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Moody's Assigns Caa2 Debt Ratings to the Province of Buenos Aires's 9.95% due 2021 Senior unsecured Notes in Usd
Moody's Investors Service has assigned a Caa2 (Global Scale Foreign Currency) ratings to the Senior Unsecured Notes to be issued by the Province of Buenos Aires for up to USD1,033 million approximately. The ratings are in line with the province's long term foreign currency issuer ratings, which carry a negative outlook. RATINGS RATIONALE On June 2, 2015 the Province of Buenos Aires priced some USD500 million of these new Notes at a 9.95% coupon rate.The bond issuance has been authorized by the Provincial Law Nº14652, by Governor's Decree Nº59 of 2015 and by Resolution Nº106 of the provincial Ministry of Economy. The Province of Buenos Aires will use the proceeds to prepay outstanding provincial debt as well as to fund infrastructure and/or social projects during 2015. At the same time, the Province launched a bond exchange offer for up to USD500 million under a USD1,050 million 11.75% coupon rate Notes maturing in October 2015. After the settlement of the first tranche of these new Notes for USD500 million and conclusion of the mentioned exchange, both tranches will be consolidated and will form a single bond series of up to USD1,033 million. The rated bonds, which constitute direct, general, unconditional and unsubordinated obligations of the province, will be denominated and payable in US dollars with a maturity of six years. The bonds will amortize in two annual installments equivalent to 50% of the outstanding principal in 2020 and in 2021 and pay 9.95% annual interest rate on a semi-annual basis. The bonds will be subject to the State of New York Law. The assigned ratings are based on preliminary documentation received by Moody's as of the rating assignment date. Moody's does not expect changes to the documentation reviewed over this period nor anticipates changes in the main conditions that the bonds will carry. Should issuance conditions and/or final documentation of these bonds deviate from the original ones submitted and reviewed by the rating agency, Moody's will assess the impact that these differences may have on the ratings and act accordingly. WHAT COULD CHANGE THE RATING UP/DOWN Given the negative outlook on the issuer ratings, Moody's does not expect upward pressures in the Province of Buenos Aires's ratings in the near to medium term. However, a change in Argentina's sovereign outlook back to stable could lead to a change in the outlook back to stable of the Province of Buenos Aires. Conversely, a sharp deterioration of the Province of Buenos Aires's financial results, coupled with materially higher debt levels could add downward pressure to the assigned ratings. The province of Buenos Aires could also be downgraded if the negative outlook on the sovereign rating materializes into a rating downgrade. The principal methodology used in this rating was Regional and Local Governments published in January 2013. Please see the Credit Policy page on www.moodys.com.ar for a copy of this methodology.
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Treasuries Pull Back Sharply In Response To Upbeat Jobs Data
Treasuries moved notably lower during trading on Friday, more than offsetting the rebound seen in the previous session. After falling sharply in early trading, bond prices regained some ground but remained firmly in negative territory. Subsequently, the yield on the benchmark ten-year note, which moves opposite of its price, jumped by 9.5 basis points to 2.402 percent. The increase extended a recent upward move by the ten-year yield, which reached its highest closing level in eight months. Treasuries came under pressure in response to the Labor Department's upbeat monthly jobs report, which added to concerns about the outlook for interest rates. The report said non-farm payroll employment jumped by 280,000 jobs in May compared to economist estimates for an increase of about 225,000 jobs. While the increase in employment in April was downwardly revised to 221,000 jobs from 223,000 jobs, the employment growth in March was upwardly revised to 119,000 jobs from 85,000 jobs. With these revisions, the Labor Department said employment gains in March and April combined were 32,000 more than previously reported. The report also said the unemployment rate inched up to 5.5 percent in May from a nearly seven-year low of 5.4 percent in April, but the uptick primarily reflected an increase in the size of the labor force. Rob Carnell, chief international economist at ING, said, "Just when all the Fed speakers were sounding more and more cautious, in comes a strong labor market report and puts thoughts of tighter policy back on the agenda." Carnell said the Federal Reserve is still unlikely to raise interest rates at its next meeting later this month, although he said a third quarter rate hike looks like a decent bet. The economic calendar for next week starts off relatively quiet, although key reports on retail sales and producer prices are likely to be in focus later in the week. Bond traders are also likely to keep an eye on the results of the Treasury Department's auctions of three-year and ten-year notes and thirty-year bonds. The Treasury is due to auction $24 billion worth of three-year notes next Tuesday, $21 billion worth of ten-year notes next Thursday and $13 billion worth of thirty-year bonds next Thursday.
