Aurelia Butler

“Today, we filed for arbitration against the Government of Malaysia for violating its obligations to appropriately credit assets against the guarantee provided by Goldman Sachs in our settlement agreement and to recover other assets,” a spokesperson for the bank told Reuters. The arbitration has been filed with the London Court of International Arbitration, a source told Reuters. The lawsuit was earlier reported by Bloomberg News. The office of Malaysian Prime Minister Anwar Ibrahim and the Attorney General’s Chambers did not immediately respond to a request for comment. The lawsuit comes less than two months after Anwar threatened to take Goldman to court. The two sides are in disagreement over a 2020 settlement agreement, in which Goldman Sachs had agreed to pay $3.9 billion to settle Malaysia’s criminal probe over its role in the scandal. Goldman is also required to make a one-time interim payment of $250 million if the Malaysian government has not received at least $500 million in assets and proceeds by August 2022, the bank said in a regulatory filing earlier this year.The two parties disagreed over whether Malaysia recovered at least $500 million as of August 2022 and whether any interim payment was due, Goldman has said.Malaysian and U.S. authorities estimated $4.5 billion was stolen from sovereign wealth fund 1MDB in an elaborate scheme that spanned the globe and implicated high-level officials in the fund, former Malaysian Prime Minister Najib Razak, Goldman staff and others.Prosecutors have said Goldman helped 1MDB raise $6.5 billion through bond sales, and earned $600 million in fees.The United States has been returning funds it has recovered from seized assets that were allegedly bought with stolen 1MDB money. More

Core orders, a highly volatile data series regarded as a barometer of capital expenditure in the coming six to nine months, slipped 0.5% in August from the previous month, Cabinet Office data showed on Thursday.That compared with the median forecast for 0.4% growth by economists in a Reuters poll.On a year-on-year basis, core orders, which exclude volatile numbers from shipping and electric utilities, declined 7.7% in August, data found. That compared with a forecast of a 7.3 % drop.The government retained its view that machinery orders are “stalling”.By sector, orders from manufacturers climbed 2.2% in August from the previous month, rebounding from a 5.3 fall in July, due to rises in orders from industries such as chemical products and autos. Those from the service-sector declined 3.8% after a 1.3% gain in the prior month, due to falls in orders from the finance and insurance sector, according to data by the Cabinet Office.Capital spending is one of the key drivers for the world’s third-largest economy and a major indicator of business confidence.Business morale at large Japanese manufacturers was subdued in October, although the services-sector mood edged up, the Reuters Tankan poll showed on Wednesday, as upbeat domestic demand helped partly offset the hit to the economy from global headwinds.Prime Minister Fumio Kishida’s government will compile a new economic stimulus package this month to help households deal with the pain of rising prices and boost wages. The package will include measures to protect people from cost-push inflation, support sustainable wage and income growth as well as promote domestic investment to spur economic growth.Japan’s economy grew less than initially estimated in April-June with both capital spending and private consumption falling, underscoring the fragile state of its recovery after the pandemic. More

