Aurelia Butler

(Reuters) -Shares in Better Home & Finance Holding plummeted more than 93% on Thursday as investors snubbed the online mortgage lender, which went public via a blank-check company merger just as mortgage rates have hit two-decade highs. Backed by SoftBank (TYO:9984), Better completed its combination with special purpose acquisition company (SPAC) Aurora Acquisition Corp, capping a rocky deal that was first announced in 2021 but delayed amid regulatory scrutiny and layoffs at Better. The company hit the headlines in December 2021 after it laid off 900 employees via Zoom, and has since seen its profits dented as high mortgage rates have dampened demand for home loans. Aurora went public in March 2021. Shares in Better Home & Finance Holding Co, the newly merged entity, finished the session down 93.4% at $1.15.SPACs are shell companies that raise funds through a public listing with the goal of acquiring a private company and taking it public. Investors in the SPAC typically have the option to redeem their shares before the merger.In Better’s case, 95% of Aurora shareholders redeemed their shares, leaving the SPAC’s trust account with roughly $24 million at the end of June from about $283 million at the end of last year, filings show. Typically, a small amount of publicly available shares makes a stock prone to volatility.The company did not immediately respond to a request for comment on the share price move.The completion of Better’s merger with Aurora will provide the mortgage lender with an infusion of $550 million from SoftBank, which it will use to expand its mortgage product offerings, CEO Vishal Garg told Reuters in an interview earlier this week.Better enjoyed huge growth during the onset of the COVID-19 pandemic when mortgage rates cratered, notching more than $850 million in revenue in 2020, filings show. But it has struggled as rates have risen, reporting a net first quarter loss of $89.9 million in July.U.S. mortgage rates continue to surge, with the popular 30-year fixed rate last week hitting the highest level since December 2000, helping drive mortgage applications to a 28-year low, the Mortgage Bankers Association said on Wednesday.That came after yields on U.S. government bonds that influence home-loan rates surged to the highest since the 2007-2009 financial crisis.BETTER OUTLOOKAmid ultra-low interest rates, the SPAC market exploded in 2021, but quickly drew scrutiny from the U.S. Securities and Exchange Commission, concerned some investors were getting a raw deal. Since then, U.S. Federal Reserve interest rate hikes aimed at taming inflation and an SEC crackdown have put a damper on the SPAC market, and redemption rates have risen.The SEC last year requested information on Garg’s business transactions and allegations made in a lawsuit that he and Better provided misleading statements. The agency informed Better and Aurora this month that it had concluded its probe and would not be recommending an enforcement action, according to a regulatory filing, clearing the path for the deal to close.Better is expecting a boom in demand for refinancings next year, when the Fed is expected to start cutting interest rates, which in turn would cause Treasury bond yields and mortgage rates to fall, executives said. “We think that this is a really great time for us to be out there, capitalized with an additional $550 million from SoftBank that will enable the company to continue to innovate and serve its customers,” Garg told Reuters. More

(Reuters) – A look at the day ahead in Asian markets from Jamie McGeever, financial markets columnist.Barring a collapse of 1.5% or more on Friday, Asian stocks are about to chalk up their first weekly rise in four, but will this mark a turning point or merely a temporary lifting of the gloom?The answers to that will begin to unfold next week as investors give their verdict on what comes out of the Federal Reserve’s Jackson Hole Symposium, particularly Chair Jerome Powell’s speech on Friday.The latest Tokyo inflation figures for July top Asia’s economic data calendar on Friday, offering an insight into Japan’s national inflation picture and potential implications for Bank of Japan policy in the coming months.The market mood in Asia on Friday will be one of caution – Wall Street sold off sharply on Thursday, the dollar had its biggest rise in a month to hit a 10-week high, and investors are reluctant to be too gung-ho ahead of Powell’s remarks.The MSCI Asia Pacific ex-Japan index rose 1.5% on Thursday, its best day in a month. But despite this flurry, August has been a bruising month and the index is on track for its steepest monthly fall since September last year.Broadly speaking, Asia-Pacific stocks seem reasonably priced right now, trading roughly in the middle of their long-term ranges and standard deviation levels. Indian stocks are by far the most expensive, and China’s are the cheapest.China’s economic, market and policy challenges this year have been well documented, so stocks are cheap for good reason. There’s little to suggest these issues will be fixed any time soon, so decent market bounces like Thursday’s will probably continue to be the exception rather than the rule.Foreign investors were buyers of Chinese stocks on Thursday for the first day in 13, according to Stock Connect data, a long stretch of outflows which authorities in Beijing will be hoping is not repeated.Tech stocks could come under extra pressure following the Nasdaq’s 1.9% slump on Thursday, a slightly perplexing fall given long-dated bond yields didn’t rise that much and