Aurelia Butler

BUENOS AIRES (Reuters) – Argentina is facing deadlines for nearly $1.1 billion in debt repayments to the International Monetary Fund (IMF) by Tuesday amid uncertainty over whether the South American country will pay and tense talks to revamp around $40 billion in loans.The grains-producing country, which has been battling currency and debt crises for years, is due to pay back $730 million to the IMF on Friday and another $365 million on Tuesday though officials have not confirmed plans to pay.”What is going to happen, we will know in the next few hours,” presidential spokeswoman Gabriela Cerruti told a news conference on Thursday. She added: “Argentina’s government is willing to reach an agreement to pay in a sustainable manner.”Cabinet Chief Juan Manzur said there was “political decisiveness and eagerness to pay” the IMF, according to official news outlet Telam. The IMF did not immediately respond to a request for comment on the looming payments.Argentina’s talks with the IMF to revamp a failed 2018 loan https://www.reuters.com/markets/us/argentinas-strategy-toward-imf-deal-hits-wall-doubt-2022-01-10 have stumbled in recent months over differences over how quickly the country should reduce its fiscal deficit as part of a medium-term economic plan.That has hit sovereign bond prices, some of which have tumbled to below 30 cents on the dollar. More hard-left politicians within the ruling Peronist coalition have also started hardening their rhetoric against the IMF.On Thursday, hundreds of people took to the streets of Buenos Aires to protest against the IMF. Many blame the organization for austerity measures that worsened a major economic crisis in 2001/02 which plunged scores of Argentines into poverty.”What we are proposing is not only to stop paying the debt and break with the IMF, but to restructure the entire economy according to the needs of the majority,” said Celeste Fierro as she marched in the city outside the central bank building.Fierro, like others in the march, said the country should not pay back its IMF debts: “We believe in … breaking with the IMF and ignoring this debt, which is a scam.”Vilma Ripol, another marcher, said the payments should be suspended and that Congress should investigate the debt to avoid a repeat of the 2001 economic crisis.”It was a disaster in 2001 that took us years to recover and we had paid,” she said. “We kept paying and our society kept on going down. Enough already.” (Graphic: Argentina’s USD bond prices continue falling, https://graphics.reuters.com/ARGENTINA-ECONOMY/DEBT/zgpomaegjpd/chart.png) More

NEW YORK (Reuters) -A U.S. appeals court on Thursday threw out the convictions of two former Deutsche Bank AG (NYSE:DB) traders for rigging Libor, once among the world’s most important financial benchmarks, and ordered acquittals for both men.The 2nd U.S. Circuit Court of Appeals in Manhattan found a lack of evidence that Matthew Connolly and Gavin Black caused Deutsche Bank (DE:DBKGn) to make false Libor submissions.Connolly, from Basking Ridge, New Jersey, had led Deutsche Bank’s pool trading desk in New York, while Black worked on the bank’s money market and derivatives desk in London.Both were convicted of wire fraud and conspiracy in October 2018.Connolly was sentenced https://www.reuters.com/article/us-deutsche-bank-libor-crime/ex-deutsche-bank-traders-avoid-prison-time-for-libor-scheme-idUSKBN1X32EH to six months of home confinement and ordered to pay a $100,000 fine, while Black received nine months of home confinement and a $300,000 fine. Federal prosecutors had sought “substantial” prison time for both.The U.S. Department of Justice did not immediately respond to a request for comment.”We are elated that Matt Connolly has been fully exonerated in this contrived case,” said Kenneth Breen, a partner at Paul Hastings.Black’s lawyer Seth Levine, a partner at Levine Lee, was “deeply appreciative” of the outcome. “Mr. Black did his job, as he has lived his life, with honor and honesty,” Levine said.Before being phased out this month, Libor, or the London interbank offered rate, had underpinned hundreds of trillions of dollars of financial products including credit cards, mortgages and other loans. Libor had once been calculated based on submissions from 16 banks, including Deutsche Bank.Prosecutors said Connolly directed subordinates to arrange false submissions consistent with his traders’ interests, while Black encouraged false submissions to benefit his own derivative trading. The alleged conspiracy ran from 2004 to 2011.Libor-rigging investigations resulted in about $9 billion of fines worldwide for banks, including $2.5 billion for Deutsche Bank https://www.reuters.com/article/us-deutschebank-libor-settlement/deutsche-bank-fined-record-2-5-billion-over-rate-rigging-idUSKBN0NE12U20150423 in 2015.Connolly and Black’s trial was the second in the United States of traders accused of rigging Libor for their own benefit. The convictions in 2015 of two former London-based Rabobank traders were also thrown out https://www.reuters.com/article/uk-rabobank-libor/u-s-appeals-court-voids-libor-convictions-of-ex-rabobank-traders-idUKKBN1A41N9 on appeal.The case is U.S. v Connolly et al, 2nd U.S. Circuit Court of Appeals, No. 19-3806. More

