經濟通通訊社１９日專訊》美國聯儲局束一連兩日議息會議，決定維持每月８５０億美元
買債規模不變，並維持利率不變。
聯儲局主席伯南克表示，買債步伐取決於經濟發展，退市亦未有固定的時間表。若果經濟前
景信心增強，數據符合預期，可能會在今年稍後退市。失業率取得進展，但仍高於可接受水平，
而數據仍未可確定可以縮減買債規模。只要失業率高於６﹒５％，維持低息將是合適，並預期在
２０１６年後兩三年內息率將逐步上升，達至４％。
有本地銀行界人士指，美息不變料港息亦暫未有變動，聯儲局減少買債規模最終仍要端視當
地經濟數據表現，假若美國經濟數據仍轉強，相信今年內落實退市機會仍大。
表列２００６至２０１３年本港銀行一般儲蓄利率及最優惠利率走勢概覽：
本港利率
聯儲局議息 聯邦基金利率 儲蓄利率╱最優惠利率
－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－
２０１３年
９月１８日 維持利率０％至 本港息率料維持不變
０﹒２５％
７月３１日 維持利率０％至 本港息率維持不變
０﹒２５％
６月１９日 維持利率０％至 本港息率維持不變
０﹒２５％
４月３０日 維持利率０％至 本港息率維持不變
０﹒２５％
３月２０日 維持利率０％至 本港息率維持不變
０﹒２５％
１月３０日 維持利率０％至 本港息率維持不變
０﹒２５％
２０１２年
１２月１２日 維持利率０％至 本港息率維持不變
０﹒２５％
１０月２４日 維持利率０％至 本港息率維持不變
０﹒２５％
９月１３日 維持利率０％至 本港息率維持不變
０﹒２５％
８月１日 維持利率０％至 本港息率維持不變
０﹒２５％
６月２０日 維持利率０％至 本港息率維持不變
０﹒２５％
４月２５日 維持利率０％至 本港息率維持不變
０﹒２５％
３月１３日 維持利率０％至 本港息率維持不變
０﹒２５％
１月２５日 維持利率０％至 本港息率維持不變
０﹒２５％
２０１１年
１２月１３日 維持利率０％至 本港息率維持不變
０﹒２５％
１１月２日 維持利率０％至 本港息率維持不變
０﹒２５％
９月２０日 維持利率０％至 本港息率維持不變
０﹒２５％
８月９日 維持利率０％至 本港息率維持不變
０﹒２５％
６月２２日 維持利率０％至 本港息率維持不變
０﹒２５％
４月２７日 維持利率０％至 本港息率維持不變
０﹒２５％
３月１５日 維持利率０％至 本港息率維持不變
０﹒２５％
１月２６日 維持利率０％至 本港息率維持不變
０﹒２５％
２０１０年
１２月１４日 維持利率０％至 本港息率維持不變
０﹒２５％
１１月３日 維持利率０％至 本港息率維持不變
０﹒２５％
９月２１日 維持利率０％至 本港息率維持不變
０﹒２５％
８月１０日 維持利率０％至 本港息率維持不變
０﹒２５％
６月２３日 維持利率０％至 本港息率維持不變
０﹒２５％
４月２８日 維持利率０％至 本港息率維持不變
０﹒２５％
３月１６日 維持利率０％至 本港息率維持不變
０﹒２５％
１月２７日 美國維持利率０％ 本港息率維持不變
至０﹒２５％不變
２００９年
１２月１６日 美國維持利率０％ 本港息率維持不變
至０﹒２５％不變
１１月４日 美國維持利率０％ 本港息率維持不變
至０﹒２５％不變
９月２２日 美國維持利率０％ 本港息率維持不變
至０﹒２５％不變
８月１２日 美國維持利率０％ 本港息率維持不變
至０﹒２５％不變
６月２５日 美國維持利率０％ 本港息率維持不變
至０﹒２５％不變
５月２０日 － 匯豐突然調低儲蓄利率至０﹒００１％，
Ｐ為５％維持不變
４月３０日 美國維持利率０％ 本港息率維持不變
至０﹒２５％不變
３月１９日 美國維持利率０％ 本港息率維持不變
至０﹒２５％不變
１月２８日 美國維持息率不變 本港息率維持不變
２００８年
１２月１７日 美息降至０％至 本港息率維持不變
０﹒２５％
１１月７日 － 匯豐、中銀香港 匯豐帶頭突減息２５點
（０２３８８）及恆生 ，Ｐ降至５％，東亞
（０００１１）最高為 銀行（０００２３）、
０﹒０１％ 渣打等減０﹒２５％至
東亞（０００２３）及 ５﹒２５％
渣打最高為０﹒２５％
１０月２９日 美息降至１％ 本港息率維持不變
１０月８日 多國央行聯手減息， 本地息率維持不變
美息降至１﹒５％
９月１６日 美息維持於２％ 本地息率維持不變
８月５日 美息維持於２％ 本地息率維持不變
６月２６日 美息維持於２％ 本地息率維持不變
４月３０日 美國減息０﹒２５％至 本地銀行未跟隨減息
２％
３月１８日 美國減息０﹒７５％至 匯豐、中銀香港 Ｐ降至５﹒２５％
２﹒２５％ （０２３８８）及恆生
（０００１１）最高為
０﹒０１％
東亞（０００２３）及渣打 Ｐ降至５﹒５％
最高為０﹒２５％
１月３０日 美國減息０﹒５％至３％ 匯豐、中銀香港（０２３８８）Ｐ降至５﹒７５％
及恆生（０００１１）最高為
０﹒５％
東亞（０００２３）及 Ｐ降至６％
渣打香港最高為０﹒７５％
１月２２日 美國突然減息０﹒７５％ 匯豐、中銀香港及恆生最高 Ｐ降至６％
為０﹒７５％
東亞及渣打香港最高為１％ Ｐ降至６﹒２５％
２００７年
