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01-04-2025
- Business
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Asia Credit Market Heats Up as Issuers Rush to Beat Tariffs
(Bloomberg) -- The countdown to US President Donald Trump's next round of tariffs has fueled a frenzy of activity in Asia Pacific's credit market, with more than a dozen issuers marketing or announcing dollar bonds on Monday. They Built a Secret Apartment in a Mall. Now the Mall Is Dying. Chicago Transit Faces 'Doomsday Scenario,' Regional Agency Says LA Faces $1 Billion Budget Hole, Warns of Thousands of Layoffs New York Subway Ditches MetroCard After 32 Years for Tap-And-Go Libraries Warn They Could Be 'Cut off at the Knees' by DOGE Korea National Oil Corp. is among the borrowers planning to price a bond on Monday, while Malaysian oil giant Petroliam Nasional Bhd has hired banks for what could be its first dollar issuance in almost four years. South Korean steelmaker Posco Holdings Inc., Philippine restaurant operator Jollibee Foods Corp. and Hong Kong metro operator MTR Corp. Ltd. are among the other issuers working on deals. They are turning to the bond market before a hotly-anticipated US tariff announcement on April 2, which Trump has referred to as 'Liberation Day.' Although the threat of rising tariffs has made investors nervous, it hasn't been entirely bad news for bond issuers: Treasury yields have fallen as investors weigh up the economic impact, reducing issuers' overall funding costs, while investment grade bond spreads in Asia remain tight. 'With Treasuries having rallied and credit spreads still near all-time tights, the Asian dollar primary market has sprung to life, with multiple issuers keen to lock in funding ahead of 'Liberation Day,'' said Mark Reade, head of credit strategy at Mizuho Securities Asia. Issuers in Asia Pacific have already sold almost $92 billion of dollar bonds so far this quarter, the highest quarterly volume since the first three months of 2022, according to data compiled by Bloomberg. Read: Trump Plans His Tariff 'Liberation Day' With More Targeted Push Trump is planning a series of so-called reciprocal tariffs, hitting countries that impose their own levies on US goods. There are signs the tariffs will be less sprawling than previously feared, but the uncertainty over Trump's moves has left investors across markets on edge. Borrowers also have an incentive to sell dollar debt before public holidays next week and the beginning of a results blackout period for some issuers, said Avinash Thakur, head of Asia Pacific capital markets financing at Barclays. --With assistance from Harry Suhartono and Wei Zhou. (Updates with bond relative value details and banker comment.) A New 'China Shock' Is Destroying Jobs Around the World How TD Became America's Most Convenient Bank for Money Launderers Tesla's Gamble on MAGA Customers Won't Work One Man's Crypto Windfall Is Funding a $1 Billion Space Station Dream The Real Reason Trump Is Pushing 'Buy American' ©2025 Bloomberg L.P. Sign in to access your portfolio
Yahoo
29-03-2025
- Business
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Kuwait Is Set to Allow Banks to Offer Mortgages for the First Time
(Bloomberg) -- Kuwait is preparing to allow banks to offer mortgages for the first time, a move that could reshape the oil-rich nation's financial landscape. New York Subway Ditches MetroCard After 32 Years for Tap-And-Go LA Faces $1 Billion Budget Hole, Warns of Thousands of Layoffs Despite Cost-Cutting Moves, Trump Plans to Remake DC in His Style Amtrak CEO Departs Amid Threats of a Transit Funding Pullback NYC Plans for Flood Protection Without Federal Funds The legislation is expected to be passed soon by the Council of Ministers, according to people familiar with the matter. The move would unlock a market that could eventually reach a value of $65 billion, implying a 40% expansion in lenders' credit portfolios, according to the people, who declined to be identified as the information is private. Traditionally, mortgages were neither allowed nor regulated, as policymakers feared the political repercussions of foreclosures on citizen-owned homes. Instead, the government has a public housing program for married citizens to receive a highly-subsidized house or a plot with a low-interest loan. But the system has been buckling under a backlog of 103,000 requests and handover rates suggesting a decade-long wait, prompting the government to plan significant changes to the system. Government officials couldn't be reached for comment on Friday, a public holiday in the country. Get the Mideast Money newsletter, a weekly look at the intersection of wealth and power in the region. Kuwait's oil wealth has propelled it into the ranks of the world's richest countries, but years of policy paralysis have meant the nation has lagged its more ambitious peers in the Middle East. The long-awaited law could provide a 'structured framework that enhances home financing accessibility for eligible citizens,' said Abdulla Al Sumait, acting group chief executive officer at Al Ahli Bank of Kuwait. 