s certainly a nice strategy,” Bluford Putnam, chief economist at CME Group Inc., which operates the world’s largest futures exchange and owns a stake in Sao Paulo-based BM&FBovespa (BVMF3) SA, said in a March 29 interview in London. “Growth rates in Europe and the U.S. are going to be lower.”
Volatility Concern
The Bovespa (IBOA) has climbed 13 percent this year, while the Micex (MIDA) gained 6.7 percent and the Sensex (JNSA) increased 10 percent. The Hang Seng China Index (BHSA) rose 6 percent and South Africa’s Top40 index advanced 3.9 percent. The MSCI All-Country World Index (MXWD) of shares in developed and emerging countries climbed 10 percent.
New futures products may encourage investors to focus on shorter-term returns and lead to increased volatility in stock markets, said Allan Conway, who oversees about $24 billion as the head of emerging market equities at Schroders Plc in London.
“That could actually be counterproductive,” Conway said in a March 29 phone interview.
Initial trading in the contracts may be “quite light,” Charles Li, the chief executive officer of Hong Kong Exchanges & Clearing Ltd., told reporters at a conference in Boca Raton, Florida on March 13. All the exchanges, except for the Russian bourse, won’t charge users to trade the index products being cross-listed for the first six months, Li said.
‘Combined Index’
Half the revenue from trading futures based on another exchange’s index will be shared with that market operator, Li said. The Hong Kong exchange, for instance, will give half the revenue it eventually produces from trading futures on India’s Sensex Index to BSE Ltd.
Russia’s Micex has delayed listing the index futures until May.
The project’s next phase will include the development of an index representing the member countries, Marta Alves, a senior adviser to BM&FBovespa, said at the March 13 conference. Products such as exchange-traded funds based on that gauge will probably generate more liquidity and interest from investors, she said.
“It shows a good level of partnership and collaboration,” said Weber. “They could move forward with a combined index.”
To contact the reporters on this story: Michael Patterson in London at mpatterson10@bloomberg.net; Nandini Sukumar in London at nsukumar@bloomberg.net
To contact the editor responsible for this story: Emma O’Brien at eobrien6@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED
Tuesday, March 27, 2012
India Said to Plan Using Foreign Currency for Iran Oil Deals
By Pratish Narayanan and Anto Antony - Mar 27, 2012
India may continue paying for Iranian (OPCRIRAN) oil in foreign currencies until European Union sanctions take effect in July, when buyers will start using rupees, according to two people with knowledge of the matter.
India will waive taxes on crude bought with rupees, it said in its March 16 budget. That raised speculation refiners will start settling its oil bill with Iran in local currency to avoid international sanctions. While India could start paying for about 45 percent of the oil in rupees from next month, the countries prefer to settle trades in foreign tender such as euros, the people said, declining to be identified because the information is confidential.
R.C. Joshi, a spokesman for India’s oil ministry in New Delhi, didn’t return two calls made to his mobile phone seeking comment. Mohsen Qamsari, head of international affairs at the National Iranian Oil Co., was not available to comment when called at his office in Tehran.
India, Iran’s second-biggest oil customer, is trying to maintain bilateral trade in the face of escalating economic and financial measures against the Islamic Republic over its nuclear program, which the U.S. and its allies say is a cover to make atomic weapons. Iran says the program is for civilian purposes.
The South Asian nation, which relies on imports for almost 80 percent of its oil requirements, has faced difficulties finding banks willing to transfer payments to Iran since the Reserve Bank of India in December 2010 dismantled a mechanism to settle trade in euros and dollars.
Foreign Cash Preferred
Increased pressure from the U.S. could lead Indian refiners to start rupee payments earlier than planned, before the EU sanctions take effect, the people said.
India’s rupee payments to Iran may total at least $4 billion a year, and will be deposited in India’s state-run UCO Bank (UCO), which doesn’t have U.S. operations and is unlikely to be affected by the global sanctions, one of the people said. Payments in foreign currencies are preferred because the rupee isn’t easily traded abroad.
The Indian rupee has dropped 11 percent over the past 12 months, making it the worst performer among Asia’s most-traded currencies, according to data compiled by Bloomberg. It has fallen 3.2 percent this month, the data show.
