Aurelia Butler

The investment bank now expects benchmark 10-year yields to rise to 2.7% by year-end, up from its previous forecast of 2.25%. It also expects two-year yields to rise to 2.9% and 3.15% at year-end 2022 and 2023, respectively.For 30-year bonds, the bank expects a more gradual increase, with the yields likely to end 2022 at 2.75%.Goldman also expects the yield curve between two-year and 10-year notes to invert modestly by year-end, but said that should not necessarily be taken as an indicator that a recession is likely to follow. “The nominal curve tends to invert more easily in a high inflation environment, and we could see earlier and/or deeper curve inversions this cycle. In such an environment, a deeper nominal curve inversion may be needed to produce the same recession odds in models as seen in more recent business cycles,” Goldman said.Risks to Goldman’s view include if the war in Ukraine deescalates or if inflation is more persistent, which could lead to even higher yields, while the opposite scenario could result in lower yields, the bank said. More

G7 countries and allies have already stripped Moscow of its privileged trade treatment at the WTO, known as “most favoured nation” status, clearing the way for them to hit Russian imports with higher tariffs or ban them entirely.The western group halted work on Belarus’ WTO accession process after President Alexander Lukashenko crushed protests following his 2020 re-election that opponents say was fraudulent.The group on Thursday said in a document filed at the WTO that it strongly condemned Russia’s unprovoked military aggression against Ukraine, enabled by Belarus. Russia, which calls its actions in Ukraine a “special operation,” has used Belarusian territory to launch its attack.”We condemn Belarus for its complicity in Russia’s aggression, which is incompatible with the values and principles of the WTO and of a just rules-based order,” the filing said.”For these reasons, we have concluded that Belarus is unfit for WTO membership. We will not further consider its application for accession,” the filing said.The group’s members include Albania, Australia, Britain, Canada, Iceland, Japan, Montenegro, New Zealand, North Macedonia, Norway, South Korea and Ukraine. More

Mexico’s President Andrés Manuel López Obrador on Thursday rattled the country’s financial sector by declaring the central bank’s interest rate decision before the official announcement.López Obrador told reporters on Thursday morning that the five-member board had voted to raise rates by a half percentage point to 6.5 per cent, in a pre-emptive announcement that was seen as a blow to the bank’s independence.“Yesterday’s decision was taken unanimously and we respect the bank’s autonomy,” he said at his daily morning news conference.Hours later on Thursday afternoon the central bank raised rates by a half-percentage point, as the president had said.It is not the first time the president has taken financial markets by surprise. Late last year, López Obrador spooked investors when he abruptly changed his nominee to lead the bank, choosing an obscure public sector economist and raising fears at the time over the institution’s independence.In 2020 a bill proposed by the ruling Morena party sought to force the bank to buy excess dollars, in another move that critics said undermined the central bank’s autonomy. The proposal was eventually shelved after strong opposition.Experts lined up to criticise the president’s announcement on Thursday, which has again stoked fears that he wants to interfere with monetary policy.“Since López Obrador entered the presidency, there were a lot of concerns about the autonomy of the Bank of Mexico,” said Gabriela Siller, head of financial and economic research at Banco Base. “With today’s announcement these worries have resurfaced again.”The Bank of Mexico declined to comment on the news. The Bank of Mexico became independent in 1994 and has built a reputation in markets for competence. Its new governor, Victoria Rodríguez Ceja, the first woman to ever hold the post, has sought to reassure markets and opposition lawmakers that she would uphold its autonomy.Like other central banks around the world, the Bank of Mexico is trying to tame high inflation, which hit 7.29 per cent in Mexico in the first half of March. Analysts have been revising down their expectations for growth.“I think that this puts the central bank in a bad position,” said Alonso Cervera, chief economist for Latin America at Credit Suisse. “People will be questioning the bank’s autonomy, why does the president know the policy decision ahead of time, who leaked it?”Thierry Wizman, global interest rates and currencies strategist at Macquarie Capital, said the rate hike was in line with expectations and that the pre-emptive announcement was an extension of López Obrador’s second-guessing and nudging of the central bank over the past three years.The Mexican peso reached 20.11 per US dollar, its strongest level since September 2021. Yields on Mexican government bonds across maturities were broadly higher, with the two-year bond yield, which moves with interest rate expectations, rising to 8.46 per cent, its highest since January 2019.Due to a banking conference taking place in Acapulco — where López Obrador, Mexico’s finance minister and the central bank’s governor are expected to speak, among others — there had been a departure from the standard timings for central bank processes, Bloomberg reported, which had potentially given the president earlier access to the information.Gabriel Casillas, chief economist for Latin America at Barclays, said that he did not think this would happen again as the bank resumed its typical schedule. More