'We see this as a transformative step.' The introduction of the mortgage law would come 10 months after Kuwait's emir suspended parliament for up to four years, effectively clearing the way for the government — headed and appointed by the ruling Al-Sabah family — to pass key bills. Just days earlier, the cabinet approved a draft decree that paves the way for the OPEC-member state to sell international debt for the first time in eight years. Those moves have already led to optimism in markets. Kuwaiti stocks are outpacing their Gulf peers this year, with banks driving the rally — Boubyan Bank KSCP, Burgan Bank SAK and Warba Bank KSCP are all up 17% or more. The pent up demand for housing means that mortgages, even with significant regulatory limitations, could significantly boost Kuwaiti lenders' profitability, according to Justin Alexander, director of Khalij Economics and an analyst for consultant GlobalSource Partners. It could also spur foreign interest in banking stocks. There's currently 4.7 billion dinars ($15.3 billion) of foreign investments in Kuwaiti banks, representing 15% of the sector. 'This opportunity goes beyond the direct impact from housing finance, considering the magnitude of infrastructure investments needed to develop new residential areas to meet the growing demand for housing in Kuwait,' said Shaikha Al-Bahar, deputy group CEO at National Bank of Kuwait SAKP. What Bloomberg Intelligence Says... The legislative amendments could potentially include mortgage durations, state subsidies, interest rate caps, and regulatory limits such as debt service ratio. Accelerating mortgage market could stimulate construction sector, potentially driving domestic credit growth to high single digits over the medium term. - Salome Skhirtladze, Europe Middle East and Africa financials analyst. Untapped Market The mortgage law is expected to spur a real-estate expansion over many years. 'It should increase project awards to create infrastructure and new cities, and increase housing starts,' said Jaap Meijer, head of research at Arqaam Capital in Dubai. Behind the scenes, the government is lining up other changes. Officials have activated a new law for urban development and the Public Authority for Housing Welfare recently signed a consulting services contract to develop three residential sites with over 5,000 housing units. 'Kuwait offers much,' said Bader Al-Saif, an assistant professor at Kuwait University and an associate fellow at Chatham House. 'It's an untapped market when compared to its immediate neighbors.' A New 'China Shock' Is Destroying Jobs Around the World Tesla's Gamble on MAGA Customers Won't Work How TD Became America's Most Convenient Bank for Money Launderers One Man's Crypto Windfall Is Funding a $1 Billion Space Station Dream The Real Reason Trump Is Pushing 'Buy American' ©2025 Bloomberg L.P. Sign in to access your portfolio
Yahoo
26-03-2025
- Business
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Systemic ‘Bank Run' Risk Hangs Over Stablecoin Bills in Congress
(Bloomberg) -- The current excitement about one of the safest corners of the cryptocurrency markets is bringing up bad memories of previous crises. They Built a Secret Apartment in a Mall. Now the Mall Is Dying. Chicago Transit Faces 'Doomsday Scenario,' Regional Agency Says LA Faces $1 Billion Budget Hole, Warns of Thousands of Layoffs Why Did the Government Declare War on My Adorable Tiny Truck? New York Subway Ditches MetroCard After 32 Years for Tap-And-Go The Trump administration and Congress are both pushing to cement the growing importance of stablecoins, the digital tokens that are supposed to maintain a steady value with backing from traditional assets. Two bills traveling through the House and Senate are designed to give stablecoins a bigger role in the global payments infrastructure, with vocal support from President Donald Trump. The interest from Washington has helped encourage the steady flow of new money into the sector — even as other parts of the cryptocurrency industry have struggled — bringing the total value to more than $230 billion. Yet the boom in tokens like Tether Holdings SA's USDT and Circle Internet Financial's USDC has revived fears about the looming risks that these coins are bringing into both the cryptocurrency industry and the broader financial system. Stablecoins have long drawn attention, and criticism, for the ways in which they have made it easier for criminals to move money across national borders. The current debate has focused on how the tokens could be vulnerable to the kind of bank runs that paralyzed the financial system during past financial crises, all of which might be amplified if the proposed legislation allows the industry to grow. 'The bill lacks basic safeguards necessary to ensure that stablecoins don't blow up our entire financial system,' Senator Elizabeth Warren said at a hearing on one of the bills, known as the GENIUS Act, this month. 