Aurelia Butler

WASHINGTON (Reuters) -The International Monetary Fund’s strategy director on Tuesday said the goal of a new sovereign debt panel of creditors and borrowers due to meet on Friday is to try to reach understandings on common standards, principles and definitions for how to restructure distressed country debts.Ceyla Pazarbasioglu, director of the IMF’s Strategy, Policy and Review Department, told reporters that the Global Sovereign Debt Roundtable does not intend to discuss country-specific debt restructuring issues, but to address some of the broader impediments that have been delaying such relief.The panel, organized by the IMF, the World Bank and India, this year’s leader of the Group of 20 major economies, is due to hold its first virtual meeting on Friday, Feb 17. This will be followed by an in-person meeting on Feb. 25 on the sidelines of a G20 finance leaders meeting in Bengaluru, India.Participants include officials from creditor countries China, India, Saudi Arabia, the United States and other wealthy Group of Seven democracies.Pazarbasioglu said the roundtable also will include the Paris Club of official creditors, the Institute of International Finance, the International Capital Markets Association and other private sector creditors that she declined to identify.She said six borrowing countries that have recently sought or been through debt restructurings would participate, but declined to name them.On Monday, three sources had told Reuters that these would include three countries that had requested debt treatments under the G20 common restructuring framework –Ethiopia, Zambia and Ghana — as well as Sri Lanka, Suriname and Ecuador.”So it’s basically to discuss issues that have been impeding reaching a timely debt restructuring process, and the lessons from the cases that we had in the recent past, and to come up with technical solutions to address these shortcomings,” Pazarbasioglu said.Zambia requested a debt restructuring under the G20 process more than a year ago, but has been held up by major creditor China’s insistence that local debt owned by foreign investors be included and that the multilateral development banks agree to reduce debt principal along with Beijing.U.S. Treasury Secretary Janet Yellen has been urging China to move faster on restructurings and to set aside these demands from country-specific debt talks and address them through the roundtable. HAIRCUTS VS CONCESSIONAL LOANSShe said the group will try to identify key impediments to restructurings and come up with standards and processes to address them. It will try to reach consensus on the notion that highly concessional loans or grants from multilateral development can achieve the same goals as a debt principal “haircut,” she said.Other concepts the group hopes to define more precisely include common parameters for analyzing debt sustainability, timing for issuing debt service suspensions and comparable treatment of creditors, Pazarbasioglu said. More

US stock markets steadied on Tuesday despite disappointing inflation data that raised the prospect of more aggressive interest rate rises than investors had previously expected.Wall Street’s benchmark S&P 500 index dropped as much as 1 per cent in early trading but ended the day flat, holding on to the gains made in strong trading on Monday.The tech-heavy Nasdaq Composite rose 0.6 per cent after falling as much as 1.1 per cent in the morning.The early falls followed the publication of data showing that US consumer prices rose 6.4 per cent year on year in January — a slight slowdown from the previous month but higher than economists had expected. Annual core inflation, which strips out volatile food and energy prices, was also slightly above expectations at 5.6 per cent, down from 5.7 per cent in December. Prices rose 0.4 per cent month on month.The high numbers renewed concerns that stubbornly high inflation would push the Federal Reserve to raise rates higher than the market expected, as chair Jay Powell warned last week.“The Fed ended the year thinking the economy is slowing, inflation is coming steadily down, the labour market is cooling . . . January data threw all of that up in the air,” said Neil Shearing, chief economist at Capital Economics. “The labour market is red hot, the economy looks like it’s in a better place and inflation is coming down more slowly. Put it all together and if you’re Jay Powell, you’re suddenly sleeping less easily.”The Fed increased its benchmark interest rate by a quarter of a percentage point in February to its highest level since September 2007 but warned “ongoing increases” would be needed to bring inflation under control. Pricing in the futures market shows investors now expect rates to peak at around 5.27 per cent in July — up from 5.18 per cent in the same month before Tuesday’s inflation numbers — with at most a single interest rate cut during the remainder of the year. Earlier this month, they had been expecting a peak of about 5 per cent in May, with two interest rate cuts by the end of 2023.The dollar followed the reverse trajectory to stocks, rallying in the immediate aftermath of the inflation data before giving up the gains. The dollar index, which tracks the US currency against a basket of peers, was down 0.1 per cent by Tuesday evening.US government bonds also sold off, with the yield on the two-year Treasury rising 0.08 percentage points to 4.62 per cent after dipping earlier in the day. Yields rise when prices fall.The 10-year Treasury yield rose 0.03 percentage points to 3.75 per cent.In Asia, Hong Kong’s Hang Seng index fell 0.2 per cent and China’s CSI 300 was steady. Europe’s region-wide Stoxx 600 closed 0.2 per cent higher. London’s FTSE added less than 0.1 per cent. UK government bonds sold off sharply after the publication of the US inflation numbers, with the yield on the interest rate-sensitive two-year gilt rising 0.17 percentage points to 3.81 per cent, its highest level since late October.The price for Brent crude, the international oil benchmark, fell 1.2 per cent to $85.58 a barrel. More