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US dollar strengthens on stronger than expected jobs data
The US dollar accelerated on Monday as firm US jobs data amplified bets the Federal Reserve will raise interest rates in September. According to the Labor Department, nonfarm payrolls leaped 280,000 in April, while unemployment rate rose to 5.5% in May. The greenback closed at $1.1108 per euro from last week's $1.1380. Against the Japanese yen, the dollar stood at ¥125.66. Payrolls data mark the case for a sturdy dollar. The markets could speculate “Fed might raise rates even twice this year,” said Masatoshi Omata, Senior Manager of Market Trading at Resona Bank. On Friday, New York Fed President William Dudley said he still anticipates the US central bank to increase rates later this year although he is concerned regarding the progress in the labor marke
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Japan M2 Money Stock Jumps 4.0% In May
The M2 money stock in Japan climbed 4.0 percent on year in May, the Bank of Japan said on Tuesday - coming in at 906.7 trillion yen. That exceeded forecasts for an increase of 3.6 percent, which would have been unchanged from the April reading. The M3 money stock was up 3.3 percent on year to 1,221.3 trillion yen - also beating expectations for 3.0 percent, which also would have been unchanged. The L money stock advanced 4.3 percent on year to 1,610.9 trillion yen after gaining 4.0 percent in the previous month.
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New Zealand May Retail Credit Card Spending Climbs 1.2%
The total number of credit card transaction in the retail industries gained a seasonally adjusted 1.2 percent on month in May, Statistics New Zealand said on Wednesday - worth NZ$4.6 billion. That beat expectations for an increase of 0.9 percent following the 0.7 percent decline in April. The May reading was up NZ$143 million or 3.2 percent compared to the previous year. "Spending rose in five of the six retail industries," business indicators manager Neil Kelly said. "Fuel spending had the largest rise, continuing a recent run of increases, but is still below the levels seen before the price falls of late last year." Overall card transactions climbed 1.4 percent after slipping a downwardly revised 1.2 percent in the previous month (originally -1.1 percent). Transactions in the core retail industries (which exclude the vehicle-related industries) added 0.4 percent following a 0.9 percent fall in April. Trends for the total, retail, and core retail series have generally been rising since these series began in October 2002, the bureau said.
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UK House Price Balance Rises To +34 In May - RICS
House prices in the United Kingdom are expected to move higher over the next three months, the latest survey from the Royal Institution of Chartered Surveyors showed on Thursday, with an index score of +34. That touches a nine-month high, and it's up from +32 in April, although it was shy of expectations for +36. The increase in prices was the natural result of the Conservative Party's electoral victory last month, RICS said. "It is hardly surprising that prices across much of the country are continuing to be squeezed higher with property set to become ever more unaffordable," RICS chief economist Simon Rubinsohn said.