While India proposed paying for oil in rupees, Iranian officials have sought partial payment in yen because they’re concerned that they may not get sufficient value from the currency, three people with knowledge of the talks said Jan. 23.
Turkish Bank Payments
Transactions are now routed through Ankara-based Turkiye Halk Bankasi AS (HALKB), which has told Indian refiners it may no longer be able to act as an intermediary when European sanctions take effect, four people with knowledge of the matter said Jan. 10.
U.S. President Barack Obama’s administration wants China, India and 10 other nations to present plans detailing how they will curtail Iranian oil imports, saying past cuts aren’t enough to win them an exclusion from new U.S. sanctions.
While India hasn’t asked its refiners to stop purchasing Iranian crude, the government has told processors in the South Asian nation to seek alternative supplies and gradually reduce dependence on the Persian Gulf state because of increasing pressure from the U.S., three Indian officials with direct knowledge of the situation said March 23.
To contact the reporters on this story: Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net; Anto Antony in New Delhi at aantony1@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
India may continue paying for Iranian (OPCRIRAN) oil in foreign currencies until European Union sanctions take effect in July, when buyers will start using rupees, according to two people with knowledge of the matter.
India will waive taxes on crude bought with rupees, it said in its March 16 budget. That raised speculation refiners will start settling its oil bill with Iran in local currency to avoid international sanctions. While India could start paying for about 45 percent of the oil in rupees from next month, the countries prefer to settle trades in foreign tender such as euros, the people said, declining to be identified because the information is confidential.
R.C. Joshi, a spokesman for India’s oil ministry in New Delhi, didn’t return two calls made to his mobile phone seeking comment. Mohsen Qamsari, head of international affairs at the National Iranian Oil Co., was not available to comment when called at his office in Tehran.
India, Iran’s second-biggest oil customer, is trying to maintain bilateral trade in the face of escalating economic and financial measures against the Islamic Republic over its nuclear program, which the U.S. and its allies say is a cover to make atomic weapons. Iran says the program is for civilian purposes.
The South Asian nation, which relies on imports for almost 80 percent of its oil requirements, has faced difficulties finding banks willing to transfer payments to Iran since the Reserve Bank of India in December 2010 dismantled a mechanism to settle trade in euros and dollars.
Foreign Cash Preferred
Increased pressure from the U.S. could lead Indian refiners to start rupee payments earlier than planned, before the EU sanctions take effect, the people said.
India’s rupee payments to Iran may total at least $4 billion a year, and will be deposited in India’s state-run UCO Bank (UCO), which doesn’t have U.S. operations and is unlikely to be affected by the global sanctions, one of the people said. Payments in foreign currencies are preferred because the rupee isn’t easily traded abroad.
The Indian rupee has dropped 11 percent over the past 12 months, making it the worst performer among Asia’s most-traded currencies, according to data compiled by Bloomberg. It has fallen 3.2 percent this month, the data show.
While India proposed paying for oil in rupees, Iranian officials have sought partial payment in yen because they’re concerned that they may not get sufficient value from the currency, three people with knowledge of the talks said Jan. 23.
Turkish Bank Payments
Transactions are now routed through Ankara-based Turkiye Halk Bankasi AS (HALKB), which has told Indian refiners it may no longer be able to act as an intermediary when European sanctions take effect, four people with knowledge of the matter said Jan. 10.
U.S. President Barack Obama’s administration wants China, India and 10 other nations to present plans detailing how they will curtail Iranian oil imports, saying past cuts aren’t enough to win them an exclusion from new U.S. sanctions.
While India hasn’t asked its refiners to stop purchasing Iranian crude, the government has told processors in the South Asian nation to seek alternative supplies and gradually reduce dependence on the Persian Gulf state because of increasing pressure from the U.S., three Indian officials with direct knowledge of the situation said March 23.
To contact the reporters on this story: Pratish Narayanan in Mumbai at pnarayanan9@bloomberg.net; Anto Antony in New Delhi at aantony1@bloomberg.net
To contact the editor responsible for this story: Alexander Kwiatkowski at akwiatkowsk2@bloomberg.net
®2012 BLOOMBERG L.P. ALL RIGHTS RESERVED.
