Banks Could Face U.S. Home-Equity ‘Payment Shock,’ Moody’s Says

Banks Could Face U.S. Home-Equity ‘Payment Shock,’ Moody’s Says

Home-equity lenders could see delinquencies rise in the next two years as borrowers face a “payment shock,” Moody’s Investors Service said.

The majority of home-equity loans were issued during the housing bubble before the 2008 financial crisis when underwriting standards were “dismal,” Moody’s said today in a report. Those loans will reach the 10-year mark between 2015 and 2017, when borrowers who are paying only interest must start repaying principal, and some won’t be able to keep up, Moody’s said. Read more of this post

Hedge funds hope losing shorts on U.S. natural gas will pay off

Hedge funds hope losing shorts on U.S. natural gas will pay off

5:54pm EDT

By Barani Krishnan and Joe Silha

NEW YORK (Reuters) – This year’s early rally in U.S. natural gas prices dealt heavy losses to hedge funds that stubbornly maintained short positions in the face of brutally cold weather, and the price slide of the past two months has not yet erased losses that prompted some investors to flee the funds, industry sources say.

Sasco Energy, Skylar Capital and Copperwood Energy, funds founded by some of the most prominent names in gas trading, posted losses after misreading winter weather patterns in the first quarter that caused a spike in prices of gas used for heating, said the sources speaking on condition of anonymity. Read more of this post

Banks slow to revive Singapore trading desks after rate-fixing cull

Banks slow to revive Singapore trading desks after rate-fixing cull

5:33pm EDT

By Rachel Armstrong

SINGAPORE (Reuters) – Cost pressures and tougher regulation mean banks in Singapore are struggling to replace the 100 traders who left the market during a rate-fixing probe.

The world’s fourth largest foreign exchange center is still reeling from the crackdown, which has left volumes flowing through banks’ once vibrant interest rate and emerging market currency trading desks a long way below pre-scandal levels. Read more of this post

Puerto Rico – a vacation oasis overrun with high debt

Analysis: Puerto Rico – a vacation oasis overrun with high debt

2:55pm EDT

By Tiziana Barghini and Michael Connor

(Reuters) – Puerto Rico’s turquoise Caribbean waters lap white sandy beaches under year-round sun, making the island a safe place to relax.

But beyond its shoreline, U.S. investors see a threatening view, a tropical version of a near-bankrupt industrial city – Detroit, whose stressed finances are run by a state-appointed manager. Read more of this post

China’s tight liquidity to continue until mid-July: experts

China’s tight liquidity to continue until mid-July: experts

Staff Reporter

2013-06-25

The Shanghai Interbank Offered Rate, or Shibor, had a drastic downward correction on the last trading session last week after a sudden surge on June 20, but the persistent tight liquidity conditions in China’s financial sector showed no signs of reversing, with the overnight rate still standing at a comparatively high level of above 8%, reports the Shanghai-based National Business Daily. The current situation regarding a shortage of funds is expected to continue throughout the rest of June, and may extend to mid-July, the paper said, citing banking executives. The overnight rate surged between June 7 to June 20 amid tightening liquidity, boosted by the delivery of fiscal deposits, income tax payments, and a drop in incremental foreign exchange deposits. The Shibor hit new highs on June 20, with the overnight rate surging 578.4 basis points to 13.444%, a record high, and the seven-day Shibor rising 292 basis points to 11.004%. On June 21, the overnight Shibor fell 495.2 basis points to 8.492%, and seven-day Shibor dropped 246.1 basis points to 8.543%. But 14-day and one-month Shibor continued to rise, adding 97.2 and 29.9 basis points, respectively, to 8.566% and 9.698%, the paper said. Zhang Chenhui, director of Financial Institute of Development Research Center under the State Council, said that liquidity should remain tight for about one more month, unless the People’s Bank of China, the nation’s central bank, moves to ease liquidity. International rating agency Fitch Group said last Friday that the Shibor rates are facing upward pressure for the rest of the month as more than 1.5 trillion yuan (US$244 billion) of yuan-designated wealth management products will expire during the period. UBS Securities also expects the fund shortage to last until mid-July, citing five main factors: the country’s five major banks paying fiscal bonuses of 240 billion yuan (US$39 billion), a net redemption of wealth management products or related financing pressure, the comparatively high leverage payments by financial institutions, the delivery of banking reserves of around 800 billion yuan (US$130 billion) in early July, and the delivery of fiscal deposits worth around 450 billion yuan (US$73 billion) in mid-July as well.