MEXICO CITY (Reuters) – Mexico on Wednesday issued a decree to grant tax breaks for companies that relocate operations to Mexico, targeting major export industries such as carmaking and semiconductors, a move that won cautious praise from economists.The incentives are designed to attract companies that want to shift their offshore operations closer to their customers, called nearshoring, in the wake of supply chain disruptions in Asia during the COVID pandemic.Deputy finance minister Gabriel Yorio said in a post on X the incentives would apply to 10 sectors of the economy, including the manufacture of batteries, engines, fertilizers, pharmaceuticals, medical instruments and agribusiness.President Andres Manuel Lopez Obrador has said Mexico should benefit from moves by industry to reduce dependence on China, but critics argue that his administration has been slow to set out clear-cut incentives to encourage investment.Though welcomed, the measures failed to dispel concerns the government is obstructing investment by failing to provide essential infrastructure for companies, especially because of its nationalist energy policies favoring fossil fuels.”These incentives are a good step in efforts to attract companies to the country”, said Gabriela Siller, an economist at Banco Base who is often critical of government policy.But Mexican authorities need to spend more to guarantee power and water supply for industry and provide companies with a stable policy environment to encourage investment, Siller said.Mexico could lure annual foreign direct investment flows of $55 billion to $60 billion if it takes better advantage of nearshoring, up from $36 billion in 2022, she said.The new incentives include accelerated investment deductions of 89%-56% in 2023 and 2024, and additional deductions of 25% during three years for worker training, Yorio said.The top 89% deduction will be available for machinery and equipment intended directly for research into new products or technology development in the country, the decree said.The automotive, farm and tech sectors are among those set to receive deductions of more than 80%.Lopez Obrador has prioritized support for Mexico’s fossil-fuel dependent and cash-strapped state power companies, feeding concerns about shortages of renewable energy that many major investors need to meet more ambitious climate targets.That has dampened expectations Mexico could benefit from increased investment in semiconductors in North America.Mexico’s moves to strengthen public sector control of the energy market have sparked trade disputes with Canada and the United States.Ramse Gutierrez, vice president of investments at asset manager Franklin Templeton Mexico, said the public and private sectors needed to work together to lift the clean energy supply many companies need to win financial backing for projects.U.S. carmaker Tesla (NASDAQ:TSLA) has urged the government of Nuevo Leon state to build vital infrastructure for its planned auto assembly plant in northern Mexico, officials said this month.Carlos Vejar, a former Mexican trade negotiator, welcomed the government’s announcement but urged it to improve infrastructure, security and the facilitation of permits.Mexico still faces competition to win investment from both North and Central America, plus Colombia, he said. “I don’t think this measure is a game-changer to persuade those who have doubts,” said Vejar. More

TOKYO (Reuters) – Most Japanese companies expect a slowdown in China’s economy to persist into 2025, with nearly two thirds of firms that operate there looking to shift some production elsewhere in search of sales in other markets, according to a Reuters monthly poll. That cautious outlook comes even though recent data suggests that an economy weighed down by infrastructure project debt and a downturn in property values has bottomed out. China’s factory activity in September expanded for the first time in six months, with sales growth accelerating in August.Of 502 major Japanese companies surveyed by Reuters, 52% said they expected the slowdown in China to continue into 2025, with 17% predicting weaker economic growth to persist until the end of 2024. Only 5% said they expected a rebound by the end of the first quarter next year.”Cargo shipments are stagnant, and it’s difficult for cargo handlers to take measures to tackle that,” a representative from a transport company said, on condition the company was not identified. More than two thirds of household wealth in China is tied up in the property market, and with youth unemployment rising, consumers and companies have been reluctant to spend.Analysts polled separately by Reuters last month, predicted the World’s No. 2 economy will grow by 5% this year and by 4.5% next year.China is Japan’s biggest trading partner. The value of that cross-border economic activity jumped 14% to 43.8 trillion yen ($294 billion) last year, according to the Japanese government. Japanese companies also operate from more than 31,000 locations in the country.Some 45% of the firms that responded to the survey said the slowdown in China had affected their businesses. In addition to those companies shifting production out of China, 12% said they were curbing capital investment there.In Japan, 86% of the companies said they want Prime Minister Fumio Kishida to boost the economy with a stimulus package worth more than 10 trillion yen, with nearly a fifth calling for at least 30 trillion yen of spending, including on measures to tackle price rises and to help companies raise wages.”Priority should be given to creating an environment where wages can be increased over the medium to long term on the assumption that prices will continue to rise,” said a manager at a wholesaler. The Reuters Corporate Survey, conducted for Reuters by Nikkei Research between Sept. 27 and Oct. 6, canvassed 502 big non-financial Japanese firms.They were polled on condition of anonymity, allowing respondents to speak more freely.($1 = 148.8700 yen) More