１２月１１日 美國減息０﹒２５％ 匯豐、中銀香港及恆生減息 Ｐ降至６﹒７５％
０﹒２５％，最高為
１﹒５％
東亞及渣打香港最高為 Ｐ降至７％
１﹒７５％
１１月１２日 － 匯豐牽頭減息０﹒２５％ Ｐ降至７％
匯豐、恆生及中銀香港降至
最高至１﹒７５％
渣打香港及東亞最高２％ Ｐ降至７﹒２５％
１０月３１日 美國減息０﹒２５％ 匯豐、恆生及中銀香港降至 Ｐ降至７﹒２５％
降至４﹒５％ 最高２％
渣打香港及東亞最高 Ｐ降至７﹒５％
２﹒２５％
９月１８日 美國減息０﹒５％ 匯豐、恆生、中銀香港儲蓄 Ｐ降至７﹒５％
利率降至最高２﹒２５％
東亞及其他銀行２﹒５％ Ｐ降至７﹒７５％
８月７月 美國維持５﹒２５％利率不變 港息不變
６月２７及 美國維持５﹒２５％利率不變 港息不變
２８日
５月９日 美國維持５﹒２５％利率不變 港息不變
３月２２日 美國維持５﹒２５％利率不變 港息不變
１月３１日 美國維持５﹒２５％利率不變 港息不變
２００６年
１２月１２日 美國維持利率不變 港息不變
１１月７日匯豐牽頭減息恆 Ｐ降至７﹒７５％
生銀行及中銀香港儲蓄利率
降至２﹒２５％至２﹒５％
東亞銀行及其他銀行儲蓄 Ｐ降至８％
利率降至２﹒７５％
１０月２５日 美國維持利率不變 本港利率維持不變
９月２０日 美國維持利率不變 本港利率維持不變
８月８日 美國維持利率不變 本港大部分銀行維持利率不
變，惟中銀香港調低Ｐ至
８％
６月３０日 美國加息０﹒２５％ 銀行維持利率不變
利率升５﹒２５％
５月１０日 美國加息０﹒２５％ 銀行維持利率不變
利率升至５％
３月２８日 美國加息０﹒２５％， 匯豐、恆生儲蓄利率升至 Ｐ升至８％
利率升至４﹒７５％ ２﹒５％至２﹒７５％
渣打香港、東亞及中銀香港 Ｐ升至８﹒２５％
部分儲蓄利率升至３％
１月３１日 美國加息０﹒２５％， 匯豐、恆生維持利率不變， Ｐ維持７﹒７５％
利率升至４﹒５％ 儲蓄利率２﹒２５％至
２﹒５％
中銀香港加息０﹒２５％ Ｐ升至８％
部分儲蓄利率升至
２﹒７５％
渣打香港、東亞及其他銀行 Ｐ維持８％
維持利率不變儲蓄利率
２﹒７５％
－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－－
（ｃｙ）
地產股普遍升逾4%-5% 聯儲局意外不退市
財政司重申「辣招」是非常時期措施，可控制樓價 飆升，暫無意撤回。此外；沙田九肚最後一幅豪宅地皮以23.9億元批予百利保(00617.HK)與富豪(00078.HK)財團，呎價6837元，低於 市場預期下限7000元，創該區地價兩年低。不過，聯儲局意外維持每月買債規模，直至經濟可持續增長，期貨市場預期聯儲局最快要至後年初才會加息。
地產股受捧急抽跑贏，尤其是1.4億元奪灣仔地皮高預期的信置(00083.HK)追升裂口高開逾3%重越100天線(11.23元)，現造11.5元，升5.3%，成交增至1453萬股。
新 地(00016.HK)及新世界(00017.HK)也高開逾3%，前者高見108元逼近5月尾高位，現造107.9元，續升4.3%；後者重越牛熊線 (12.42元)，高見12.6元，暫受制5月30日下跌裂口(12.84-12.62元)，現造12.54元，續升4.7%。
恆地(00012.HK)四連升，重越牛熊線(49.2元)，現造49.9元，續升4.7%；九倉(00004.HK)高見70.9元，現造70.1元，續升4%。
主 席重申無意遷冊的長實(00001.HK)四連升，承昨天升3%跑贏強勢，今早進一步升至122.9元，創七個月高遇壓，現造121.5元，升1.3%。 此外，恆隆地產(00101.HK)連續五天拾級而上，現造26.5元，升1.7%，挑戰100天線(26.65元)。
金管局：退市時間未明市場波動或持續 未見資金淨流出
金管局就聯儲局議息結果發表回應，指聯儲局維 持現行貨幣政策，反映美國經濟復甦的動力仍然有待觀察，聯儲局對今明兩年的經濟增長展望亦有所下調。未來一段時間市場仍然會隨著美國經濟和勞工市場數據變 化，而對退市時間表作出不同的預期和反應。因此，市場波動的情況可能會持續一段時間。
市場對聯儲局退市的預期早前觸發資金流出個別新興市 場，導致當地匯率、利率和金融市場大幅波動。但香港經濟基調相對良好，到目前為止，未見資金淨流出港元，港元匯率和利率亦大致保持穩定。金管局指，難以預 測資金日後的流向，在這大環境下，銀行、企業和個人都應小心管理流動性和利率風險，避免過度借貸。
Fed Refrains From QE Taper, Keeps Bond Buying at $85 Bln
The Federal Reserve unexpectedly refrained from reducing the $85 billion pace of monthly bond buying, saying it needs more evidence of lasting improvement in the economy and warning that an increase in interest rates threatened to curb the expansion.