Saturday, March 24, 2012
Soldier Charged in Afghan Shootings Had Secret Clearance
By Roxana Tiron and Tony Capaccio - Mar 24, 2012 9:31 AM GMT+0530
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Robert Bales, the U.S. Army staff sergeant accused of murdering 17 Afghan civilians, was given a security clearance even though he’d had previous financial troubles and scrapes with the law.
Bales, 38, who served in Iraq three times before being sent to Afghanistan, held a secret-level clearance, according to two U.S. military officials who had access to his records and asked not to be named because the details have not been made public.
While secret is a common, mid-level clearance, it may have given Bales access to classified material that according to the government’s definition, could cause “serious damage” to national security if disclosed to unauthorized sources. Two other military officials familiar with the clearance program, also speaking on condition of anonymity, said they were troubled that Bales held a clearance with a record that could expose him to blackmail or bribery.
About 90 percent of active-duty military personnel in Afghanistan and Iraq have a security clearance, according to Evan Lesser, managing director of Clearancejobs.com, a website that matches U.S. clearance-holders with prospective employers.
“It’s not abnormal that Mr. Bales had a security clearance,” said Lesser, whose website is part of New York- based Dice Holdings Inc. (DHX) “Military personnel in Afghanistan and Iraq and most of the Middle East are probably going to have some level of security clearance.”
More than 2 million government workers, including military personnel, held confidential or secret security clearances as of October 2010, according to a report from the U.S. Director of National Intelligence. The Defense Department issues more than 80 percent of all clearances, according to information posted on clearancejobs.com.
Bales’s Troubles
Bales, who was charged yesterday with 17 counts of premeditated murder, enlisted in the Army on Nov. 8, 2001. Court records show he was arrested in 2002 at a hotel in Tacoma, Washington, in an investigation of an assault on a woman. Bales pleaded not guilty and underwent 20 hours of anger management counseling, and the charge was dismissed.
Bales was involved in a drunken altercation with a woman and her boyfriend in 2008 after making comments about her, a police report and the woman involved say. Bales wasn’t charged in the incident outside a bowling alley in Tacoma, Washington, near the Joint Base Lewis-McChord where he was stationed, according to police and court records.
Before he joined the military, Bales swindled an Ohio couple of more than $600,000 when he served as their stockbroker, according to records of the Financial Industry Regulatory Authority, an industry group. He was ordered in 2003 to pay more than $1.3 million in damages to the couple.
‘Need to Know’
The charges against Bales in the Afghanistan shootings don’t accuse him of misusing his clearance. John Henry Browne, a Seattle lawyer for Bales in the Afghan case, didn’t immediately reply to an e-mail seeking comment.
It’s unclear when Bales received his secret clearance or whether he held a higher-level top secret clearance for his job. There are three levels of security clearances: confidential, secret and top secret. The most closely held secrets are classified top secret and controlled on a “need to know” basis as what’s called sensitive compartmented information.
Bales may have failed to report some of his financial and legal troubles when applying for a clearance, the officials famiiar with the clearance program said. Providing false information on an application for a security clearance is a violation of both the U.S. criminal law and the Uniform Code of Military Justice.
Clearance Backlog
Screeners reviewing Bales’s application may have ignored blots on the soldier’s record or failed to check his information thoroughly, the officials said. The wars in Afghanistan and Iraq created an enormous backlog in the clearance system, so some applications have gotten less scrutiny than they once did, especially at the secret level, one of the officials said.
More than 512,000 government employees and contractors were approved for confidential or secret clearances in fiscal 2010, according to the report from the Director of National Intelligence.
“There is a large number of cleared personnel,” Steven Aftergood, the director of the Project on Government Secrecy at the Federation of American Scientists, said in an interview. “Just keeping tabs on that is an enormous task. Every one of them not only needs to go through initial review, but needs to go through periodic review.”
Classified Technology
Radios and weapons systems often contain classified technology, so even low-ranking soldiers have to be cleared to use them, and enlisted personnel often get a secret clearance as they gain seniority, an Army reservist with a secret clearance said in an interview. Almost every soldier deployed overseas has a clearance, said the soldier, who spoke on condition he not be named because he wasn’t authorized to speak publicly.