Nvidia (NASDAQ:NVDA) managed to close in positive territory. Just.The macro focus in Asia on Friday shifts to Tokyo inflation. The annual rate for July is seen easing below 3% for the first time since September last year.The dilemma for Japanese policymakers runs deep. National core inflation has exceeded the central bank’s 2% target for 16 straight months, as firms continue to pass on higher import costs driven in part by the weak yen.Worried about hurting a fragile economy, the BOJ has stressed its resolve to keep interest rates ultra-low even as it decided last month to raise a cap on long-term bond yields.Here are key developments that could provide more direction to markets on Friday:- U.S. Fed’s Jackson Hole Symposium- Japan Tokyo CPI inflation (August)- Malaysia CPI inflation (July) (By Jamie McGeever; Editing by Josie Kao) More

NEW YORK (Reuters) – Recent shifts in the U.S. Treasury yield curve may indicate that market optimism around the economy could wane, with some investors looking at Federal Reserve Chair Jerome Powell’s speech at an economic symposium on Friday as a potential trigger for a correction or rapid unwind in positions.The yield curve comparing two-year with 10-year yields has been inverted on a continued basis for over a year, a reliable sign of a looming recession, but it has steepened in recent weeks because 10-year yields have been rising while shorter-dated ones have remained flat.The so-called “bear steepening” suggests that the market expects high interest rates to no longer hurt the economy, with investors extending their horizon for how long the Fed will maintain its restrictive policy stance.The move has coincided with rising market expectations for a so-called soft landing for the economy – a scenario in which the Fed curbs inflation without causing a recession.In line with that trend, hedge funds’ bearish bets on long-term U.S. Treasuries have built up over several weeks, with net short positions in 10-year U.S. Treasuries futures at their highest levels since the beginning of July, according to Commodity Futures Trading Commission data from last week. That has led to the risk of an unwind, some market participants say.”The problem with crowded trades is that it is a bit like 100 elephants trying to squeeze through one door,” said Michael Harris, president of New York-based hedge fund Quest Partners, who sees the risk of the short bond position getting unwound. “It’s not pretty.”Some analysts warn that rising yields could push up borrowing costs, causing the economic slowdown investors are now betting against.”Repricing for higher rates amid an expectation of ‘higher for longer’ Fed policy is creating a tightening in financial conditions that could strain the economy and markets,” said Gennadiy Goldberg, head of US Rates Strategy at TD Securities USA.The key question is how much further bear steepening the market needs to see for “investors to become nervous,” he added.The 2/10 curve steepened to minus 78 basis points from minus 108 bps at the beginning of July, although it has flattened in the last few days.Previous similar bear-steepening episodes have not lasted long, said Alfonso Peccatiello, chief executive of global macro investment strategy firm The Macro Compass who studied similar dynamics in 2018, 2007-2008 and 2000.In 2018, for instance, the curve shifted to a bear-steepening dynamic as the economy appeared to hold up well despite the Fed’s tightening. That lasted for about seven weeks, until early October 2018, when equities peaked before falling sharply over the following months.Investors tend to become frustrated when largely anticipated recessions fail to materialize as the Fed approaches the end of its hiking campaigns, “so bond markets push the tightening aggressively down the curve right when the economy is slowing – a dangerous cocktail,” Peccatiello said.Several Wall Street banks have recently revised or pushed out their forecasts for a U.S. recession in light of surprisingly strong economic data. Risks remain, however, warned Jonathan Cohn, head of US Rates Desk Strategy at Nomura Securities International, including the pain for companies refinancing debt at higher rates and China’s weakening growth.”It’s quite possible that capitulation on recession calls has happened too soon,” he said.Investors largely expect the Fed to have reached a peak in interest rates and to maintain them in the current 5.25%-5.5% range until it starts easing in the second quarter next year.BEARISH BETSSome investors are worried that Powell’s speech at the Fed’s annual economic symposium in Jackson Hole, Wyoming, could trigger a short squeeze.”If Powell doesn’t come across as conveying the message that they will kind of stay at the top of the mountain for as long as they need, then the market goes in the opposite direction,” Harris said. “That’s where you have the risk that (that) short bond position gets unwound.”Harris said it could create a reversal like that seen in March, where the banking crisis caused yields to plunge and hurt hedge funds’ short Treasury positions.A softer message from Powell is possible, said Eoin Walsh, a partner and portfolio manager at TwentyFour Asset Management.”Powell may feel he can hit pause on the message for further hikes and higher for longer, potentially allowing him the rare opportunity to be more market friendly this week,” he said.Conversely, a reaffirmation that the battle against inflation is far from over and that more tightening is needed to bring it down to the Fed’s 2% goal could push short-term yields higher and ignite a rally in long-term bonds, as investors would see further hikes as accelerating an economic downturn, said Jim Cahn, chief investment officer at financial investment and advisory firm Wealth Enhancement Group.”I think that (would) signal to the market that the Fed is willing to overshoot to the upside on rates,” Cahn said.Michael Edwards, deputy chief investment officer at multi-strategy hedge fund Weiss, said a very hawkish read from Powell would cause bear flattening, as the front end of the curve would come up, although he sees that as unlikely.”The back end would come down relative to the front end because there’d be a higher probability of a recession in 2024,” Edwards said. “It would be a pain trade for people.” More