“Conditions in the job market today are still far from what all of us would like to see,” Chairman Ben S. Bernanke said at a press conference today in Washington after a two-day meeting of the Federal Open Market Committee. “The committee has concern that rapid tightening of financial conditions in recent months would have the effect of slowing growth.”U.S. stocks rose, sending the Standard & Poor’s 500 Index to a record, while Treasuries and gold rallied as Bernanke stressed that the pace of bond buying would be dependent on economic data, and the Fed has no predetermined schedule for tapering the purchases that have pushed its balance sheet to $3.66 trillion.
“There is no fixed calendar schedule, I really have to emphasize that,” Bernanke said. “If the data confirm our basic outlook” for growth and the labor market, “then we could begin later this year.”
The S&P 500 climbed 1.2 percent to 1,725.48 at 4:02 p.m. in New York. The yield on the 10-Year Treasury note dropped 15 basis points to 2.70 percent. Gold for immediate delivery jumped $55.61 to $1,366.25 an ounce. Oil rose more than 2.5 percent.
“It looks like the Fed has done a major reset in terms of expectations on what they need to see before they start to taper,” said Chris Rupkey, the chief financial economist for Bank of Tokyo-Mitsubishi UFJ Ltd. in New York.
Rate Outlook
The central bank, in a statement, left unchanged its outlook that its target interest rate will remain near zero “at least as long as” unemployment exceeds 6.5 percent, so long as the outlook for inflation is no higher than 2.5 percent.Bernanke added in his press conference that the first interest-rate increase may not come until the jobless rate is “considerably below” 6.5 percent.
“Even after asset purchases are wound down,” Bernanke said, the “Fed’s rate guidance and its ongoing holdings of securities will ensure that monetary policy remains highly accommodative, consistent with an aggressive pursuit of our mandated objectives of maximum employment and price stability.”
Bernanke said the Fed could also specify that it would not tighten if inflation was too low. “An inflation floor is certainly something that could be a sensible modification or addition to the guidance,” he said.
Forecasts Reduced
Fed officials today reduced their forecasts for economic growth this year and next. They forecast U.S. gross domestic product to increase 2 percent to 2.3 percent this year, down from a June projection of 2.3 percent to 2.6 percent growth.“They feel the risks are too great to taper now, and the economy is not growing as fast as they had hoped,” said John Silvia, chief economist at Wells Fargo Securities in Charlotte, North Carolina. “They are going to take a few more months and maybe start in December.”
Economists had forecast the FOMC would dial down monthly Treasury purchases by $5 billion, to $40 billion, while maintaining its buying of mortgage-backed securities at $40 billion, according to a Bloomberg News survey.
Fed officials were spooked by an increase in bond yields that followed Bernanke’s comments in May that the Fed may step down the pace of purchases in the “next few meetings,” said Scott Brown, chief economist for Raymond James & Associates Inc. in St. Petersburg, Florida.
Treasury Yields
The yield on the 10-year Treasury note climbed almost 1 percentage point through yesterday since Bernanke’s May 22 comments, with yields on Sept. 6 exceeding 3 percent on an intraday basis for the first time since July 2011. That compares with 1.61 percent on May 1, and a record-low 1.38 percent in July 2012.“They were really surprised back in May and June by the market’s response to the initial talk of tapering,” Brown said. “The Fed’s view was that it’s the amount of asset purchases, not the monthly pace that matters. In that case, it doesn’t matter whether they start tapering in September or December, but the markets decided it does, so it does matter.”
“We’re seeing the reaction that bond yields are coming down, and that’s got to be helpful for their outlook.”
Kansas City Fed President Esther George dissented for the sixth meeting in a row, repeating that the policy risks creating financial imbalances.
Higher interest rates have started to take a toll on housing, one of the drivers of the expansion. A Commerce Department report today showed that builders began work on fewer U.S. homes in August than projected by economists.