Because Bales was working with members of the Army’s Special Forces in Afghanistan, he may have had access to sophisticated equipment, such as advanced night vision gear and sensors used to detect people and improvised explosive devices, said the officials who spoke on condition of anonymity.
Although secret clearances are now considered routine, the release of information classified as secret can still cause significant damage if given to the wrong people, said one official, citing the case of Army Private First Class Bradley Manning, who’s on trial for passing State Department cables and other secret material to the Wikileaks website.
‘Background Check’
Applicants for secret clearances undergo “a fairly extensive background check,” Lesser said in an e-mail. Such clearances must be reviewed every 10 years, he said.
The most common investigation for a secret clearance includes a national agency check combined with a credit search and checks with local law enforcement agencies where the applicant has lived, worked or studied, according to Lesser. The investigation includes inquiries to current and past employers, schools and references and covers the preceding five years.
In 2009, Bales and his wife, Karilyn, defaulted on a mortgage for one of their two properties in Washington state, and they recently attempted to sell the other for less than what they owe on it. At one point, the couple owed more than $500,000 on the two homes.
Mortgage problems aren’t necessarily a red flag for security clearances, Lesser said. Financial considerations boil down to whether the person’s financial troubles are due to their own actions, such as gambling, risky business decisions and spending sprees beyond the person’s means, Lesser said.
‘Close Attention’
The military “pays close attention to debt and other financial issues when it comes to screening applicants for security clearance to handle sensitive information,” Lieutenant Colonel James Gregory, a Defense Department spokesman, said in an e-mail. “A person with big debts is more likely to accept money in exchange for revealing secrets. So that’s why financial things are, if not the biggest, one of the biggest reasons that a clearance would not be granted or be revoked.”
Even so, the military takes a “whole person” approach when granting a clearance, weighing an individual’s past and present behavior, considering favorable as well as unfavorable conduct, Gregory said. “The military also considers the circumstances and recency of the conduct, as well as the presence of rehabilitation or positive behavioral changes,” he said.
To contact the reporters on this story: Roxana Tiron in Washington at rtiron@bloomberg.net; Tony Capaccio in Washington at acapaccio@bloomberg.net
To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net
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Robert Bales, the U.S. Army staff sergeant accused of murdering 17 Afghan civilians, was given a security clearance even though he’d had previous financial troubles and scrapes with the law.
Bales, 38, who served in Iraq three times before being sent to Afghanistan, held a secret-level clearance, according to two U.S. military officials who had access to his records and asked not to be named because the details have not been made public.
While secret is a common, mid-level clearance, it may have given Bales access to classified material that according to the government’s definition, could cause “serious damage” to national security if disclosed to unauthorized sources. Two other military officials familiar with the clearance program, also speaking on condition of anonymity, said they were troubled that Bales held a clearance with a record that could expose him to blackmail or bribery.
About 90 percent of active-duty military personnel in Afghanistan and Iraq have a security clearance, according to Evan Lesser, managing director of Clearancejobs.com, a website that matches U.S. clearance-holders with prospective employers.
“It’s not abnormal that Mr. Bales had a security clearance,” said Lesser, whose website is part of New York- based Dice Holdings Inc. (DHX) “Military personnel in Afghanistan and Iraq and most of the Middle East are probably going to have some level of security clearance.”
More than 2 million government workers, including military personnel, held confidential or secret security clearances as of October 2010, according to a report from the U.S. Director of National Intelligence. The Defense Department issues more than 80 percent of all clearances, according to information posted on clearancejobs.com.
Bales’s Troubles
Bales, who was charged yesterday with 17 counts of premeditated murder, enlisted in the Army on Nov. 8, 2001. Court records show he was arrested in 2002 at a hotel in Tacoma, Washington, in an investigation of an assault on a woman. Bales pleaded not guilty and underwent 20 hours of anger management counseling, and the charge was dismissed.
Bales was involved in a drunken altercation with a woman and her boyfriend in 2008 after making comments about her, a police report and the woman involved say. Bales wasn’t charged in the incident outside a bowling alley in Tacoma, Washington, near the Joint Base Lewis-McChord where he was stationed, according to police and court records.
