Aurelia Butler

“I’d love to see a day where people eventually sell Bitcoin-backed bonds like mortgage-backed securities,” Saylor said in an interview Tuesday after the software maker announced that it was taking a loan to buy more of the digital asset. “The market is not quite ready for that right now. The next best idea was a term loan from a major bank.”That may serve as a warning to El Salvador, which is planning to sell about $1 billion of so-called volcano bonds that will be backed by Bitcoin. While the proposed offering has been the talk of the crypto industry since it was first proposed last year, the nation’s Bitcoin advocating president, Nayib Bukele, has delayed offering the securities. “There’s a lot of talk about the El Salvador Bitcoin bond,” Saylor said. “That’s a hybrid sovereign debt instrument as opposed to a pure Bitcoin-treasury play. That has its own credit risk and has nothing to do with the Bitcoin risk itself entirely.” The $205 million loan, which will be backed by MicroStrategy’s Bitcoin holdings, was the best possible course for shareholders after exploring a slew of financing options, Saylor said. They included issuing Bitcoin-backed bonds, tapping DeFi or decentralized finance tools and loaning out its stash of digital assets. “If it was JPMorgan (NYSE:JPM) and it was their balance sheet at 4% interest, I’d probably do that deal. But if a hedge fund or operation doesn’t have 100 times my balance-sheet, then there’s probably theoretical counterparty risk offsetting nominal yield,” Saylor said. Saylor has effectively turned MicroStrategy shares into a leveraged play on Bitcoin. It owns about $5.9 billion of the cryptocurrency, based on Wednesday’s price of around $47,500.“At every scale anybody can readily use Bitcoin as their fulcrum and leverage is plentifully available to every corporation in the world right now. Municipalities could do it,” he said. “New York can issue $2 billion of debt and buy $2 billion worth of Bitcoin — the Bitcoin is yielding 50% or more, the debt costs 2% or less.” . ©2022 Bloomberg L.P. More

ORLANDO, Fla. (Reuters) – The first quarter was a scary ride for most investors but those who stuck to a conventional ’60-40′ portfolio of stocks and bonds escaped relatively unscathed. Having endured an energy price shock after Russia invaded Ukraine, rising interest rates and U.S. bond market plunge, and wild divergent swings in stocks and commodities, investors will be glad to see the back of the first quarter.But the benchmark, long-term ’60-40′ equity/fixed income investment portfolio held up reasonably well. That’s because most of the pain came on the smaller bond side of the portfolio, and because the remarkable rebound on the larger stocks side late in the quarter significantly reduced overall losses.According to Barry Gilbert at LPL Financial (NASDAQ:LPLA) in Boston, a simple portfolio weighted 60% the S&P 500 and 40% the Bloomberg aggregate U.S. bond index lost around 4% in the January-March period. That was ‘only’ the 19th worst performance out of 185 quarters going back to 1976, when the aggregate bond index was launched. There have been 47 ‘down’ quarters in total, the worst of all in late 2008 when losses topped 11%.The average decline of these ‘down’ quarters is around 4%, roughly where the portfolio will close the current quarter.”The first quarter was a big shock for investors. But if you’re looking at 60-40, it’s not good, but it’s not horrible,” Gilbert said. “We’ve been a little bit spoiled by the long bull market in bonds and sometimes people forget that bonds have risk too.”Gilbert notes that the aggregate index comprising Treasuries, investment grade corporate and mortgage-backed bonds is down around 6%, on track for the third worst quarter since 1976. S&P 500 total returns are down around 2.5%Other cuts of the U.S. bond market show the first quarter was equally bleak historically. The Bank of America (NYSE:BAC) Treasuries index lost 6% and the corporate bond index lost 9%, both the worst in at least 25 years.Q1 Stocks & Bonds Performance https://fingfx.thomsonreuters.com/gfx/mkt/jnvwekjrnvw/Q1totals.pngJoe LaVorgna, chief U.S. economist at Natixis, notes that an index of the two-year Treasury note as measured by its weekly total return compared with a year earlier had its biggest fall ever, even worse than the bond market routs of the early 1980s and 1994. Yields have shot up enough, and it may be time to buy.”A person of courage would get long the long