'Under this bill, stablecoin issuers can invest in risky assets including the very assets that were bailed out in 2008,' she added. 'Anyone who thinks the US taxpayer won't be called on, directly or indirectly, to bail out these guys, is kidding themselves.' Researchers at the Federal Reserve Bank of New York and the Financial Stability Oversight Council called attention to these run risks in multiple papers published last year and various central bankers have spoken about the dangers in recent speeches. Market Panic Market experts have focused on a problem that is built into the basic structure of stablecoins. These coins generally derive their value from the underlying assets that they own — when someone buys a stablecoin, an equivalent amount of assets must be held in reserve to support its value. Stablecoin reserves are usually stuffed with liquid assets like cash and short-dated US government debt, but they can also include risker assets like Bitcoin or corporate debt. If customers rush to cash in their stablecoins during market panic, an issuer might have to quickly sell their holdings — as has happened in the past — creating problems in the markets for the underlying assets. 'If a run on a large stablecoin were to occur, liquidation of the assets backing the stablecoin could be disruptive, especially if those assets were linked to other funding markets,' Lisa D. Cook, a governor on the Federal Reserve's board, said in a speech at a conference in January. This could end up looking a lot like what happened to money-market funds in 2008, experts have warned. Back then, the Reserve Primary Fund broke its intended peg to the dollar as investors lost confidence in the $785 million in Lehman Brothers' debt backing it, triggering a broader run on money-market funds that spread chaos through the financial system. To be sure, stablecoins are still small compared with money-market funds — all the coins combined are just 15% as big as the money-market funds tracking US government debt, for example. But the coins are growing fast, up 90% in value since late 2023. And advocates have big ambitions for them to become a primary mechanism for international transactions, which would turbocharge the business. Among the proponents is Howard Lutnick, Trump's Secretary of Commerce, who used to work closely with Tether when he was the CEO of Cantor Fitzgerald LP. Lutnick and Treasury Secretary Scott Bessent have said that legitimizing stablecoins could help firm up the dominance of the dollar as a global reserve currency. Past Problems Given the potential expansion, critics are concerned with the problems stablecoins have already faced. In 2023, for example, the value of USDC dropped as low as 81.5 cents after Circle stated it had stored some $3.3 billion in reserve assets at Silicon Valley Bank during the latter's collapse. These kinds of problems have arisen in part because stablecoins have faced few requirements for where they put their reserves. The proposed pieces of legislation that are moving through the House and the Senate — the GENIUS and STABLE Acts — are supposed to change that. If passed, stablecoin companies would need to be licensed and back their tokens one-to-one with approved assets like cash, short-term US Treasury bills, repurchase agreements and money-market funds. The text of the GENIUS Act — which stands for Guiding and Establishing National Innovation for US Stablecoins — was approved 18-6 by the Senate Banking Committee this month, receiving bipartisan support after several amendments. The STABLE Act is expected to come up for a vote in the House Financial Services Committee at the beginning of April. Most observers agree that the legislation would improve the quality of the assets held by stablecoin issuers and lower the disruptive potential of a bank run. But the US proposals are much less strict than similar recent legislation that was implemented in Europe last year. And there are already fears that the legislation would not fix some of the more basic problems with stablecoins. Arthur E. Wilmarth Jr, a professor emeritus at George Washington University Law School, published a policy brief last month calling attention to some of the vulnerabilities that the legislation does not address. Even safe, short-term US Treasury bills, which would be allowed into reserves in the proposed legislation, have been vulnerable to bank runs and frozen up during previous crises, Wilmarth said. 'Uninsured stablecoins are virtually certain to experience investor runs during future crises,' Wilmarth added in an interview. He noted that Circle's USDC only managed to recover its peg in 2023 after federal regulators stepped in to cover all of Silicon Valley Bank's uninsured depositors. Given that stablecoins are being treated like cash, some critics of the current legislation wanted all the reserves to be held in insured bank accounts, an idea that got voted down. Existing banks, meanwhile, are scared that the new industry will siphon off deposits and reduce their ability to make loans. But some monetary experts who have worried about stablecoin runs in the past believe that the proposed legislation will fix many of the holes. Nellie Liang, the former Federal Reserve board member who stepped down as undersecretary of the Treasury for domestic finance in January, said the recent amendments to the GENIUS Act would force issuers to hold cash-like assets that should be safe even in a run. 