Housing Starts
Housing starts rose 0.9 percent to a 891,000 annual rate, following the prior month’s 883,000 pace that was weaker than previously estimated. The median estimate of 83 economists surveyed by Bloomberg called for 917,000. Permits, a proxy for future projects, dropped more than forecast.The average interest rate on a 30-year fixed home loan was 4.57 percent last week, compared with a record-low 3.31 percent in November 2012, according to Freddie Mac. The rate soared 35 percent in 10 weeks ended July 11, the most ever for a comparable period, the data show.
Bernanke, who is nearing the end of his second term as chairman, has orchestrated the most aggressive easing in the Fed’s 100-year history, pumping up the balance sheet from $869 billion in August 2007 and holding the main interest rate close to zero since December 2008.
Leading Candidate
Vice Chairman Janet Yellen, a supporter of Bernanke’s policies, is the top candidate to succeed him after former Treasury Secretary Lawrence Summers withdrew from contention, according to people familiar with the process.The Fed’s asset purchases have fueled gains in asset prices. Counting today’s increase, the S&P 500 Index has climbed 23 percent since Aug. 31, 2012, when Bernanke made the case for further monetary easing at the central bank’s annual forum in Jackson Hole, Wyoming.
Officials have also credited the program, which began last September, with reducing the unemployment rate, which is the lowest since December 2008. Officials have said that they would maintain bond purchases until the labor market has “improved substantially.”
At the same time, recent data on payrolls, housing and retail sales have lagged behind economists’ forecasts.
Jobless Rate
U.S. companies created 169,000 jobs last month, fewer than economists projected, and increases in the prior two months were revised down. The unemployment rate fell as workers left the labor force. August and July were the weakest back-to-back months for payroll gains in a year.Employment growth has nevertheless improved since the bond purchases began. The U.S. has added an average of 160,000 jobs over the past six months, compared with 97,000 originally reported for the half-year before the Fed decided to start the third round of purchases a year ago.
Faster employment gains may be needed to spur the consumer spending that accounts for 70 percent of the economy. Retail sales last month rose less than forecast, with purchases climbing 0.2 percent, the smallest gain in four months, the Commerce Department reported last week.
Bright Spots
Homebuilding and manufacturing remain bright spots for the economy.Companies such as Hovnanian Enterprises Inc. have said the recent rise in mortgage rates will temporarily restrain the housing recovery rather than end it.
Homebuilder confidence held this month at the highest level in almost eight years, even as mortgage rates rose. The National Association of Home Builders/Wells Fargo confidence index registered 58 this month, matching August’s revised reading as the strongest since November 2005.
Such optimism has found fuel from a recovery in home prices that pushed up the S&P/Case-Shiller (SPCS20Y%) index of values in 20 cities by 12.1 percent in June from a year earlier.
Factories turned out more cars, appliances and home furnishings in August, propelling the biggest increase in U.S. industrial production in six months. Output at factories, mines and utilities rose 0.4 percent after no change the prior month, the Fed reported this week.
Auto Sales
Cars and light trucks sold last month at the fastest annualized rate since 2007, according to researcher Autodata Corp. Sales at General Motors Co., Ford Motor Co. (F), Toyota Motor Corp. and Honda Motor Co. all exceeded analysts’ estimates.Texas Instruments Inc., the largest maker of analog chips, is among companies with a brighter outlook as global markets stabilize.
“Orders continue to be quite solid” this quarter, Chief Financial Officer Kevin March said at a Sept. 11 conference. “We continue to see strength in three of the four regions of the world,” with Asia, Japan, and the Americas expanding, he said.
Bernanke Saves Companies $700 Billion as Verizon Leads Sales
America’s companies, from Apple Inc. (AAPL) to Verizon Communications Inc., are saving about $700 billion in interest payments with the Federal Reserve’s unprecedented stimulus.
Corporate bond yields over the past four years have fallen to an average of 4.6 percent from 6.14 percent in the five years before Lehman Brothers Holdings Inc.’s demise, a savings equal to $15.4 million annually per every $1 billion borrowed. Businesses took advantage of the Fed’s largesse to lock in record low rates, extend maturities and raise cash by selling $5.16 trillion of bonds, data compiled by Bloomberg show.
“The stimulus was a huge saving grace in the economy overall,” said J. Michael Schlotman, the chief financial officer at Cincinnati-based Kroger Co. (KR), the grocery store operator that estimates it’s paying about $80 million less in interest than it would have pre-crisis. “It probably kept some businesses from failing because they were able to refinance their debt at lower interest payments.”
The combination of a near-zero rate policy and more than $3 trillion of bond purchases by the Fed since December 2008 means that the collective interest savings enjoyed by Apple, Verizon (VZ) and more than 2,000 other corporate borrowers exceeds Switzerland’s $632 billion economy.
Defaults Plummet
That’s money freed up to expand businesses and hire workers. Corporations boosted their capital expenditures to $699 billion in the three months ended June 30, about the most in a decade, and up 8.7 percent from the corresponding period last year, according to JPMorgan Chase & Co. Even the neediest companies have been able to obtain cash as the trailing 12-month U.S. speculative-grade default rate has plummeted to less than 3 percent from more than 13 percent back in 2009.Drugstore chain Rite Aid Corp. (RAD) and residential property firm Realogy Corp. (RLGY) are two of the 283 junk-rated borrowers identified in March 2009 by Moody’s Investors Service as being at the highest risk of default that have since sold bonds.