ORLANDO, Florida (Reuters) -The recent surge in long-dated U.S. bond yields to their highest since 2007 has a few plausible triggers, but the Fed’s quantitative tightening (QT) policy of reducing its balance sheet does not appear to be one of them. If anything, shifts in the composition of the central bank’s holdings of Treasury bonds since ‘QT 2’ was launched in June last year may actually be keeping longer-term borrowing costs from spiking even higher.While the Fed has reduced its holdings of Treasury bonds and bills by around $840 billion in that time, its stash of bonds with a maturity of 10 years or more has actually grown, both in nominal terms and as a share of total holdings.Indeed, it is now a record high by both measures – $1.5 trillion in nominal terms, up around $75 billion since QT 2 started; and 30.5% of all the Fed’s holdings of bills and bonds, up almost 6 percentage points. Fed holdings of Treasury-issued debt of all other maturity segments – bills, one-to-five years, and five-to-10 years – have declined to varying degrees, nominally and as a share of the total, particularly the one-to-five year part of the curve.If the Fed’s holdings of long-dated securities were shrinking like other parts of the curve, or even at all, more of these bonds would be available to the wider market. All things equal, these yields would probably be higher. “It’s at least reasonable and fair to raise the argument that the backup in long-dated yields doesn’t owe to QT dynamics,” said Benson Durham, head of global policy and asset allocation at Piper Sandler. Curiously, the Fed’s holdings of longer-dated bonds as a share of the total also rose during ‘QT 1’ between October 2017 and July 2019, although the nominal value held pretty steady around $620 billion.Durham is reluctant to put too much weight on QT 2’s impact on the broad rise in yields, given that the program has been so well-flagged and the monthly caps have been in place for over a year. Well before the current volatility.But Joseph Wang, chief investment officer at Monetary Macro and a former senior trader on the Fed’s open markets desk, believes QT is a factor driving yields higher as it increases the supply of Treasuries the private sector must hold. Wang recognizes that if the Fed held fewer longer-dated securities these yields might be even higher, but also points out that the Fed’s holdings are largely determined by what Treasury issues. POOR LIQUIDITY?All told, the Fed’s ‘QT 2’ is almost twice the pace of QT 1. It involves reducing the central bank’s balance sheet by as much as $95 billion a month – up to $60 billion of Treasury debt and $35 billion of mortgage-backed securities.The Fed has not sold a single bond back to the market and is still reinvesting the proceeds of some maturing paper into new debt of similar maturities. But it allows some securities to mature without reinvesting, which reduces its holdings. Since the Fed started QT 2, its total holdings of Treasury bills and bonds have fallen to $4.93 trillion from $5.77 trillion. More than half of that $840 billion decline, almost $500 billion, has been in one-five year securities.This may be more mechanical than anything else, driven by Treasury issuance. Also, a two-year bond falls out of the one-five year maturity bucket quicker than 20-year and 30-year bonds fall out of the 10-year and longer maturity segment. The average profile of Fed-held Treasury debt is longer than total outstanding Treasury debt, and getting longer. If current trends continue, the Fed’s largest holding of Treasuries will be 10-30 year maturities by the middle of next year. Heavy selling at the long end of the curve in recent months has propelled yields higher and steepened the yield curve, developments which could spell bad news for the economy. IMF chief economist Pierre-Olivier Gourinchas said on Tuesday that the spike in long-term borrowing costs was “a little bit odd,” while Minneapolis Fed President Neel Kashkari said it is a bit “perplexing.”Some point to growing fiscal concerns, with the government budget deficit potentially approaching the $2 trillion mark. Some point to the ‘term premium’ – the somewhat nebulous level of compensation investors demand for taking on the extra risk of holding longer-dated securities rather than regularly rolling over shorter-term bonds. Whatever is driving yields higher, trades are clearing and there is no obvious sign of stress or liquidity air pockets. So far, at least, the market is functioning smoothly. “It has been a relatively orderly move, but it is getting more volatile. And price volatility is synonymous with poor liquidity,” Wang warns.(The opinions expressed here are those of the author, a columnist for Reuters.) (By Jamie McGeever; Editing by Andrea Ricci) More