end. The market is pricing in a lot of Fed tightening, probably too much. The slope of the curve gives me confidence that the front end will rally at some point. Perhaps sooner rather than later,” he said.2-Year US Treasury History https://fingfx.thomsonreuters.com/gfx/mkt/zgpomyalopd/NatixisUST.jpgSHAFTS OF LIGHTIf the 60-40 investor is feeling any relief right now it is thanks to the rebound in stocks. As recently as March 15 the S&P 500 was down 14% year-to-date and on March 14 the Nasdaq confirmed a bear market, down 20% from its November peak.The S&P 500 is back to within 5% of the all-time high it struck on January 4.It was a similar picture globally. The MSCI World will end the quarter down around 4%, its worst performance since the pandemic crash two years ago. But it was also down 14% two weeks ago, and of the 47 negative quarters since the late 1980s, there have been 21 larger declines.Valuations have come down and are closer to – although still above – long-term averages, and history suggests that stocks typically rebound after the 10-year U.S. Treasury yield falls below the two-year yield, as briefly occurred on Tuesday.Recession risks are undoubtedly rising and inverted curves across the rates and bond markets confirm that. But imminent contraction is not in the cards, giving investors scope to push equities higher.”Overall we find too much negativity rather than too much complacency in markets, and stay with a pro risk stance in our model portfolio,” JP Morgan strategists wrote on Wednesday. Analysts at UBS note that since 1965 the S&P 500 has returned an average of 8% in the 12 months following an inversion of the 2s/10s part of the U.S. yield curve. Strategists at Truist IAG (LON:ICAG) calculate that the average return is 11%, based on the previous seven inversions going back to 1978.S&P 500 Corrections https://fingfx.thomsonreuters.com/gfx/mkt/byvrjbmdove/SPCORRECT.jpg(The opinions expressed here are those of the author, a columnist for Reuters.) (By Jamie McGeever) More

COLOMBO (Reuters) – Sri Lankans faced 10-hour power cuts on Wednesday and warnings of longer blackouts on Thursday, as a deepening economic crisis roiled markets and the electricity regulator urged more than a million government employees to work from home to save fuel.The island nation has been unable to pay for fuel shipments because of a foreign exchange shortage, and is poised to seek assistance from the International Monetary Fund (IMF).”We made a request to the government to allow the public sector, which is about 1.3 million employees, to work from home for the next two days so we can manage the fuel and power shortages better,” Janaka Ratnayake, Chairman of the Public Utilities Commission of Sri Lanka, told Reuters.Power cuts would be extended to 13 hours on Thursday, Sri Lanka’s power regulator said in a statement.Amid the country’s worst economic crisis in decades, foreign exchange reserves have fallen by 70% in the past two years and were down to a paltry $2.31 billion as of February, leaving Sri Lanka struggling to import essentials, including food and fuel.The drawn-out power cuts on Wednesday were partly caused by the government’s inability to pay $52 million for a 37,000 tonne diesel shipment that was awaiting offloading, Ratnayake said.”We have no forex to pay,” he said, warning of more power cuts over the next two days. “That is the reality.”‘CAN’T SEE END OF TUNNEL’Sri Lankan shares closed 3.6% lower on Wednesday, after falling more than 7% during the day, prompting the Colombo Stock Exchange to halt trading twice.Udeeshan Jonas, Chief Strategist at equity research firm CAL Research, said the market was responding to a deepening of a crisis set off by badly-timed tax cuts, the coronavirus pandemic and historically weak government finances.”Investors can’t see the end of the tunnel,” he said.To seek a way out of the crisis, Finance Minister Basil Rajapaksa is set to visit Washington in April for talks with the IMF. The Fund’s assessment published on Friday said Sri Lanka was experiencing a combined balance of payments and sovereign debt crisis, and would need a “comprehensive strategy” to make its debt sustainable.If Sri Lanka secures an IMF programme it would be its 17th financial rescue package from the global lender.Harpo Gooneratne, a restaurateur in Sri Lanka’s main city of Colombo, said that even though some of his 10 restaurants had their own generators, the diesel shortage made it difficult to run his business