NEW YORK (Reuters) – Two Federal Reserve officials on Thursday tentatively welcomed a jump in bond market yields as something that could complement the U.S. central bank’s work to slow the economy and get inflation back to the 2% target, while also noting they see a good chance that no more interest rate increases will be needed.The policymakers – Philadelphia Fed President Patrick Harker and Boston Fed President Susan Collins – spoke in separate interviews that took place as central bankers and other economic leaders gathered for an annual symposium in Jackson Hole, Wyoming. As they laid out their outlooks for monetary policy and the economy, Harker and Collins also took stock of what a jump in bond yields means for the central bank’s mission to slow economic activity to lower inflation.The rise in long-term borrowing costs “helps cool the economy some,” Harker said in an interview on CNBC. He said the jump was not a major concern but was something he was monitoring.Meanwhile, Collins said on Yahoo Finance’s video channel that the rise in yields “absolutely fits in” with the broader story around the economy and monetary policy. “I think it’s helpful that the higher longer rates are consistent with an understanding that this is going to take some time” on the part of the Fed to get inflation back down to the 2% target.Harker and Collins spoke before the formal start of the Kansas City Fed’s Jackson Hole conference, which will feature a hotly anticipated speech on the economic outlook by Fed Chair Jerome Powell at 10:05 EDT (1405 GMT) on Friday.The Fed, which has pushed short-term rates aggressively higher since March 2022 to curb the worst inflation surge in decades, lifted its benchmark overnight interest rate to the 5.25%-5.50% range at a policy meeting last month. Fed officials continue to believe that inflation is too high, while noting its moderation had opened the door to an end to the rate-hike cycle. Financial markets currently doubt the U.S. central bank will raise rates again at its Sept. 19-20 meeting.The question over the need for more rate increases has been driven in large part by the resiliency of financial markets and the broader economy in the face of aggressively more restrictive monetary policy. In the face of the rate hikes, which have lifted the Fed’s policy rate by more than five percentage points, the unemployment rate has remained historically low and economic growth has been robust, even as sectors like housing have been hard hit by higher borrowing costs.The state of the economy has suggested the Fed may have to do more with monetary policy, while the jump in long-term borrowing costs, which restrains activity, takes some pressure off the central bank.Since resting at around 3.84% at the start of 2023, the yield on the 10-year Treasury note, a key benchmark, has ground higher, and while the moves have been choppy, it has risen notably since the middle of July and stood at around 4.23% in early afternoon trading on Thursday.”If rates remain at current levels, this will deliver substantial additional restraint relative to conditions that prevailed at the time of the last Fed meeting in July, and this extra restraint will be persistent, reaching a peak at the end of 2024,” analysts at Evercore ISI said in a research note on Wednesday. This tightening “seems adequate – indeed plausibly more than adequate – to offset the recent upside surprise on growth without the need for a Fed rate response,” they said.HOLD STEADY?In their interviews on Thursday, Harker and Collins leaned against the need for more increases.”Right now I think that we’ve probably done enough” and it’s probably a good idea to hold steady for the rest of this year and see how that affects the economy, Harker said. “We are in a restrictive stance, do we have to keep going even more and more restrictive?” he added.For Harker, it’s very much a question of the economy working through the ongoing impact of the Fed’s prior tightening. “What I’ve heard loud and clear through my summer travels is, ‘please, you’ve gone up very rapidly. We need to absorb that,'” he said of his local contacts. Harker also noted that bank credit conditions have tightened, creating additional restraint on the overall economy.Collins kept the door open for more action but did not call for it.”We may be near, we could even be at a place where we would hold” and not raise rates further, Collins said. “But certainly additional increments are possible, and we need to look holistically and be really patient right now and not try to get ahead of what the data will tell us as it unfolds,” she said.Harker sees inflation cooling to 4% this year, 3% next year and back to the central bank’s 2% goal in 2025, and expects the unemployment rate, which was at 3.5% in July, to rise to 4% or maybe higher. He believes economic growth should moderate. More