MEXICO CITY (Reuters) – Miguel Alejo does not know how inflation is measured or what makes a recession. But at the Mexico City food market where he has worked for over 40 years, he knows when business is struggling.Like many colleagues working stalls in the open market in a middle-class neighborhood in the west of the city, the vegetable vendor complains bitterly of poor sales and increases in the price of goods he makes a living from.”It’s become very tough for us here,” the 62-year-old said, as he sold broccoli, spinach and lettuce. “We’re not bringing in much because things really aren’t selling like they used to.””The economy has really gone down,” he added, describing December sales as “dead” and well below pre-pandemic levels.Economic growth in the country of over 126 million people ground to a near standstill during the second half of 2021.On Monday, the national statistics agency is due to publish a preliminary estimate for fourth-quarter gross domestic product (GDP). If the figure is negative, Mexico will likely have entered a technical recession.Brokerage Monex reported recently that data suggested the economy had entered a “recessionary dynamic” as it clawed back ground after the pandemic led to a GDP contraction of 8.5% in 2020.Some forecasters now believe the economy may not even have grown 5% last year, and an increasing number expect GDP to have gone backwards in the final quarter.Jonathan Heath, a board member of Mexico’s central bank, said last week that if there are no revisions to prior quarters, GDP could have shrunk 0.5% quarter-on-quarter.GDP had gone negative even before the pandemic began, and worries are growing that the $1.3 trillion economy could be smaller when President Andres Manuel Lopez Obrador’s six-year term ends than it was when he took office in December 2018.U.S. economic growth in 2021 outpaced that of Mexico, where the tepid economy could encourage more people to migrate and try their luck in the United States.STAGFLATIONLopez Obrador has prioritized assisting Mexico’s poorest, and analysts said his welfare schemes have helped offset the pandemic’s impact at the lower end of the spectrum.But he has also unsettled investors, accusing companies of conspiring with past governments to bilk taxpayers and trying to renegotiate their contracts. Gross fixed investment levels are about 16% lower than when he was elected in July 2018.This month, Lopez Obrador said the worst of the pandemic has passed and the economy was on the right track. But plenty of Mexicans are not convinced.”It makes me angry because it’s not true, that’s why (Lopez Obrador) needs to go out and be with the people so they realize how things really are, not just the statistics and the data that they give him,” said Noemi Santiago, a 59-year-old Mexico City homemaker. “The economy is very slow.”Also, prices are rising fast. Headline inflation was 7.13% in the first half of January. The core index of inflation, which strips out some volatile items, surged above 6%, the highest in two decades.”Everything is very expensive and there’s hardly any profit margin,” 59-year-old fruit vendor Felix Rodriguez said in the market. “There isn’t much money circulating, I don’t exactly know why, but we’re feeling it here.”Gabriela Siller, an economist at Grupo Financiero BASE, said economic stagnation and high inflation was a recipe for a feared combination: stagflation. More