'For stablecoins to function and not cause or pose risk to financial stability, reserve assets have to be very safe and very liquid,' she said. Dominant Players Today, the stablecoin space is dominated by Tether and Circle, with Tether making up around 60% of the market. Both stablecoin firms have welcomed Trump's efforts to lay down legislation. But the business model of Tether, which is based in El Salvador, would have to change significantly if it sought a license to issue its token in the US. At the end of last year, Tether's reserves included — in addition to Treasury securities — billions of dollars worth of precious metals, secured loans, Bitcoin and other assets not immediately permitted under the legislation. Chief Executive Officer Paolo Ardoino said he had met with lawmakers when he visited Washington earlier this month. 'Our mission is to drive the adoption of digital dollars in a way that benefits both global users and the US financial system, and we remain committed to working with regulators and stakeholders to shape policies that reflect this reality,' Tether said in a statement. Shortly after the Silicon Valley Bank fiasco, Circle said it moved the cash holdings in its reserves to systemically important banks like BNY Mellon. The stablecoin issuer has also advocated for companies like theirs to hold cash deposits at the Fed, just like banks do. Circle didn't respond to requests for comment. If the legislation passes, it would likely encourage the expansion of the industry. A number of banks, crypto exchanges and others are considering plans to build their own stablecoins. That growth only makes skeptics of the industry more concerned about the risks. 'At their current size that doesn't matter,' said Steven Kelly, associate director of research at Yale's Program on Financial Stability. 'But there's a world in which the financial system is in a crisis, crypto is in a 2x crisis of that, and them pulling $5 billion from markets is live or die.' A New 'China Shock' Is Destroying Jobs Around the World How TD Became America's Most Convenient Bank for Money Launderers The Richest Americans Kept the Economy Booming. What Happens When They Stop Spending? Tesla's Gamble on MAGA Customers Won't Work One Man's Crypto Windfall Is Funding a $1 Billion Space Station Dream ©2025 Bloomberg L.P. Sign in to access your portfolio
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25-03-2025
- Business
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Orange Juice Prices Are Down 45% This Year
(Bloomberg) -- Orange juice futures extended a slump in New York, with prices down 45% since the start of the year as demand fears stalk the one-time breakfast staple. They Built a Secret Apartment in a Mall. Now the Mall Is Dying. Chicago Transit Faces 'Doomsday Scenario,' Regional Agency Says Why Did the Government Declare War on My Adorable Tiny Truck? LA Faces $1 Billion Budget Hole, Warns of Thousands of Layoffs New York Subway Ditches MetroCard After 32 Years for Tap-And-Go If the losses hold through the end of the month, this quarter's drop would be the largest in records going back to 1967. It's a swift reversal in fortunes for a market that as recently as December was trading at record highs on the back of extreme weather that hurt global production. But the elevated prices only served to accelerate a shift in demand habits — consumption has more than halved since peaking in the late 1990s. During the throes of the pandemic, demand was briefly renewed as consumers sought out the immune-boosting benefits of the juice's vitamin content. Since then, shoppers have focused on cutting back on sugar, and OJ has once again fallen out of favor. Data gathered by Nielsen and the Florida Department of Citrus show a 7% decline in juice volumes sold this season through February. Prices are trading near the lowest levels in two years. The market has also been caught in the cross-hairs of trade tensions. Canada included orange juice on its list for retaliatory tariffs against US-made products. And there's speculation that boycotts of American products in Canada will also hurt demand. Florida is among the world's top producers. There are still ongoing issues in Brazil, the No. 1 supplier. After a period of dry weather and heat, the quality of the country's oranges has declined. The juice from poorer-quality fruit can become less sweet and more acidic, turning unpleasant for consumers, analysts at investment bank Itau BBA wrote in a Monday report. A New 'China Shock' Is Destroying Jobs Around the World How TD Became America's Most Convenient Bank for Money Launderers The Richest Americans Kept the Economy Booming. What Happens When They Stop Spending? Tesla's Gamble on MAGA Customers Won't Work One Man's Crypto Windfall Is Funding a $1 Billion Space Station Dream ©2025 Bloomberg L.P. Sign in to access your portfolio