After plunging to 9.5 cents on the dollar in March 2009, Camp Hill, Pennsylvania-based Rite Aid’s $295 million of debentures due February 2027 have rebounded to 101.38 cents, as their yields fell to 7.53 percent from 80 percent.
While borrowing costs are starting to rise in anticipation that the Fed will start reducing stimulus measures, they’re still below pre-crisis levels and enticing borrowers. Verizon sold $49 billion of bonds last week in the biggest corporate offering on record.
Quantitative Easing
When Fed Chairman Ben S. Bernanke started to pump cash directly into the financial system in December 2008 by purchasing bonds in a policy known as quantitative easing, unemployment was the highest in 26 years and companies rated below Baa3 at Moody’s and less than BBB- by Standard & Poor’s faced $1.2 trillion of debt maturing through 2015. That’s been cut to about $115.8 billion, according to Barclays Plc.“The benefits of quantitative easing include the confidence that it gave to markets, which allowed credit markets to re-open,” said Eric Gross, a Barclays credit strategist in New York. “If a company can get to the primary market and pay off its obligations, it can live to fight another day. The problem back then was the primary market was completely closed.”
Companies sold just $21.9 billion of investment-grade and high-yield bonds in the month after Lehman collapsed on Sept. 15, 2008, less than half the size of Verizon’s sale last week.
Spending, Jobs
Kroger’s $3.1 billion of bond sales in the past four years included $600 million of 10-year notes sold in July with a 3.85 percent coupon. That’s below the 6.4 percent for similar-maturity debt that the largest supermarket operator in the U.S. issued in August 2007, data compiled by Bloomberg show.Schlotman said the interest savings gave him the confidence to ask Kroger’s directors to approve $10 billion in capital expenditures and boost employment by 35,000 jobs over the past five years. The company had 343,000 employees as of Feb. 2, data compiled by Bloomberg show.
Savings of about $700 billion represents the difference between what companies that have sold bonds since Sept. 17, 2009, are paying based on an average maturity of nine years for securities in the Bank of America Merrill Lynch U.S. Corporate & High Yield Index, versus what they might have paid before the crisis.
IBM’s Record
After rising as high as 11.1 percent on Oct. 28, 2008, it wasn’t until Sept. 17, 2009 that yields fell below the pre-Lehman average of 6.14 percent, the Bank of America Merrill Lynch index shows.International Business Machines Corp. (IBM), the largest computer-services provider, sold $1.25 billion of seven-year notes in May at a record low coupon of 1.625 percent. That compares with a 5.7 percent rate on 10-year debt issued in 2007 by the Armonk, New York-based company.
Verizon, the largest U.S. telephone carrier after No. 1 AT&T Inc., issued $49 billion of bonds in eight parts on Sept. 11 in the biggest sale on record to help fund its $130 billion purchase of the rest of Verizon Wireless from Vodafone Group Plc. On the $11 billion portion due in 10 years, the New York-based company is paying a coupon of 5.15 percent, less than the 5.5 percent on similar-maturity notes it sold in March 2007.
Verizon’s offering exceeded the previous record of $17 billion set on April 30 by Cupertino, California-based Apple. That sale, the iPhone-maker’s first since 1996, included $4 billion of 1 percent, five-year notes and $5.5 billion of 2.4 percent, 10-year securities.
Fed Taper
With the economy now firming, the Fed has been considering curtailing its stimulus. The central bank unexpectedly refrained today from reducing the $85 billion pace of monthly bond buying, saying it needs to see more signs of lasting improvement.Yields on 10-year Treasuries (USGG10YR), a benchmark for everything from corporate bonds to mortgages, have risen to 2.76 percent as of 2:17 p.m. in New York, after reaching as high as 2.99 percent on Sept. 5, from 1.76 percent on Dec. 31. Apple’s 2.4 percent bonds have fallen 11.3 cents since they were issued to 88.6 cents on the dollar, pushing the yield up to 3.83 percent.
The Fed embarked on its stimulus in the face of an economy spiraling into the worst financial crisis since the Great Depression, when a collapse in the subprime mortgage market and deteriorating property values led to the forced sale of Bear Stearns Cos. and the demise of Lehman.
Early Benefits
Mortgage financiers Fannie Mae (FNMA) and Freddie Mac (FMCC) were placed into government conservatorship, insurer American International Group Inc. agreed to a U.S. takeover to avert collapse, Merrill Lynch & Co. was compelled to sell itself to Bank of America Corp. and automaker General Motors Corp. faced insolvency.To bring down a jobless rate that eventually reached a peak of 10 percent in October 2009, the Fed cut its target rate for overnight loans between banks to a range of zero and 0.25 percent and started buying Treasuries and mortgage debt on Dec. 5, 2008.
Within the first 30 days of the program’s onset, yields on dollar-denominated corporate bonds dropped a percentage point to 9.8 percent on Jan. 5, 2009, Bank of America Merrill Lynch index data show. By the time the Fed started its second round of QE on Nov. 12, 2010, yields on the notes had plunged to 4.6 percent, less than half what they were two years earlier.