Until recently, mortgage holders across advanced economies seemed safe in the knowledge that interest rates would stay put for some time. For the entirety of some of their lives as homeowners, there has barely been a hint of problematic inflation, let alone a suggestion that central banks would raise rates quickly to stop it. The worry was not unmanageable repayments, or falling prices, but finding enough money for a deposit to keep up with a market that showed no signs of slowing. Many now find themselves revising these expectations. The Bank for International Settlements — the so-called central bankers’ central bank — has warned that rising interest rates could make existing debt burdens difficult to cope with and cause house prices to fall. Some have wondered whether housing debt represents the next “Minsky moment”: a term used to denote the point at which debt-fuelled asset bubbles unwind to cause economic collapse.Much ink has been spilled in an effort to explain the long housing boom in advanced economies. The availability of cheap money with which to buy property has undoubtedly been a significant factor. Rates have been kept low in an effort to boost wages and growth. The side effect of these measures has been turbocharged demand for housing which ran head-on into supply constraints in many big cities.If this boom is about to meet its own “Minsky moment”, an out-and-out crisis should be avoidable. While some banks could be overexposed to housing, regulators have not been ignorant to this risk. Stricter capital requirements should better insulate banks — unlike in 2008 — while some authorities have also been on the front foot, restricting the ability of households to become too highly leveraged. Still, regulators cannot afford to be sanguine. Many mortgage borrowers who purchased over the course of the boom will be in significant debt — keeping up with house price inflation has been costly. While these high-leverage loans may not make up a large proportion of banks’ books, they are the kind that could go bad as borrowers struggle to keep up with higher rates, record increases in energy prices and other cost-of-living pressures.Even if broader financial turbulence can be avoided, falling prices would not pass by without any impact. Economists have long speculated that households’ willingness to spend has some relationship to wealth as well as income. If house prices fall markedly, some decline in consumption is likely. Any shortfall in spending due to this so-called “wealth effect” may also be exacerbated by individuals devoting a greater proportion of their income to debt repayments as rates rise, and less to purchasing goods and services in the broader economy. Unwinding housing bubbles can also have deep ramifications in communities where defaults, or mortgage stress, may be more concentrated.There are more benign possibilities. If inflation is brought under control, increases to long-term rates — which tend to inform mortgage rates — may be tempered. Many households could cope in this situation by using the buffer of savings they accrued during the pandemic. House prices may not fall as far as feared, or even at all.That does not mean the risks are not real. Supporting growth and staving off economic crisis through years of “cheap money” was an understandable choice. As a new age of monetary tightening dawns, central banks and governments alike must hope that the housing debt built up in the previous era does not weigh too heavily on the prospects of the next. More

JOHANNESBURG (Reuters) -South Africa is close to reaching a five-year target for new investment, President Cyril Ramaphosa said on Thursday as he sought to drum up further backing for the pandemic hobbled economy.In 2018 soon after coming to power, Ramaphosa set a goal to raise 1.4 trillion rand – or around $100 billion at the exchange rate at the time – to revitalise Africa’s most developed economy following repeated recessions and years of anaemic growth. The global pandemic, which temporarily shuttered swathes of the economy and helped push unemployment rates to record levels, has complicated those efforts. But speaking to an investment conference in Johannesburg, Ramaphosa said South Africa nonetheless remained an attractive investment destination.”You see opportunities in this country. You see beyond the difficulties and the challenges,” he told investors. “Your investments are making a difference in our country and our local communities.”The conference, which in part aims to sell foreign companies on South Africa’s potential, brought in a total of 332 billion rand ($22.83 billion), bringing the total of new investment since 2018 to 1.14 trillion rand. “We’ve now reached 95% of the ambitious target we set ourselves four years ago,” Ramaphosa said.MANUFACTURING, MINING, VACCINESFord Motor (NYSE:F) Co has committed 16.4 billion rand that would enable it to produce its next generation Ranger pick-up in South Africa. Mining companies, which were benefiting from favourable market conditions even before Russia’s invasion of Ukraine sent prices soaring, are also boosting their South African operations. Anglo American (LON:AAL) plans to expand an existing 100 billion rand investment to put an additional 10 billion rand into the country this year. And Impala Platinum (OTC:IMPUY) pledged 11.8 billion rand to develop new mining and processing capacity.With the pandemic, South Africa has sought to position itself as a vaccine manufacturing hub for the vastly underserved African continent, attracting investment from Pfizer (NYSE:PFE) and South Africa’s Biovac Institute and Aspen Pharmacare (OTC:APNHY). Netflix Inc (NASDAQ:NFLX) meanwhile is investing 929 million rand for television and film production in South Africa’s Gauteng and Western Cape provinces.The African Development Bank (AfDB) is committing $2.8 billion over the next five years to support private sector investment in agriculture, renewable energy, transport, youth employment, health and vaccine manufacturing. The bank is already supporting South Africa’s struggling state-owned companies, and is currently preparing a $400 million loan package to assist coal-dependent power utility Eskom’s transition to renewable energy.($1 = 14.5431 rand) More

The five-year ‘rhino bond’ issued on Wednesday will pay investors returns based on the rate of growth of black rhino populations at South Africa’s Addo Elephant National Park (AENP) and the Great Fish River Nature Reserve (GFRNR), the bank said.After five years, investors would get a return of between 3.7% and 9.2% if the population increases. They would get no return if there is no change in the black rhino population, it added.Black rhinos are two-horned species of the endangered rhino family and are found only in Africa. Between the 1970s and 1990s, their population fell by 96% to below 2,500 due to poaching to meet demand for their horns in China and the Middle East, according to Save The Rhino International, a London-based non-profit organisation.Later, large scale conservation efforts were taken up which led to their increase to between 5,000 and 5,500, according to Save The Rhino’s website. South Africa accounts for approximately half of the total black rhino population on the continent, World Wildlife Fund (WWF), a global non-governmental organisation says. “The pay-for-success financial structure protects an endangered species and strengthens South Africa’s conservation efforts by leveraging the World Bank’s infrastructure and track record in capital markets,” World Bank Group President David Malpass said in the statement. More