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25-03-2025
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Billions Raised by ‘Perennially Private' Firms Keep IPOs on Ice
(Bloomberg) -- The billions of dollars hauled in by numerous high-profile companies in private investing rounds is sparking a debate on Wall Street: How long can firms stay private at eye-popping valuations before they have to IPO? They Built a Secret Apartment in a Mall. Now the Mall Is Dying. Chicago Transit Faces 'Doomsday Scenario,' Regional Agency Says LA Faces $1 Billion Budget Hole, Warns of Thousands of Layoffs Why Did the Government Declare War on My Adorable Tiny Truck? New York Subway Ditches MetroCard After 32 Years for Tap-And-Go Yes, marquee tech companies like CoreWeave Inc. and Klarna Group Plc are expected to test the public markets in the coming weeks. But from OpenAI to Anduril Industries Inc. to Databricks, major privately held businesses have been able to gather billions in capital from investors eager to get an early piece of the action as the chill remains in the market for initial public offerings. 'Some companies may forge ahead, and others who are ready to go may not want to jump in with a backdrop that's highly volatile and makes finding a market clearing price trickier than it would be in more predictable times,' said David DiPietro, head of private equity at T. Rowe Price. The recent trend of investors cutting large checks to private companies represents a 'structural shift' in the market, according to Rob Stowe, head of Americas equity capital markets at Barclays. These 'perennially private' companies have used maneuvers like secondary share sales to enable employees to sell down their stakes in bits and pieces while delivering returns to investors without the day-to-day volatility of public markets. This has sucked up the energy for new issues as management teams and their boards increasingly opt to delay more robust exits in the form of IPOs, at least for the time being. That said, there's a limit to the size of these deals, according to investors and bankers, as hundreds of companies will require more formal exits from the private market so shareholders and employees can get much-needed liquidity. There are only five to 10 companies that 'have the crowding and excitement that means investors will show up in the private markets regardless of valuations,' said Matthew Witheiler, head of Wellington Management's late-stage growth equity business. The remaining firms, by his count more than 100, were 'supposed to be public at this point,' and while they've delayed because of the still-icy exit environment, they will have to tap the public market sooner than later, he added. 'A lot of these companies have investors who took early positions who maybe are having partial access to liquidity for now,' Witheiler said. 'But at some point you need the real ability to sell all their shares.' Falling Flat Since the start of 2022, just $104 billion has been raised through US IPOs, less than the amount brought in by new issues during the final six months of 2021 alone, when they were closing out a two-year boom. With the S&P 500 Index up 21% from the end of 2021 — despite a 6.4% slide from its peak last month — large-cap companies have won the day. The performance of new entrants, however, has been mixed. While IPO volumes have ticked higher this year, albeit at a pace well below what bankers penciled in just months ago, investors are left to pick through deals that have mostly fallen flat. Seven of the 10 largest US IPOs this year have left IPO buyers sitting on losses. That's encouraging the companies considering a new listing to remain on the sidelines and raise money as they need to. But that can't last forever, according to investors and bankers, pointing to an eventual need for real stock market returns. 'There is so much paper worth in these perennial private companies that cannot easily or at all be unlocked in the private market,' Witheiler said. 'At some point the majority of them will have to be public.' That's where Nvidia Corp.-backed cloud provider CoreWeave, Klarna and ticket-selling platform StubHub Holdings Inc. come into play. CoreWeave may raise as much as $2.7 billion at the top of a marketed range, while Klarna is seeking to raise at least $1 billion at a greater than $15 billion valuation, Bloomberg News has reported. For CoreWeave, its cash-intensive operations mean a public exit for investors is all-but-necessary. Klarna, meanwhile, is set to go public after two decades as a private company, years longer than most early-stage investors would've anticipated back in 2005. 'The availability of private capital is deep, but it's not infinite,' said Barclays' Stowe. 'In many cases this just means a longer gestation period before they end up as public companies.' 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