Interest Lowered
“It’s allowed companies such as ourselves to continue to access the capital markets,” Dan D’Arrigo, the executive vice president and chief financial officer of Las Vegas-based casino company MGM Resorts International (MGM), said in a Sept. 17 telephone interview. During the crisis, “we still had access but at much more costly rates to our company,” he said.MGM, which runs the Bellagio and MGM Grand casinos, was able to lower its interest expenses by $230 million in December, to about $770 million annually, refinancing debt with $4 billion of loans and $1.25 billion of bonds, according to a Dec. 20 statement from the company.
As credit loosened, corporate yields plunged as low as 3.35 percent on May 2, from 9.76 percent at the end of 2008. Verizon has led $1.1 trillion of dollar-denominated issuance this year, on pace to surpass last year’s record $1.47 trillion, data compiled by Bloomberg show.
Refinancings have cut the amount of speculative-grade bonds and loans set to mature in 2014 to $43.7 billion, compared with $331.5 billion when the Fed started its QE program in 2008.
‘Maturity Wall’
“There was this maturity wall that people were terrified of,” said Neil Wessan, the group head of New York-based CIT Group Inc. (CIT)’s capital markets unit. “That’s been spread out over a much broader period of time.”CIT emerged from a month of bankruptcy protection in December 2009. After a $592.3 million loss last year, analysts surveyed by Bloomberg forecast CIT will report its highest earnings in 2013 and 2014 since exiting bankruptcy.
The business lender sold 5 percent securities in July that are due in August 2023 to yield 5.125 percent. That’s below the 6.625 percent coupon on seven-year notes it issued in March 2011, data compiled by Bloomberg show.
“The availability of all this excess liquidity has allowed the market to re-price, amend and extend,” Wessan said. “That took a lot of pressure out of the system.”
Fed Governor Jeremy Stein warned in February that some credit markets, such as corporate debt, were showing signs of excessive risk-taking. Investors poured $758.7 billion into U.S. bond funds in the four years after 2008, according to research firm EPFR Global in Cambridge, Massachusetts.
Stein’s Warning
“We are seeing a fairly significant pattern of reaching-for-yield behavior emerging in corporate credit,” Stein said at the time in a speech in St. Louis.Company debt loads in the U.S. have increased faster than cash flow for six straight quarters. Debt of investment-grade companies rose in the second quarter to 2.09 times earnings before interest, taxes, depreciation and amortization, according to JPMorgan. That’s up from 2.07 times in the first three months of 2013 and compares with 2.13 in the third quarter of 2009, when it peaked after the longest recession since the 1930s.
Rite Aid, which lost money in five of the past six years, sold $810 million of eight-year debentures in June paying 2.5 percentage points less than similar-maturity debt it issued last year.
The most indebted U.S. drugstore generated $504 million of free cash in the 12 months ended March 2, the most since at least 1996. Rite-Aid, which Moody’s placed on its “Bottom Rung” list in its March 2009 report, is ranked B3 by the ratings firm and B- by S&P, both six levels below investment grade.
Susan Henderson, a spokeswoman for Rite Aid, didn’t respond to a telephone and e-mail message seeking comment.
Realogy Cuts
Madison, New Jersey-based Realogy, the most indebted U.S. real-estate services company, has decreased its total interest expense to $255 million from $672 million in 2012, Chief Financial Officer Anthony Hull said in a July interview.A strengthening economy may help indebted companies meeting interest payments even with yields on the Bank of America Merrill Lynch U.S. Corporate & High Yield index having risen to 4.23 percent, 0.64 percentage point more than at the end of 2012.
Gross domestic product is expected to grow by 2.65 percent next year from 1.6 percent this year and after contracting 2.8 percent in 2009, according to 81 economists surveyed by Bloomberg. The unemployment rate was 7.3 percent in August.
The Fed’s QE “was the right thing at the right time,” Kroger’s Schlotman said. “You can’t keep rates here forever. At some point, market forces have to drive your ability to succeed in the marketplace.”
Bernanke Buys Time for Brazil to India as Ibovespa Leads Gains
The Federal Reserve’s surprise decision to refrain from scaling back monetary stimulus provided a respite to investors in emerging markets, where currencies are in the midst of their worst rout in two years.“It gives everyone some breathing time,” Denise Simon, an emerging-market fixed income manager at Lazard Asset Management, which oversees $147 billion, said by phone from New York. “It certainly takes some of the immediate pressure off the more vulnerable countries. Emerging markets will continue to correct on the upside as the result.”
The Brazilian real, Turkish lira and South African rand jumped more than 2 percent, while the Ibovespa posted the biggest gain among 94 global stock gauges, after the Fed said yesterday it will keep buying $85 billion of debt a month. JPMorgan Chase & Co.’s index for dollar-denominated bonds in developing nations headed for the largest rally in 14 months.
Fed Chairman Ben S. Bernanke held back from paring monetary stimulus to support economic growth, soothing investors who had dumped emerging-market assets since May as higher U.S. interest rates sparked capital flight. A group of the 20 most traded emerging-market currencies lost 7.4 percent between May and August, the most in two years.