NEW YORK (Reuters) – U.S. banks will enjoy stronger growth this year from their “bread-and-butter” business of taking deposits and lending money as the U.S. economy expands and the Federal Reserve prepares to raise interest rates for the first time in three years.The Fed’s move could bring an end to the low interest-rate environment which banks have faced for most of the past decade and, particularly, through the COVID-19 pandemic.Net interest income, the difference between what banks earn from lending and pay out on deposits and other funds, declined during the pandemic due to interest rate cuts and a drop in borrowing. But this is about to change in 2022.The Fed on Wednesday signaled it is likely to raise U.S. interest rates in March. Federal funds futures have priced in another three rate hikes later in the year. “Banks that, for the last ten years, were not able to enjoy a steady yield curve are going to get it,” said Ken Leon, research director at CFRA Research, referring to the line that shows the interest rates buyers of government debt require to lend over increasing periods of time.”It’s likely to provide significant growth in net income interest revenues in 2022.”Net interest income accounted for 60% of revenue in the fourth quarter for the median bank among the biggest two dozen in the United States, said Barclays (LON:BARC) analyst Jason Goldberg. That was the lowest proportion in six years and down from 66% three years ago, before the pandemic and subsequent Fed rate cuts.JPMorgan Chase & Co (NYSE:JPM) told analysts earlier this month that net interest income from its businesses beyond securities markets could increase to $50 billion in 2022 from $44.5 billion last year, a 12% increase. Wells Fargo (NYSE:WFC) & Co said its net interest income could rise by 8%.Some banks will benefit more than others depending on their ability to retain low-cost deposits and use them to lend and invest in higher-yielding securities. Banks with portfolios weighted toward floating-rate loans will benefit more.”Some banks’ balance sheets are just more rate sensitive,” said Goldberg, who believes increases in net interest income will continue into 2023.Bank of America Corp (NYSE:BAC) executives were not as specific in their outlook when the bank reported earnings. But they said they expected the year to bring “robust growth” in net interest income, starting with “a couple of hundred million” dollars more in the first quarter on top of its $11.4 billion in the fourth quarter. Citigroup Inc (NYSE:C) executives said they would not provide estimates on net interest income until an “Investor Day” on March 2. Chief Financial Officer Mark Mason, however, said that the bank expects support for net interest income from higher global interest rates and from putting more of its cash into loans and securities.Executives said the changing outlook for interest rates will make forecasting net interest income uncertain. But other factors also support an increase.JPMorgan said changes in rates account for only about one-third of the increase it expects in net interest income. The bulk of the rise should come from loan growth, it said.Wells Fargo said that higher rates account for almost two-thirds of the increase it expects with loan growth and balance sheet changes supplying the rest.With or without higher rates from the Fed, net interest income will increase for large banks, analyst Ken Usdin of Jefferies said in a report.Banks are expecting to lend more to businesses, particularly those who want to build inventories after losing sales to supply chain interruptions.JPMorgan and Citigroup also said they expect more interest income from credit card users who resume incurring interest charges instead of paying down their balances as they have done in the pandemic.So far, executives have said they do not expect more than modest hikes in deposit rates. More

SINGAPORE (Reuters) -Strategists at the world’s top investment banks scrambled to change their Federal Reserve rate calls on Thursday after policymakers emphasised at a policy meeting that it would tighten policy to clamp down on inflation.The Federal Reserve on Wednesday said it was likely to hike interest rates in March and reaffirmed plans to end its bond purchases that month, surprising investors who had already braced for as many as four rate hikes until the end of the year. Deutsche Bank (DE:DBKGn) strategists now expect policymakers to raise interest rates at each meeting from March to June and then revert to a quarterly tightening cycle from September totaling five rate hikes this year. Analysts at Nomura, Japan’s biggest brokerage and investment bank, said they expect the U.S. Federal Reserve to hike its benchmark rate by 50 basis points (bps) in March.Analysts at TD Securities, meanwhile, said they now expect four rate increases of 25 basis points, rather than three. They are also looking for the Fed to begin reducing its nearly $9 trillion balance sheet in May, compared to a previous forecast calling for the central bank to do so in September.At the conclusion of Wednesday’s meeting, Fed Chairman Jerome Powell said a