Before he joined the military, Bales swindled an Ohio couple of more than $600,000 when he served as their stockbroker, according to records of the Financial Industry Regulatory Authority, an industry group. He was ordered in 2003 to pay more than $1.3 million in damages to the couple.
‘Need to Know’
The charges against Bales in the Afghanistan shootings don’t accuse him of misusing his clearance. John Henry Browne, a Seattle lawyer for Bales in the Afghan case, didn’t immediately reply to an e-mail seeking comment.
It’s unclear when Bales received his secret clearance or whether he held a higher-level top secret clearance for his job. There are three levels of security clearances: confidential, secret and top secret. The most closely held secrets are classified top secret and controlled on a “need to know” basis as what’s called sensitive compartmented information.
Bales may have failed to report some of his financial and legal troubles when applying for a clearance, the officials famiiar with the clearance program said. Providing false information on an application for a security clearance is a violation of both the U.S. criminal law and the Uniform Code of Military Justice.
Clearance Backlog
Screeners reviewing Bales’s application may have ignored blots on the soldier’s record or failed to check his information thoroughly, the officials said. The wars in Afghanistan and Iraq created an enormous backlog in the clearance system, so some applications have gotten less scrutiny than they once did, especially at the secret level, one of the officials said.
More than 512,000 government employees and contractors were approved for confidential or secret clearances in fiscal 2010, according to the report from the Director of National Intelligence.
“There is a large number of cleared personnel,” Steven Aftergood, the director of the Project on Government Secrecy at the Federation of American Scientists, said in an interview. “Just keeping tabs on that is an enormous task. Every one of them not only needs to go through initial review, but needs to go through periodic review.”
Classified Technology
Radios and weapons systems often contain classified technology, so even low-ranking soldiers have to be cleared to use them, and enlisted personnel often get a secret clearance as they gain seniority, an Army reservist with a secret clearance said in an interview. Almost every soldier deployed overseas has a clearance, said the soldier, who spoke on condition he not be named because he wasn’t authorized to speak publicly.
Because Bales was working with members of the Army’s Special Forces in Afghanistan, he may have had access to sophisticated equipment, such as advanced night vision gear and sensors used to detect people and improvised explosive devices, said the officials who spoke on condition of anonymity.
Although secret clearances are now considered routine, the release of information classified as secret can still cause significant damage if given to the wrong people, said one official, citing the case of Army Private First Class Bradley Manning, who’s on trial for passing State Department cables and other secret material to the Wikileaks website.
‘Background Check’
Applicants for secret clearances undergo “a fairly extensive background check,” Lesser said in an e-mail. Such clearances must be reviewed every 10 years, he said.
The most common investigation for a secret clearance includes a national agency check combined with a credit search and checks with local law enforcement agencies where the applicant has lived, worked or studied, according to Lesser. The investigation includes inquiries to current and past employers, schools and references and covers the preceding five years.
In 2009, Bales and his wife, Karilyn, defaulted on a mortgage for one of their two properties in Washington state, and they recently attempted to sell the other for less than what they owe on it. At one point, the couple owed more than $500,000 on the two homes.
Mortgage problems aren’t necessarily a red flag for security clearances, Lesser said. Financial considerations boil down to whether the person’s financial troubles are due to their own actions, such as gambling, risky business decisions and spending sprees beyond the person’s means, Lesser said.
‘Close Attention’
The military “pays close attention to debt and other financial issues when it comes to screening applicants for security clearance to handle sensitive information,” Lieutenant Colonel James Gregory, a Defense Department spokesman, said in an e-mail. “A person with big debts is more likely to accept money in exchange for revealing secrets. So that’s why financial things are, if not the biggest, one of the biggest reasons that a clearance would not be granted or be revoked.”
Even so, the military takes a “whole person” approach when granting a clearance, weighing an individual’s past and present behavior, considering favorable as well as unfavorable conduct, Gregory said. “The military also considers the circumstances and recency of the conduct, as well as the presence of rehabilitation or positive behavioral changes,” he said.
To contact the reporters on this story: Roxana Tiron in Washington at rtiron@bloomberg.net; Tony Capaccio in Washington at acapaccio@bloomberg.net
To contact the editor responsible for this story: John Walcott at jwalcott9@bloomberg.net
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