The decision came at a time when economic data from China to Brazil are showing signs of improvement and helps especially countries most dependent on foreign financing such as Brazil and India, said Simon.
Real, Rand
The real led the rally in developing-nation currencies yesterday, gaining 3.2 percent to 2.1860 per dollar. It has jumped 9.1 percent in September, poised for the biggest monthly advance since October 2011. South Africa’s rand added 2.2 percent yesterday, set for the best month since May 2009.The MSCI Emerging Markets Index of stocks increased as much as 0.7 percent, while the iShares MSCI Emerging Markets Index exchange-traded fund rallied 4.2 percent to a four-month high. Brazil’s Ibovespa (IBOV) climbed 2.6 percent, extending its gain from a four-year low reached in July to more than 20 percent. JPMorgan’s bond index advanced 0.6 percent, bringing its rally this month to 3 percent, the most since July 2012.
The yield on the benchmark U.S. 10-year note fell 16 basis points, or 0.16 percentage point, to 2.69 percent at 4:59 p.m. in New York, according to Bloomberg Bond Trader prices, making higher yielding emerging market assets more attractive.
“This has created a much better environment for risky assets,” Paul Denoon, who oversees $25 billion as the head of emerging-market debt at AllianceBernstein Holding LP (AB), said in a phone interview from New York. “It’s important because one of the concerns for the market is the large external financing needs for developing countries. This creates stability.”
Risk Appetite
Strategists at Citigroup Inc. yesterday recommended their clients buy the Mexican peso and bet 10-year interest-rate swaps will fall, saying the Fed’s decision boosts investors risk appetite.Brazilian state development bank president Luciano Coutinho said he expects currency volatility to increase because the Fed didn’t start tapering.
“For us, the sooner it starts and ends, the better,” Coutinho said in an interview at Bloomberg’s headquarters in New York yesterday. “I would rather see it start today and have some date to finish because then we will feel the whole impact. The worst thing is the uncertainty.”
Bernanke first signaled on May 22 that policy makers could reduce the bond purchases, triggering capital outflows and a selloff in emerging markets. More than $50 billion has left global funds investing in emerging-market bonds and stocks since May, extending the outflow this year to $11 billion, according to data from EPFR Global.
‘Fragile Five’
The rand, real, India’s rupee, Indonesia’s rupiah and the lira, dubbed the “fragile five” by Morgan Stanley strategists because of their reliance on foreign capital for financing needs, led the declines, losing as much as 18 percent during the four months through August.The selloff reversed this month as economic data from China to Brazil improved while a weaker-than-expected U.S. job report helped keep the U.S. Treasury yields from a two-year high.
China’s exports jumped 7.2 percent in August from a year earlier, beating estimates, the nation’s customs service said Sept. 8. Brazil’s July retail sales rose almost 10 times faster than economists forecast, as consumers spent more on food, clothing and appliances.
‘Too Optimistic’
“People trashed emerging markets,” said Pablo Cisilino, a money manager at Stone Harbor Investment Partners LP, which has about $55 billion in emerging-market debt, in a phone interview from New York yesterday. “People were too optimistic about developed market growth and too pessimistic about emerging markets. They are revising that now. There’s more room to go.”The market stability encouraged developing-country borrowers to come back to the international debt market to raise funds. Companies including America Movil SAB (AMXL), the biggest Latin American mobile-phone company, and Ecopetrol SA (ECOPETL), Colombia’s state-owned oil producer, raised $16.8 billion in bond sales this month, compared with $7.5 billion in August, according to data compiled by Bloomberg.
Brazil’s central bank announced a $60 billion intervention program of currency swaps and foreign-exchange credit lines through the end of the year in a bid to support the real. Reserve Bank of India Governor Raghuram Rajan, who took office this month, unveiled a package of measures that Barclays Plc. estimated may lure $10 billion in capital inflows.
The Fed’s decision yesterday has brought the countries some time to build up their defenses and rebalance their economies, said Lazard’s Simon.
“It does not solve all the issues in emerging markets,” said Simon. “But with the rates staying low and dollar weakness, that’s a positive for emerging-market assets.”
Wall Street Banks Facing Drop in Trading Look to Fed
Wall Street banks, facing a drop in third-quarter trading revenue, are counting on today’s Federal Reserve announcement to spark a surge in volume.
Banks including JPMorgan Chase & Co. (JPM) and Barclays Plc (BARC) have indicated to investors that trading revenue for the period probably will be down from a year earlier. Jefferies Group LLC, whose third quarter ended in August, said yesterday that fixed-income trading revenue plunged 88 percent while equity trading fell 28 percent.Investors had been waiting to see whether the U.S. central bank will begin reducing its $85 billion in monthly bond purchases. The Fed unexpectedly refrained from reducing the pace of buying, saying today that it needs to see more signs of lasting economic improvement. The decision could boost trading as investors make adjustments to their portfolios, according to Brad Hintz, a Sanford C. Bernstein & Co. analyst.
“I don’t want to write the quarter off yet,” Hintz, who’s based in New York, said before the Fed announcement. “July and August were not particularly strong months, and this is going to be one where to find out how the quarter turns out, we’re going to have to actually wait until the very end of the quarter.”