decision would be made in coming months on when to start shrinking the central bank’s government bonds and mortgage-backed securities.BNP Paribas (OTC:BNPQY) expects as much as six 25 bps hikes in 2022 from four earlier, and expects the fed funds target range at 2.25-2.50% at end-2023, 25 bps higher than a previous forecast.”Our new base case for six hikes this year poses challenges to our bullish outlook for US equities,” the French bank’s strategists said in a note. Powell did not rule out such a move when asked about it after Wednesday’s Fed meeting. “He repeatedly appeared to differentiate the upcoming hiking cycle from the last time the Fed normalised its policy rate at a roughly quarterly pace,” Nomura’s analysts said in a note.”We now expect a 50 bp rate hike at the March (Fed) meeting, followed by three consecutive 25 bp hikes in May, June and July,” they said, adding that another 25 bp hike was expected in December. Fed funds futures, which track short-term rate expectations, are now pricing nearly five rate increases of 25 bps each this year, up from four expected hikes before Powell’s news conference.Some major investment banks like Goldman Sachs (NYSE:GS) and HSBC are sticking with their rate forecasts of four and three rate hikes respectively, betting the recent selloff in markets will lead to a tightening in financial conditions.”The interplay of Fed policy, financial conditions, and the growth outlook could make it hard for the Fed to actually deliver consecutive hikes, even if they feel like a natural forecast along the way,” analysts at Goldman Sachs said. More

ZURICH (Reuters) -Swiss banks have criticised planned new measures designed to cool the country’s red hot property market, saying the steps were unnecessary and would do nothing to slow rising house prices.The government said on Wednesday that from October, lenders must increase their cushion against home lending risks, sounding the alarm over one of Europe’s most expensive housing markets, where total mortgage lending has swollen to more than $1 trillion.The plan was one of the first in Europe to cool housing markets that have been booming in recent years because of rock bottom interest rates.The Swiss Banking Association (SBA), which represents around 300 banks in Switzerland including heavyweights UBS and Credit Suisse (SIX:CSGN), opposed the obligation for banks to hold more capital against home loans.The change distorted competition because it applied only to banks and not pension funds and insurers, which are gaining an increased share of the mortgage market, the SBA said.”Ultimately, we don’t think it’s either necessary or effective,” said Oliver Buschan, a member of the SBA’s executive board. “People could simply go elsewhere for their loans.”Changing the balance sheets of the banks is not going to cure the situation, if it needs curing,” he told Reuters, adding that house prices were rising because of fundamental factors like a lack of space and population growth.”We do not consider this a bubble,” he said.House prices have increased by more than 80% over the past 15 years, according to the Swiss National Bank. The median price for a house in Zurich has risen to 2.6 million Swiss francs ($2.79 million), while the explosion in lending has triggered fears about a damaging collapse if interest rates increased.Switzerland experienced its last property bubble and collapse in the 1990s, when house prices plunged after rising strongly during the late 1980s.The SBA cited the average loan to value in Switzerland as 60%.”The whole market would have to collapse by 40% for there to be a problem with the collateralisation, and that is just not going to happen, given the fundamentals,” Buschan said.Credit Suisse’s head of Real Estate Economics was also sceptical, saying the increased capital requirement would increase the costs only minimally for lenders and by a hardly noticeable amount for borrowers.”It can neither eliminate nor significantly influence the causes of the strong price increases on the Swiss real estate market,” said Fredy Hasenmaile. “Accordingly, I do not expect any weakening of the upward price trend on the Swiss real estate market as a result of the measure.”Elsewhere in Europe, Germany’s financial regulator wants to see banks hold a bigger crisis cushion to absorb losses, while France tightened mortgage standards last year to reduce lending.Sweden’s financial watchdog has ordered banks to hold more capital from September to protect them against future crises, citing the upswing in housing prices and household debts.($1 = 0.9304 Swiss francs) More