during power cuts.”Its crazy,” he said.The worsening electricity cuts will hit already struggling businesses, especially exporters that have locked in orders and limited capacity to absorb cost increases, said Dhananath Fernando, an analyst at Colombo’s Advocata Institute think tank.”This will further hurt Sri Lanka’s growth and threaten foreign exchange earnings that are crucial to improve reserves, repay debt and pay for essential imports,” Fernando said.Gooneratne said there were 30% fewer customers at his restaurants and they were spending less.”Even when people go out they are cautious about their spending,” he said. “The person who earlier had two beers will now only have one.” More

WASHINGTON (Reuters) -The Biden administration will make available nearly $3.2 billion from the bipartisan infrastructure law to help Americans lower home energy costs, Energy Secretary Jennifer Granholm said on Wednesday.Low-income Americans spend up to 30% of their paychecks on energy. This investment will help them afford improvements to their homes such as switching to better insulation and ventilation, installing energy efficient heating and cooling systems and upgrading lighting and appliances, she said.”The $3.2 billion we are mobilizing today is about 10 times what we spend on retrofitting homes every year,” Granholm said. The efficiency improvements will have an immediate impact of helping families save hundreds to thousands of dollars per year in energy bills, she said.The current government program upgrades 38,000 homes annually. The additional amount will push that to 450,000 homes, she said.The $3.2 billion will be distributed by the Energy Department’s Weatherization Assistance Program, which takes applications from states and tribes and territories for the funding to retrofit low-income homes.In November, President Joe Biden signed into law a $1 trillion infrastructure bill that would create jobs across the country by disbursing billions of dollars to state and local governments to fix crumbling bridges and roads and by expanding broadband internet access to millions of Americans.In 2021, the average nominal retail electricity price paid by U.S. residential electric customers rose at the fastest rate since 2008, increasing 4.3% from 2020 to 13.72 cents per kilowatt hour, according to the U.S. Energy Information Administration https://www.eia.gov/todayinenergy/detail.php?id=51438 (EIA).Prices for most types of energy commodities rose significantly in 2021, including the cost of power generation fuels, especially natural gas, which helped push electricity prices higher, the EIA analysis shows.The United States accounted for about 17% of the world’s primary energy consumption in 2019, the EIA said, but had about 4% of the world’s population. Biden’s public approval rating fell to a new low of 40%, according to a Reuters/Ipsos poll conducted March 21 and 22, a clear warning sign for his Democratic Party as it seeks to retain control of Congress in the Nov. 8 election.The national poll found that 54% of Americans disapprove of his job performance as the country struggles with high inflation and Russia’s invasion of Ukraine has pushed geopolitical concerns to the fore. More

US president Joe Biden will invoke Korean war-era powers to boost the domestic supply of minerals crucial for electric vehicles and large capacity batteries, as his administration tries to reduce its dependence on overseas energy. Biden will use a presidential determination as soon as this week to invoke the Defense Production Act to help increase the availability of lithium, nickel, cobalt, graphite and manganese in the US.Under the terms of the DPA, an administration can compel companies to prioritise government contracts over private ones, for instance, or to provide loans and grants to boost manufacturing.A person familiar with the White House’s plans said the administration was not contemplating making direct purchases of the minerals, but would aim to make government funding available for mining feasibility studies and safety upgrades, as well as producing minerals from existing mining waste.The person said triggering the DPA would not allow mining companies to bypass or expedite any permitting or environmental review processes.Currently, the US imports the vast majority of the minerals the White House intends to add to the list of items covered by the DPA. Biden ordered a review of critical supply chains early last year as he sought to reduce US