Last year, traders speculated about whether the central bank would increase the stimulus, which it did in September. Fed Chairman Ben S. Bernanke said today that a decision on tapering asset purchases depends on economic data, and there is no set timetable.
Trading Revenue
While the decision could increase volatility and volume in the next couple weeks, any revenue gains may not be enough to fully offset the performance of the first two months, said Devin Ryan, a bank analyst at JMP Group Inc. (JMP) When rates do start to rise, that could also lead to a boost in trading revenue, provided the increase isn’t too quick, he said.The Fed’s actions “will continue to be top of conversation,” Ryan said. “As rates do begin to move up in the future, that could be a positive for trading activity. The key is higher rates within reason. If you have a jolt that catches people off-guard, that could lead to issues.”
The nine largest global investment banks generated $32.4 billion from trading stocks, bonds, currencies and other products in the second quarter, or 24 percent of total net revenue. The firms produced $70.9 billion in the first half, down 1.9 percent from the first six months of 2012.
‘Challenging Summer’
Jefferies Chief Executive Officer Richard Handler, 52, said the firm suffered from “unsettled” fixed-income markets in June and “subdued summer activity levels” in July and August. The business “markedly improved” in September, he said.“With the significant change in expectations regarding interest rates, we experienced a very challenging summer in our fixed-income businesses due to the rising rate environment, spread widening, redemptions experienced by our client base which heavily muted trading, and related mark-to-market writedowns within our inventory,” he said in a statement.
In the past two weeks, four analysts have cut their third-quarter earnings estimates for New York-based Goldman Sachs Group Inc. (GS), the bank most reliant on trading and investment-banking revenue. Other lenders have provided investors with warnings about trading.
“We have seen continued volatile fixed-income market conditions in July and August, which has exacerbated the normal seasonal slowdowns in trading volumes, and thus adversely impacted our fixed-income business,” Credit Suisse Group AG (CSGN) Chief Financial Officer David Mathers, 48, said Sept. 11.
June Moves
Investors stepped aside after an increase in interest rates in June caused a jump in trading volume and losses for some bond investors, Hintz said. Bernanke said June 19 that policy makers may reduce the central bank’s purchases this year and halt them altogether by mid-2014 if the economy improves in line with officials’ expectations.“We could see this higher-volume scenario unfold in the coming weeks as the Fed meeting on the 18th has the potential to introduce some volatility into the market in a variety of asset classes,” Roger Freeman, an analyst at Barclays, said in a Sept. 13 note to clients. “The back half of September has the potential to set the tone for volumes over the remainder of the year.”
A lack of trading in the first two months of the quarter may increase the importance of banks’ gains and losses on their inventory positions. The Bloomberg U.S. Corporate Bond Index, which measures the performance of investment-grade company debt, dropped 0.3 percent this quarter through yesterday, while the high-yield index climbed 2 percent. The Standard & Poor’s 500 Index is up 6.1 percent this quarter.
Barclays Drop
“A lot of the performance will have to do with how big the risk-taking was,” Hintz said. “The volumes aren’t going to drive the quarter. It’s going to be what kind of risk positions did you have on?’”Barclays, the U.K.’s second-largest bank by assets, said a drop in stock and bond trading in July and August sparked a “significant” fall in revenue at its largest unit. The decline in fixed income, currencies and commodities at the investment bank helped shave 500 million pounds ($797 million) from the group’s adjusted revenue for the two months compared with 2012.
JPMorgan, the biggest U.S. bank, expects third-quarter revenue from stock and bond trading may decline as much as 5 percent from a year earlier, when it produced $4.77 billion.
Lake, Porat
Trading revenue is “tracking well versus the third quarter of last year, but September last year was particularly strong and we don’t expect it to be as strong as last year,” Marianne Lake, the bank’s CFO, said at an investor conference in New York on Sept. 9.Morgan Stanley (MS) CFO Ruth Porat said the next day at the same conference that trading volume was “a bit lower” than the year-earlier period across the industry.
Daily trading of high-yield bonds is down 4.4 percent from the third quarter of 2012, while trading of investment-grade bonds is up 2.6 percent, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Average daily volume for U.S. equities is 5.64 billion shares in the quarter, a drop of 5.5 percent from last year, according to data compiled by Bloomberg.
Trading may have gotten a boost from Verizon Communications Inc.’s record $49 billion bond offering last week. That helped global corporate-debt issuance mark its second-strongest week of the year, and the pickup is “broadly supportive” of brokers such as Goldman Sachs, Doug Sipkin, a New York-based analyst at Susquehanna Financial Group LLLP, wrote in a note this week.
A bigger bump may come from investors reacting to today’s Fed decision, Bernstein’s Hintz said. Bernanke has orchestrated the most aggressive easing in the Fed’s 100-year history, pumping up the balance sheet to $3.66 trillion from $869 billion in August 2007 and holding the main interest rate close to zero since December 2008.
“Fixed-income is a business of watching central banks,” he said. “Changing policies by central banks tend to be good for fixed-income, at least initially.”
Editors: Robert Friedman, David Scheer