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Moody's: China Has Made Substantial Progress on Reform and Rebalancing
Moody's Investors Service says that China has made substantial progress on reforming and rebalancing its economy, since the government committed to deep reforms during the third plenary session of the 18th Central Committee of the Communist Party of China in November 2013. "Substantial progress has been made on reform and rebalancing, and the general direction of government policy is supported by important initiatives such as the anti-corruption campaign and the One Belt, One Road strategy," says Michael Taylor, a Moody's Managing Director and Chief Credit Officer for Asia Pacific. "However, there are two main tail risks to the relatively benign scenario that forms our core view, although we do not think either of them is very likely. The first would be an asset price correction in property or equities, and the second would be a rapid and ill-prepared liberalization of the capital account," adds Taylor. Taylor explains that China's reforms and rebalancing of its economy involve balancing the following four factors: 1) The reorientation of the economy away from state-led, capital intensive investment towards private consumption; 2) Lowering the economy's dependence on credit-fuelled growth; 3) The implementation of policies that will allow markets to play a decisive role, to scale back on the government's role in the economy, and to enhance property rights; and 4) Ensuring that short-term growth does not fall substantially below the government's target of around 7%.
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Moody's Investors say Regulatory Costs and a Lack of Liquidity Inhibit the Growth of Europe's structured Finance Market
In a round table discussion, Moody's Investors Service found that the European securitisation market's regulatory capital costs is a barrier to demand, in addition to a lack of liquidity. In a new report published today, the rating agency says investors do not believe the capital treatment of European structured finance instruments reflects their associated risks. "Investors desired change in the capital framework for banks that hold structured finance instruments, which could create more liquidity in the market. The market's growth depends on the arrival of more bank investors, in their view," commented Jean Dornhofer a Moody's Senior Vice President and author of the report. "While investors consider the idea of standardisation - as part of criteria for qualifying securitisation - to be a step forward for the market, they say it should be a second-order objective as it doesn't create demand," she observed. The new report: "Investors Say Regulatory Costs and a Lack of Liquidity Are Barriers to the Growth of European Structured Finance Market," is available on /go?link=https://www.moodys.com. Moody's found these investors consider that the regulatory capital treatment of structured finance instruments does not reflect their associated risks. If the current levels of regulatory capital associated with structured finance instruments remain the same, the European structured finance market will not return, according to some investors. Investors say the concept of a qualifying securitisation provides an opportunity to revisit the rules on capital and liquidity treatment of structured finance instruments and align them with instruments of equivalent risk. The discussion revealed that the expansion of the European structured finance market depends on the arrival of more bank investors. A change in the capital framework might help create more liquidity in the structured finance market. Investors consider that banks do not want to invest in instruments that cannot be easily liquidated. Improving the standardisation of capital treatment of structured finance instruments versus other instruments would help increase the investor base, increasing liquidity in the secondary market. The low depth of the secondary market affects the appetite of "real money" investors. Investors said that issuers need to find a broader, active investor base for mezzanine and equity tranches. With spreads tightening, hedge funds may exhibit less demand for subordinated tranches. Moody's report summarises investors' general feedback, rather than the specific view of any individual participant. As the number of participants is not statistically significant, the findings are more anecdotal than scientific. The views expressed are not necessarily Moody's view.
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Canadian dollar slightly changed on weak data, before Fed meeting
The Canadian dollar was moderately changed on Monday as factory sales dropped more than projected and the market awaits Federal Reserve's policy meeting this week. Official figures showed factory sales fell 2.1% in April because of lower sales of food and aerospace products, its third decline in four months. Traders are also expecting Fed's policy statement on Wednesday. The loonie ended at 81.19 US cents from Friday's 81.23 US cents. Markets are disregarding Greece's debt crisis as of the moment “as you really do't know which way things are going," said Benjamin Reitzes, Senior Economist and Foreign Exchange Strategist at BMO Capital Markets.
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Xbox, PlayStation present new games ahead of E3 conference
Videogame console giants Microsoft and Sony vied for attention ahead of the annual E3 conference, giving fans sneak peeks of the latest Xbox and PlayStation games. Microsoft also told gamers that new Xbox One consoles would have "backward compatibility", meaning they will also be able to play games made for the older Xbox 360. Sony told fans a deal with Activision would allow PS4 owners to be the first to play the upcoming "Call of Duty: Black Ops III" this summer.
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