dependence on China for a range of imports deemed important to national security, including minerals, pharmaceuticals and computer chips. The US Department of Energy last year released a blueprint specifically aimed at reviving the US’s domestic battery supply chain, and forecast that a boom in electric vehicles would lead to a surge in demand for batteries over the next decade.It proposed securing US access to the raw minerals needed to make batteries by providing incentives for “safe, equitable and sustainable” domestic mining, and devoting money to researching ways to capture minerals through recycling waste or expired batteries.In its paper, the DoE noted that China dominates the supply chain for the manufacturing of lithium batteries, including the processing of minerals.Last month, the DoE said it would make nearly $3bn available to companies in the US battery manufacturing supply chain to help scale up production. Biden’s infrastructure bill, which passed through Congress last year, also made $7bn available over five years for the processing of minerals and for recycling end-of-life batteries. The DPA was invoked by former president Donald Trump to boost the production of coronavirus-related medical supplies during the height of the pandemic. More

Saudi Arabia has deposited $5bn in Egypt’s central bank in an effort to shore up the economy of the most-populous Arab state, which has come under intense pressure as a result of the Russia’s invasion of Ukraine.The state-run Saudi Press Agency said the funds deposited were part of the kingdom’s “tireless efforts” to support Egypt. Cairo announced last week it was seeking IMF support after the war sent the prices of wheat, cooking oil and fuel soaring and cut the flow of tourists from Russia and Ukraine — both important markets for its crucial tourism sector.Egypt is one of the IMF’s biggest borrowers after Argentina and analysts said the country, which had resorted to the fund twice in the last six years, had exceeded its quota of IMF borrowing rights and would probably be required by the lender to secure co-financing from other sources. The deposit from Saudi Arabia would help meet this condition.In addition to the cash from Saudi Arabia, the kingdom, Qatar and the United Arab Emirates have also signalled a willingness to invest billions in Egypt’s economy.“Gulf states are offering different kinds of support to Egypt whether in investments or the cash deposit,” said Mohamed Abu Basha, head of macroeconomic analysis at EFG-Hermes, the Cairo-based regional investment bank. The Egyptian cabinet on Wednesday said Cairo and Riyadh had signed an agreement to encourage investments in Egypt by Saudi Arabia’s sovereign wealth fund. Mostafa Madbouly, Egypt’s prime minister, said there will be measures over the “coming period” for up to $10bn of Saudi investments from the Kingdom’s Public Investment Fund.This came a day after an announcement that Qatar had signed an agreement to invest $5bn in Egypt during a visit by Doha’s ministers of foreign affairs and finance.Bloomberg last week reported that UAE was discussing acquiring Egyptian government stakes worth $2bn in successful companies listed on the Egyptian stock exchange. These include 18 per cent of Commercial International Bank, Egypt’s biggest private lender, and 13 per cent of Fawry, an e-payments company. Saudi Arabia and the Emirates stepped in to support Egypt’s economy in 2013 after Abdel Fattah al-Sisi, the current president and a former defence minister ousted Mohamed Morsi, his elected predecessor who came from the Muslim Brotherhood group. The Islamist organisation, now outlawed in Egypt and accused of terrorism, has been seen as a threat by the Gulf monarchies which welcomed Morsi’s toppling.Cairo’s relations with Qatar have been strained for most of the past decade because of its support for the Brotherhood but the two countries mended their rift last year as part of a wider Arab reconciliation.Spiralling commodity prices and the withdrawal of billions of dollars from the debt market forced Egypt to devalue its currency last week just ahead of its announcement that it had gone to the IMF. Cairo is the world’s biggest wheat importer with a subsidised bread programme that serves some 70mn people — about two-thirds of the population. In recent years Egypt has been reliant on attracting “hot money” or foreign inflows into its short-term debt market by offering one of the highest real interest rates in the world. More